April 9, 2018

This eAlert is prompted by ABC’s observation in recent months of increased audits of anesthesia practices by the recovery audit contractors (RACs).  Included here are recommendations for preparing for and monitoring the audit and appeal process in order to help your group minimize losses.

The controversial Recovery Audit Program of the Centers for Medicare and Medicaid Services has garnered criticism from healthcare providers, medical groups and clinicians for, among other things, creating a huge backlog of appeals that can take months, if not years, to resolve, straining hospitals’ and medical practices’ financial resources in the process.  A 2017 study published in the Journal of Hospital Medicine found that the appeals process for denied claims can drag on for more than four years. 

But the RACs are not going anywhere.  The Medicare Modernization Act, Section 306, authorized a RAC demonstration project, and the Tax Relief and Healthcare Act of 2006, Section 302, made the program permanent and nationwide.  Between the program’s start in 2009 and 2016, the RACs have recovered more than $8 billion in improper payments for the federal government.

Changes to the RACs could be on the horizon that might ease the audits’ administrative burden somewhat. In 2012, the American Hospital Association (AHA) sued Health and Human Services (HHS), claiming that hospitals were illegally being denied Medicare payments for audited outpatient procedures.  “The government’s refusal to pay for this care is harming hospitals and patients,” the lawsuit stated.  “More pertinent here, it violates the Medicare Act and is otherwise unlawful.”  AHA alleged the agency’s bureaucratic bottleneck wreaks havoc financially with hospitals, particularly smaller institutions, some of which choose not to appeal rather than face a costly appeal process.

A federal judge in the District of Columbia has ordered the AHA to submit suggestions for how HHS can address the backlog by June 22, 2018, after which HHS will have until July 6 to respond, a recent article in Modern Healthcare reports.  As of this past June, HHS’s Office of Medicare, Hearing and Appeals (OMHA) had more than 600,000 appeals pending with an estimated wait time of three years. The backlog could reach more than 950,000 appeals by the end of 2021. 

An attorney for the AHA said the organization may suggest that HHS shift responsibility for audits of claims involving medical judgment to Quality Improvement Organizations (QIOs) rather than RACs, noting that QIOs may be better qualified to review the claims because many of them are run by clinicians.  AHA will also request that CMS financially penalize RACs if the majority of their denials are overturned on appeal, arguing that the strong financial incentive for RACs to deny claims puts an unfair financial burden on providers.

Improvements in the recovery audit process for clinicians also could be coming in 2018, according to the American Medical Association (AMA).  In letters to CMS, the AMA has requested changes to help lighten the administrative burden imposed on physicians by the RACs, and it appears that some of these recommendations might be accepted.  These include requests for CMS to: 

• Increase educational efforts for physicians on how to avoid common coding and billing errors
• Work with practices to address deficiencies that may lead to a high volume of coding and billing errors
• Consider replacing financial penalties with corrective action plans
• Refine reviews using predictive analytics to identify claims at high risk for improper payments.

In the meantime, we advise anesthesia practices to be primed.  In general, anesthesia practices that understand the intricacies of the audit process, complete the necessary groundwork and stay on top of events stand a better chance of emerging from a RAC audit unscathed.  The following strategies should help, should you find yourselves the focus of an audit:

• Designate a single individual within your practice to function as the conduit for every RAC request, response, denial and appeal.  Give this person high visibility so that everyone knows all RAC requests must funnel through them.
• Know the current target issues for your state.  These can be found on the RAC websites (see list below).  Based on claims, assess your risk relative to each area.  Are you documenting medical necessity?
• Sample a cross section of your coding over time and check all of the gradations that will be covered. If errors are identified, are they isolated errors or is there a pattern?  The sooner you identify and address areas of weakness, the stronger your position.
• Establish a RAC repository for requests, denial letters, appeals, policies and procedures, and other documentation to track every interaction between your organization and the auditors.  The repository should allow you to look at trends over time, including the reasons for recoupment, how many cases have been appealed, how many cases are scheduled for appeal and why you are appealing.
• Appeal aggressively.  Various studies show that the majority of RAC recoupments are overturned on appeal.  Despite the lengthy appeal process, the aggressive appeal of every denial is in the provider’s best interest.

In addition, ABC’s annual documentation in-service for clients offers a wealth of valuable information to help practices ensure that they are compliant. 

RAC Contact Information

Performant Recovery, Inc.
CT, MI, IN, ME, MA, NH, NY, OH, KY, RI and VT and
Nationwide for DMEPOS/HHA/Hospice
info@Performantrac.com
1?866?201?0580

Cotiviti, Inc.
IL, MN, WI, NE, IA, KS, MO, CO, NM, TX, OK, AR, LA, MS and
AL, FL, GA, NC, SC, TN, VA, WV, Puerto Rico and U.S. Virgin Islands
RACInfo@Cotiviti.com
1?866-360-2507

HMS Federal Solutions
AK, AZ, CA, DC, DE, HI, ID, MD, MT, ND, NJ, NV, PA, OR, SD, UT, WA, WY, Guam, American Samoa and Northern Marianas
racinfo@emailhdi.com
Part A: 1-866?590?5598
Part B: 1-866?376?2319

With best wishes,

Tony Mira
President and CEO