After CMS announced the Recovery Audit Contractor expansion in September 2008, most healthcare financial seminars have had sessions on the RAC program. Using data from the RAC demonstration project, the focus was generally on the RAC appeals—but interestingly, appeals of overpayment denials were so rare in the demonstration project that $992 million was recovered from hospitals in California, Florida, and New York.
In RAC Expansion, however, PPS hospitals' first focus should be on preparation, not appeals. A vigorous appeals response is essential, but it is the last step. Appeals can be compared to a football team's offense (the RAC) having a first-and-goal game situation. Preparation is the defense by PPS hospitals before the game situation gets to first and goal.
From the demonstration project, PPS hospitals should now recognize that effective preparation can reduce the number of appeals and minimize recoupment. These 10 actions could do just that.
Prepare, prepare, prepare: The RAC may review records as far back as October 2007. To prepare. PPS hospitals should take the following steps:
(1) Identify all cases at risk; (2) Prioritize by recoupment impact; (3) Perform coding and medical necessity reviews; (4) Establish a RAC repository; (5) Test RAC work flow; (6) Prepare periodic status reports; (7) Get RAC updates (e.g. new targets, new issues)
As steps 4 and 5 are perhaps the most critical, they deserve further comment.
Step 4—Establish RAC Repository: This repository will consist of all claims that may be requested and subject to possible recoupment. The repository will identify the claim, potential issue, corrective action taken (if any), and medical record location. If possible, these records should be available electronically to facilitate timely medical record response.
Step 5—Test RAC Work Flow: RAC requests for medical records will cover from October 2007 to the current date. As the time period could be 1½ to 2 years, the volume may be large—possibly 500 records. To ensure a complete and timely response, RAC workflow should be thoroughly tested, well before RAC requests begin.
Together, steps 4 and 5 should facilitate a complete response to RAC requests and eliminate overpayment denials for lack of timely response—frequently the case in RAC Demonstration. These seven tasks will allow PPS hospitals to identify and correct possible exposure to RAC audit targets, reduce overpayment denials, and minimize recoupment. If sufficient personnel and system resources are available, preparation may be done by internal staff. If sufficient personnel and system resources are not available, it should be done by external staff, with prior RAC experience and RAC systems capability.