Hospital Entrance

Recovery Audit Contractors (RACs) entered into the United States Health Care System in 2009 under the Medicare Modernization Act, Section 306, Tax Relief and Health Care Act of 2006, Section 302. The purpose of the RAC is to identify overpayments and underpayments made by the Medicare Program under Parts A and B. RACs are responsible for the recoupment of overpayments made to providers. They are divided into regions covering the entire nation.

Their introduction was not been without detractors. The four companies responsible for performing the audits received between 9-13% of the amount flagged as inappropriate according to Joe Carlson in the April 2014 article, “CMS Proposes Waiting Longer to Pay Medicare Bounty Hunters, ” leading the industry to believe RACs are incentivized to find alleged overpayments quickly and underpayments slowly. RACs collected $9.6 billion between 2010 2015, giving some credibility to this view.

Additionally, claims appealed by hospitals have been overturned at a rate of 66% since 2010. However, per the May 2014 House Ways and Means Health Subcommittee hearing on “Current Issues in the Medicare Program” it was recognized that CMS, RACs and hospitals all use different figures to make their claims on appeals, accuracy and financial recoupment, Ann Sheely, MD. Combine this with the enormous investment of staff, time and money hospitals have to expend in countermeasures related to the RACs and it is clear there are few fans of the RACs.

The recent $1.5 billion settlement between the RACs and hospitals seems to lend even more fuel to the fire regarding the lack of effect this system has demonstrated. It is prudent to manage healthcare billing within government guidelines and regulations combined with a strong moral compass, all while ensuring positive patient outcomes. However, in today’s healthcare climate, it is necessary to have a sharp business plan to keep the hospital doors open. Many in the industry believe the resources devoted to the RAC system could be better spent on direct patient care.

Adding to this complex process, on May 4th of 2016, the Centers for Medicare and Medicaid Services (CMS) announced a temporary suspension of initial patient status reviews used to determine the appropriateness of Part A payment for short stay inpatient hospital claims. This action was taken in an effort to promote consistent application of the medical review of patient status for short hospital stay and to allow adequate time to improve standardization in the review process. Prior to lifting the suspension, retraining on the inpatient admission policy, provider outreach and education, and re-review of previously formally denied claims will need to be completed.

It is unknown just how long this suspension will be in effect, but the critical thing for Case Managers to take away is that the focus is clearly on short stay admissions regardless of observation or inpatient. Case Managers must be true to their role and facilitate the patient being in the right status based on patient condition and physician determination with the best possible outcome for the patient as the focused goal.

Case Managers must keep in mind that a three day hospitalization to access Medicare funding for post-acute care services that are not clinically supported is considered “gaming” in the eyes of Medicare with negative consequences reflected back on to the institution(s) involved with potential ramifications for the patient as well. The quality of work performed by the Case Manager is not what is being scrutinized at a personal level, but could be called into the mix since audits never go away.

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Cathy Massaro
CM Education and Training Consultant