September 2014

Righting RACs — Five Ways to Improve the RAC Process
By Selena Chavis
For The Record
Vol. 26 No. 9 P. 14

HIM professionals who take a quick trip around the Internet will find a multitude of articles, thought leader columns, and helpful websites detailing how hospitals and other health care organizations can best ready themselves for a dreaded recovery audit contractor (RAC) visit. Everything from how to shore up documentation improvement initiatives and internal controls to educating staff and proactively minimizing the potential for noncompliance is part of the new reality ever since the RAC program was set into motion in all states as a requirement of the Tax Relief and Health Care Act of 2006.

That’s one end of the RAC spectrum, the side that receives the most attention because providers naturally care more about what’s happening inside their walls. But in reality how the RAC program itself operates carries more weight in the grand scheme of things. In that regard, it’s important to understand how the process can be tweaked and improved to make life easier for all parties.

While health care organizations have endured the frustrations of the RAC labyrinth and the weight of hefty penalties for years, recent industry outcry may be turning the tides a bit. “As of the latest issued announcement by the CMS [Centers for Medicare and Medicaid Services], it appears there were efforts made to equalize the process between the hospitals and RACs,” says Joanna Malcolm, RN, BSN, CCM, consulting manager with Pershing Yoakley & Associates, PC. “This will hopefully decrease issues and headaches.”

Following a February announcement to suspend RAC audits—some of which are scheduled to be restarted—to allow contractors to complete remaining claim audits before the next contract procurement process, steps were taken “to continue to refine and improve the Medicare RAC program,” according to the CMS. The agency, which detailed numerous improvements slated to be implemented once the next round of contracts are awarded, expects the changes to “result in a more effective and efficient program, including improved accuracy, less provider burden, and more program transparency.” (Current RAC contracts expired June 1. While the procurement process for new RAC contracts began in May 2013, the CMS has not stated when those contracts will be awarded although it’s shooting for sometime this year.)

These steps came in response largely to industry feedback, notably from the American Hospital Association (AHA), which said in a released statement that the changes “are small steps toward addressing significant hospital concerns with the administrative burden caused by the RAC program, but do not address lengthy delays in the RAC appeals process or discourage RACs from making inappropriate denials in the first place.”

Specifically, data from the AHA’s RACTrac Survey—which covers the start of the program in 2010 through the fourth quarter of 2013—revealed that 49% of RAC denials were appealed by hospitals and 64% of these denials were overturned in favor of the hospital. According to several industry professionals, lengthy appeals processes and increasing revenue cycle risk associated with delayed Medicare reimbursement have increased frustrations over time within the hospital community.

Pat Hurley, RN, CPC, a denial prevention coordinator with Atlantic General Hospital, a 62-bed facility in Berlin, Maryland, believes hospitals must keep working with industry leaders to improve the RAC program’s overall scope and direction. “I think we need to keep trying to use the RACTrac Survey to compare this ever-changing data and help the AHA gain insights to give to the legislators,” she says.

While the industry continues to grapple with how best to level the playing field between hospitals and the CMS, professionals working in the trenches identified several areas where the process is lacking.

Failure to Adhere to Timelines
RAC timeframes can be confusing, especially if the organization legislating deadlines isn’t following what they have published, says Rachel Nelson, RHIA, CPC, the HIM director and compliance officer with Arkansas-based Mena Regional Health System. “If [RACs] could meet timelines the way that they are supposed to, it would help tremendously,” she says.

When a hospital receives a chart request from a RAC, the organization has 45 days to deliver the documents. In turn, the RAC has 60 days to render either a review results letter (a complex review) or a demand letter (an automated review). If an overpayment is identified, hospitals can participate in a discussion period to provide additional information to the RAC and discuss why recoupment should not be initiated.

However, these parameters are not always practiced, Nelson says. “[RACs] are allowed to request charts every 45 days, and sometimes we are waiting for six or more months for the results,” she says. “In a few cases I have seen, we have waited over a year. They do not adhere to their timeline.”

Convoluted Appeals Process
If Medicare identifies and recoups overpayments, hospitals can begin the appeals process—a lengthy, cumbersome undertaking for resource-strapped hospitals, according to Lynne Snyder, director of medical records at Atlantic General Hospital. “I think CMS needs to work on the structure of the appeals process,” she says, pointing out the complexity inherent in the agency’s five-level approach. “It’s very bureaucratic and not a timely process at all.”

At the first level, an appeal must be sent to the Medicare administrative contractor (MAC) within 120 days of the initial overpayment determination. The MAC is afforded 60 days to make a decision regarding the appeal. The second appeal level, which must be received by a qualified independent contractor within 180 days of the MAC’s first-level decision, also affords a 60-day window for a final decision.

The third and fourth appeal levels require an administrative law hearing and an appeals council review. Both must be submitted within 60 days from the previous appeal’s decision and each allows 90 days for a final decision to be made by either an administrative law judge (ALJ) or a Medicare appeals council. The final level, which requires judicial review, must be submitted within 60 days of the Medicare appeals council. At this level, there is no identified timeframe for a final decision.

This whirlwind of back and forth can have long-lasting effects. “Hospitals have had months to years between recoupment and appeal decisions where the funds were held until the cycle terminated,” Malcolm says. “The timeframe has improved by delaying recoupment until after the second appeal. However, due to the large number of file requests by the RAC, the hospitals are still very vulnerable.”

