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At the recent RAC summit in Washington, D.C., the RAC spokespersons stated a few things you should know about, so we repeat them here.  Also, because it is so important, we offer a list of our articles about Medical Necessity, at the bottom of this post…

Claims Data Not Yet Distributed

The RACs have evidently not yet given the RAC Contractors access to the claims data warehouse. The natural question is then, so when will they give the contractors access to the data? No date has been set, that we’ve heard of, but it would seem that it should be soon. After all, they have already begun the “provider outreach,” (see previous post) which was a stated requirement before demand letters could be sent out. So, there would appear to be no more stops to remove. Realistically, however, we would guess that demand letters probably won’t start appearing for a month or two, at least, for the first states affected.

Black & White Issues First

The RACs claim that in the interest of causing as little controversy as possible, at least to begin with, the first denials will all be for so-called “black and white” issues. That is, the RACs will begin with only automatic denials, which are not subject to appeal. Automatic denials happen by “scrubbing” the data for issues that are known to be absolute violations of the payment rules, but were somehow missed by the edits already in place in the payment system. These denials do not require the RAC to see the documentation, and therefore they do not send out any requests for copies of the records from the facilities/practices. So, the good news is, they won’t ask for you to copy any records for these denials. The bad news is, you have no right to appeal, period.

Disclosures Encouraged (by CMS)

The RACs recommend that self-disclosure of overpayments is the best course of action. That is, if you know about a problem, because you’ve found it in an internal self-audit, they say you should go ahead and tell them about it. It’s not hard to see why they would recommend this action. First, it lets CMS not have to pay the bounty-hunter fees to the contractors, and it also gives CMS additional data to use to find the same problem in other facilities. So, is it really a good idea for a facility to self-disclose? We’d advise you — maybe.

We’re not lawyers, so we can’t give legal advise. However, we would advise any facility to tread carefully and with legal counsel at your side, absolutely. Preferably, you should have counsel with experience in healthcare audits and appeals. We work with several such firms: if you need recommendations, just contact us.

Medical Necessity Is Still A Major Target

But this is no surprise, yes?  If you’ve been following this process, you already know that Medical Necessity denials made up about 40% (in reimbursement dollars) of all denials in the RAC Demonstration Project. One thing we wish to continue to point out: when the RACs mention Medical Necessity, you need to keep in mind what they can look for, in the documentation.

Reread our previous post on clinical versus contract language. The RACs do not have to show or even disagree with the clinical decision associated with a billed code — they don’t have to question whether the patient needed the procedure or care given. They could, but they don’t have to go there to get a denial. They can simply disagree with the location, the setting that the care was given in — e.g., was the care appropriate for outpatient versus inpatient? Sometimes, the answer is clear, and sometimes it’s not.

You must pay attention to the setting, AND the documentation to show that the setting was appropriate, in order to keep the reimbursement. If the RAC decides that the documentation does not support the setting (for example, that the procedure billed should have been billed as outpatient, rather than inpatient), then the RAC can recoup the entire claim, including all the ancillary procedures, codes, bills, etc., even the ones from the physicians themselves. And you can recover little, if anything, on appeal.

The only good news in this last part, is that these types of denials can only be done via the Complex Reviews, not the Automatic Reveiws. So, since the RACs will start with the Automatics, these denials will come later.

That gives you, dear reader, a month or two extra perhaps, to do more internal audits and figure out your own problems before the RACs find them.

One last thing to remind you about, and hopefully motivate you to do those internal audits…

RACs Can Use Extrapolation

It was confirmed at this conference that the RACs will be able to use the practice of Extrapolation, but without the usual constraints of having to do all the scientific proofs of how they got the data, and used statistically valid random samples. Whatever that means, we are certain that it means that the RACs will be even more motivated to find these issues, because now they will be allowed to figure out an error rate, as a percantage of your claims, and M-u-l-t-i-p-l-y.

Example: The RAC asks for 100 records from you, concerning 1-Day Stays, for DRG XXX. In that batch, they find 45 errors for lack of documentation for Medical Necessity. That means they get to recoup 100% of the claim, for each of those errors. Let’s say that just cost you $450,000. Bad, but not horrific, you think…but they’re not done. The RAC can use Extrapolation, going back 3 years (but not earlier than 10/1/07).  So, based on that, they find that you filed 450 claims like those, over that time period. Now, via the magic of Extrapolation, they get to say that 45% of all 450 were likely in error — or 202 claims, at an average reimbursement of $10,000.

Voilà!  Now they recoup $2,020,000. And that’s just one DRG. Ouch!

It gets worse: since the denial was based on Medical Necessity, you cannot win on appeal.

See our other posts on Medical Necessity:

• Medical Necessity: Clinical vs. Contract
• CMS Bans Rebill For RAC Denials
• Largest Risk Area: Medical Necessity
• RACs Affect MDs Also
• Likely RAC Targets
• What’s Medical Necessity? Try…40%

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