To this point of the RAC preparation process, I have been very impressed with the proactive efforts of many hospitals.

Some have done their own data mining to determine potential risk areas; some have analyzed medical record documentation to assess coding and medical necessity risk; some have dedicated themselves to partnering with their medical staffs by educating them about the importance of documentation, especially as it relates to justifying medical necessity of short-stay cases; and some have done all of the above and more.

To those of you who have taken the time and effort to prepare, kudos, as ultimately you will be in better condition than some other hospitals that have not been as proactive.

This article is targeted toward those hospitals and other Medicare providers that have taken the "maybe it will go away" approach, the "why would they visit us?"  or my personal favorite, "we don't have any funds to repay the claims anyway," as to why they haven't prepared for the RACs.

A Tale of Two Entities

A colleague of mine was at a recent Recovery Audit Contractor presentation at a state hospital association meeting and overheard a conversation that went something like this (names have been changed):

Jim:  "Joan, how are you? And how are things in the western part of the state?"

Joan:  "Hi Jim. It was a nice summer but we are struggling... the same old things, you know? By the way, what about these RACs? Where did this come from?"

Jim:   "Well, you know we've been spending the better part of the past year getting ready for this, given what happened during the demonstration project. We've got a committee, consultants, chart reviews and education going on, because there's a lot of work to do."

Joan:  "Well, why are you doing all this? It must be costing you time and money. It's just another way for the government to scare us, and they never visit our area of the state anyway - they always deal with you city folks."

Jim:   "We were pretty concerned about this, and our CEO told us last year that she did not want any financial or compliance surprises. We've had external assessments done on our risk areas, like short-stay medical necessity cases, inpatient coding and wound debridement, then we followed that up with some education for our doctors. That was rough at first, but now they are beginning to understand the risks associated with the RACs and potential financial paybacks. It was a tough process, but we got some good outside help, we educated internal staff, and now we believe our payments are accurate. We had some financial exposure with our RAC going back to October 2007, but we really believe that during the past year we have been getting proper payments. We'd like to believe that if the RAC doesn't find many overpayments with us, we won't be on their radar screen for chart requests every 45 days for the next five years. What have you guys done?"

Joan:  "You know, Jim, we heard about this last year from consultants and our compliance officer, but they always are saying the sky is falling.  We just don't have time for this stuff!"

Jim:   "Well, good luck with that, Joan. I hope you guys get through this ok."

Joan:   "I think we will - maybe it will just go away. See you at next month's meeting."

Failing to Plan

The purpose of outlining this conversation is to indicate that this is not a rare mentality for providers to have. Joan does not understand or even believe in the existence of the financial risk a RAC presents to her hospital - or maybe she does, but no one has been able to convince senior management and the board that this is a legitimate concern.

There is an old business adage that states "failing to plan is planning to fail." From my perspective, there is real risk to those hospitals that currently are not actively engaged in their RAC preparation activities, and the cruel reality is that some may never recover from their decisions not to be proactive.