How Revised RAC Statement of Work Will Impact Providers

James Carroll, for HealthLeaders Media , September 23, 2011

 "What's so interesting about this is the fact that, across the country, we see that a common practice of the RACs is to deny an entire claim instead of a partial denial, and so why aren't we seeing these partial denials? If we have a patient that is admitted for an inpatient admission when observation was appropriate, then the SOW would suggest that the RAC should just be down coding the claim to a partial denial, instead of issuing a full denial. It will be interesting to see if this statement of work changes RAC behavior," he said.

Semi-automated reviews

Many providers are already aware that recovery auditors—which are now the official names for RACs, according to the new SOW—have been using what are known as "semi-automated reviews." These reviews are now officially recognized as a form of claims review in the new SOW as follows:

[Semi-automated reviews] are a two-part review that is now being used in the Recovery Audit Program. The first part is the identification of a billing aberrancy through an automated review using claims data.  This aberrancy has a high index of suspicion to be an improper payment. The second part includes a Notification Letter that is sent to the provider explaining the potential billing error that was identified. 


In order to be current on the recovery audit process, providers should definitely take a look into the updated guidance on the discussion period, medical necessity, and semi-automated reviews, suggests Taylor.


James Carroll is associate editor for the HCPro Revenue Cycle Institute.
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1 comments on "How Revised RAC Statement of Work Will Impact Providers"

Terry Myers (9/23/2011 at 11:30 AM)
The example provided for the partial denial using an inpatient admission down graded vs. denied to observation is very misleading. The RAC auditor can not downgrade/allow a partial payment in this situation. If this is an inpatient admission with an inpatient admission order the RAC auditor can not create an observation (refer to observation) order only a physician (primarily responsible for the care of the patient with proper privileges at the hospital) can create an order. The RAC has no choice in this situation but to deny the inpatient admission. The hospital can try to go back and bill for services provided, lab, X-ray and others (no observation) IF they have valid physician orders for the services that include the medical justification. The job of the RAC is not to bill for the hospital. The above example is driven by three primary issues: 1) Physician education on inpatient vs. refer to observation requirements is important. 2) Lack of case management and other physician support assessing a patient upon admission that provides assistance to physicians in [INVALID]ing the appropriate service. 3) CMS has clarified that an admit order without any further clarification as to inpatient or refer to observation is an inpatient admission. Good forms design along with a process to assure a proper admission order is also required. A valid example would be a partial denial caused by a coding change that takes away a CC or MCC. In this case the hospital will see the removal from the MAC of the total payment for the original DRG than a payment for the new (lower) DRG. This example also requires that a valid physician inpatient admission order exists. A normal validation item for the RAC audit.




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