August 16, 2010

RACs — There’s Beauty in the Beast
By Selena Chavis
For The Record
Vol. 22 No. 15 P. 20

Experts say don’t focus on the program’s horrifying features, but instead consider how it can boost process improvement.

Recovery audit contractor (RAC)—it’s a term that has become synonymous with dread and fear in the healthcare industry. It’s the dread of the work and resources involved to manage the process and the fear of what the results may be in terms of lost revenue.

“When I talk to different hospitals, they are always resource restrained,” says Cheryl Golden, senior manager of Deloitte’s Healthcare and Government Group. “A lot of people are getting the RAC role placed on them on top of their everyday role. Naturally, if you say RAC, people are going to say ‘bad.’”

And the fear has not been unfounded, notes Georgia de la Barre, MS, CPC-H, RMC, of corporate integrity at Louisiana’s Ochsner Health System (OHS), which is composed of eight hospitals and more than 35 health centers. “In the demonstration program, there were some hospitals that had to close their doors,” she says, noting that while there have been refinements to the audit process, most hospitals still have nightmare images of the $1 billion in overpayments identified as part of the demonstration project.

With the diagnosis-related group (DRG) audits under way, de la Barre says OHS received a couple hundred reviews from February through May, but has yet to receive any significant denials, making it difficult to predict the long-term effects of the audits.

Despite the trepidation associated with the RAC initiative, the prospect of greater regulatory scrutiny, and the strain of heightened budget constraints, many industry professionals agree that hospitals can actually benefit from an audit. Some even suggest the process should be embraced as a value proposition going forward.

“A RAC audit isn’t any different than other defense audits we go through … it’s just a different slant,” says Phyllis Cartwright, RHIA, CCS, director of coding, auditing, and education services with Pyramid Healthcare Solutions, who adds that fear is a misconception. “At the end of the day, they [auditors] are looking for a payment error, whether it’s underpayment or overpayment. It’s a fear factor so to speak from the perspective that any time we have the federal government looking at our operations … it’s their way of flushing out our operational weaknesses.”

Experts suggest that hospital executives take a step back, breathe deeply, and look at the bigger picture of RAC audits. The following is an outline of the benefits healthcare organizations can realize from being under the scrutiny of a RAC audit.

CDI Revisited
In reaction to the emphasis being placed on specificity, including RAC audits, many hospitals are revisiting and reestablishing clinical documentation improvement (CDI) and concurrent documentation programs. It was a trend that began in the 1990s but fizzled out, according to industry experts.

“To the extent that you have improved documentation, that can help a hospital in a number of ways,” Golden says.

When it comes to making all the pieces work correctly—from patient safety and outcomes to compliance and revenue cycle—the quality of physician documentation sets the stage for success or failure in many areas of hospital operations and patient care. The AHIMA points out that successful CDI programs can have an impact on Centers for Medicare & Medicaid Services (CMS) quality measures, present on admission, pay for performance, value-based purchasing, data used for decision making in healthcare reform, and other national reporting initiatives that require the specificity of clinical documentation.

“CDI development can tremendously benefit from these very focused RAC audits,” Cartwright says, noting that it can help stabilize operational weaknesses in the physician query process. “It helps a facility determine where its CDI program is working and where its weaknesses are.”

Cartwright suggests many of the audits are raising the bar for CDI, setting the stage for the implementation of a second-level review for some high-exposure DRGs. “Having that second set of eyes operationally challenges facilities to look at that second-level review,” she notes. “More and more organizations are going to start adopting a second-level review to mitigate exposure.”

Because Medicare documentation requirements frequently change, de la Barre says the RAC process could prove beneficial. “It will help clarify and codify some of the rules,” she notes.

A More Complete Patient Picture
HIM professionals are quick to point out that improved documentation ultimately will not affect quality of care, but it will have an indirect influence on the overall patient picture and outcomes data.

“It might improve our documentation in the medical record, but it doesn’t affect how we care for patients,” de la Barre says, pointing out that better documentation means better communication of overall health, but the “care” of patients has always been the primary concern. “It will improve documentation processes.”

Improving the accuracy of clinical documentation can reduce compliance risks, minimize vulnerability during external audits, and provide insight into legal quality-of-care issues, according to the AHIMA.

Golden suggests that with better information and tracking for patient care, there is a more complete picture of a patient’s health. “Just by way of process improvement, there’s a trajectory toward improved patient care,” she explains, adding that it leads to better continuity of care from provider to provider.

With access to a more-detailed, easier-to-follow medical record, other physicians can pick up the information and have a clearer picture of where a patient’s care should move next. When documentation is more accurate, it also reflects the patient’s true severity of illness and risk of mortality, which can ultimately have a positive impact on physician and hospital report cards.