She adds that the sting of the appeals process could be decreased if hospitals were permitted to return only a percentage of the payment at recoupment if the second level appeal is denied and the organization chooses to appeal further.

As part of the improvements introduced in the CMS February announcement, RACs will have to wait 30 days to allow for a discussion before sending the claim to the MAC for adjustment. This keeps providers from having to choose between a discussion process and an appeal. Also, RACs will be required to confirm receipt of a discussion request within three days. When debates and disagreements regarding recoupment can be ironed out during the discussion period, hospitals can avoid the lengthy appeal process.

Lack of Hospital Resources
Like many small rural hospitals, Mena Regional Health System faces challenges related to effective resource allocation. Nelson says limited staff availability hinders the system’s ability to tackle RAC audits. “When RAC is going full force, we could use a full-time RAC coordinator to log, track, and complete defense audits,” she says. “I currently handle compliance, HIPAA, RAC, and medical records. It’s a lot to juggle.”

Despite any shortcomings, hospitals must dedicate the necessary resources to respond to a RAC in a timely manner, especially during the appeals process. “If hospitals are one day late with submitting the record, we will be denied payment,” Hurley says.

With few third-level appeal ALJ judges trained in RAC appeals, Hurley says the wait can be extensive. “There are four main [offices] that receive these third-level appeals,” she explains, adding that paper charts are “piled to the rafters” at some ALJ locations, while others have waiting periods of up to 10 years. “Some of these appeals remain unopened in the mailrooms. Meanwhile, interest is accruing on the cases awaiting these appeals.”

The latest check of the Office of Medicare Hearings and Appeals reveals a 20- to 24-week delay in docketing new requests into the system. “The assignment of the judge can take up to 28 months. Then it takes additional time to have a hearing scheduled,” Hurley says. “After a hearing is held it can take up to 60 days to receive a decision. These are all average times so I can see where many will take longer.”

Too Many Record Requests
In today’s regulatory climate, hospitals are inundated with audit requests. Malcolm notes that the large volume of documentation requests from multiple government auditors and private payers is a significant burden to resource-strapped hospitals. “This increases workloads and staffing,” she says. “The tracking of these documents is very laborious.”

As of April 15, 2013, a RAC can request a minimum of 20 records in a 45-day period, down from the prior 35-record minimum.

Malcolm suggests that better coordination between government and private auditors to minimize the impact would be beneficial, especially if the total number of documentation requests is capped to a specific number according to facility size and demographics.

Unclear Communication Channels
At Mena Regional Health System, communication with the RAC has been problematic, according to Nelson, who often gets passed around in a fruitless search for answers. “I would contact [the RAC] about a claim, then get told to call CMS. Then they tell me to call [the RAC] because they didn’t have the information requested,” she says.

In June, the CMS announced the establishment of a provider relations coordinator to help increase program transparency and offer more efficient resolutions to providers affected by the medical review process. In essence, the position, held by Latesha Walker, RN, BSN, MS, is designed to bolster communication between providers and the CMS.

In the press release, the CMS said that “although providers should continue to take questions about specific claims directly to the recovery auditor or Medicare administrative contractor (MAC) who conducted the review, providers can raise larger process issues to the coordinator. For example, if a provider believes that a recovery auditor is failing to comply with the documentation request limits or has a pattern of not issuing review results letters in a timely manner, CMS would encourage the provider to contact the provider relations coordinator.”
Health care organizations with suggestions on how to improve the processes or questions about a particular problem can contact Walker at RAC@cms.hhs.gov (for RAC review process concerns/suggestions) and MedicareMedicalReview@cms.hhs.gov (for MAC review process concerns/suggestions).

Other Considerations
Although the recent improvements are a step in the right direction, Malcolm says that “in order for these changes to be successful and beneficial to all entities involved, the RACs will need to be audited for their compliance with the new procedural processes.”

She also believes the CMS should consider eliminating new documentation requests or new fund recoupment until the existing third-level ALJ appeals are nearing decisions or overturned appeals have been repaid.

Complications arising from the two-midnight rule, which requires patients spend two nights in the hospital to qualify for inpatient rates, have complicated RAC matters and promise to continue to do so, according to Hurley. “Medicare states it does not use InterQual or Millimen medical necessity criteria. There is very little said in the law as to what constitutes medical necessity,” she explains. “We are told it needs to be in the medical record and the physician makes the decision to admit but now, with the two-midnight rule, it seems hospitals are encouraged to place the patients in an outpatient setting.”

In terms of RAC audits, Hurley says the rule has become a huge headache for hospitals. In fact, the rule has come under fire for creating mass confusion within the industry, resulting in the CMS twice delaying the timeframe for RACs to target violations. As it stands, auditing for stays falling under the two-midnight rule will not begin until March 31, 2015.

Recently, the CMS indicated interest in soliciting public comments to help determine a more effective definition of the rule and ascertain whether there are alternative payment systems that could apply criteria more accurately for short hospital stays.
In the meantime, hospitals get a slight breather from new RAC audits as the CMS considers how to improve processes moving forward.

— Selena Chavis is a Florida-based freelance journalist whose writing appears regularly in various trade and consumer publications covering everything from corporate and managerial topics to health care and travel.