According to the AHIMA, effective CDI initiatives will have the following goals, which will ultimately affect the bigger picture of patient care:

• Identify and clarify missing, conflicting, or nonspecific physician documentation related to diagnoses and procedures.

• Support accurate diagnostic and procedural coding, DRG assignment, severity of illness, and expected risk of mortality, leading to appropriate reimbursement.

• Promote health record completion during the patient’s course of care.

• Improve communication between physicians and other members of the healthcare team.

• Provide education.

• Improve documentation to reflect quality and outcome scores.

• Improve coders’ clinical knowledge.

Compliance Readiness
The compliance landscape revolves around much more than RAC audits. However, the urgency to set up a wall of defense against RAC denials will ultimately spill over into a hospital’s ability to counteract other compliance issues.

“It makes you inventory what you have in place and make sure you have the right controls implemented,” Golden says. “RAC has pushed process improvement when it comes to compliance. [Healthcare organizations] are making sure controls are enhanced as government becomes more focused on external audits.”

The expectation is that compliance reviews will be extended to cover more areas and payers. Specifically, Medicaid will be added to RAC in 2011, according to de la Barre. She notes that the trend is expected to trickle down to private payers as well.

“I’ve heard from our RAC team that private payers are moving in that direction already,” she says.

Golden says that “there’s the opportunity for other payers to follow on the footsteps of federal regulators. Ultimately, private payers will take advantage and implement what RAC is doing.”

With a greater emphasis on CDI, physicians and clinicians are becoming better equipped for compliance, according to Cartwright. “RAC audits provide an opportunity to get involved in coder and physician education,” she notes, adding that hospitals are now providing avenues to gain the skills and resources needed to code correctly. “Education is the pinnacle of what we are doing here.”

Pointing out that physician education is typically the root of the problem when it comes to documentation compliance issues, she points out that “physicians speak Greek and coders speak Latin. We have to learn to translate that.”

Specifically, with improved clinical documentation, the AHIMA says hospitals will naturally achieve improved outcomes data that will “assist in preparing the healthcare entity for a variety of future payment methodologies … and can provide a defense for regulatory compliance reviews, including the RAC initiative, zone program integrity contractors, and Medicaid integrity contractors program.”

The Bottom Line
It may seem odd to suggest that a visit from a RAC could ultimately improve hospital finances, especially when so many organizations are focused on that $1 billion overpayment figure from the demonstration project, but there are reasons to believe an audit can better position a facility for revenue improvement and retention.

“During the demonstration project, there were underpayments reported,” Golden says, adding that organizations that adopt solid RAC preparation programs will be better positioned to capture severity of illness going forward.

It comes down to responsibility, Cartwright says. “We can move forward with controlling that impact. That really drives our financial performance,” she explains. “It’s our responsibility to ensure those proper payments are made through a complete and accurately coded record.”

While refinements have been made to counteract the severe outcomes from the demonstration program, de la Barre suggests healthcare organizations should use RAC audits to prepare for what may be coming in the future, especially if their Medicare case mix is high. In other words, if an organization is seeing trends develop from current RAC audits, it may need to set aside cash for future paybacks as well as put controls in place to avoid future penalties.

RAC audits can also help an organization develop payer mix strategies. “It’s that delicate profit margin that may be out of balance,” de la Barre says, pointing out that Medicare barely covers cost. “It can eventually help you get the correct balance for all payers.”

She points to the Comprehensive Error Rate Testing (CERT) as a gauge. Developed by the CMS, CERT produces national, contractor-specific and service-specific paid claim error rates that de la Barre says can be used in combination with RAC trends to help a facility be better prepared.

Specifically, she notes the error rates were as high as 9.4% in 2000, equating to approximately $16.4 billion, but dropped to 3.6% in 2008. In 2009, though, the error rates jumped to 7.8%, including 5.5% for inpatient care.

“Medicare believes there is that much opportunity to pull payments back for just the year 2009,” she says, pointing out that hospitals can use RAC now to be equipped for what may be coming over the next few years. “If you take a look at your revenues for 2009 and take 5.5%—that would be your revenues at risk.”

Improved Systems and Workflow
It’s about getting everyone on the same page and identifying ownership—an area that may have been lacking in some institutions in the past in pulling HIM, financial, and clinical departments together.

“RAC audits bring about better training and integration of coders, HIM, and financial. It has pushed process improvement,” Golden says. “It’s bringing them together around a common cause and generating a better understanding of compliance.”

RAC audits are also pushing coders more into the spotlight. “I think the role of coders is being elevated every day,” Golden says, adding that organizations have struggled with how to track the auditing process and whom to make responsible. “It has brought them more into the mainstream.”

— Selena Chavis is a Florida-based freelance journalist whose writing appears regularly in various trade and consumer publications.