Internal Audits: An Investment towards Avoiding RAC Audits

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Original story posted on: August 2, 2017

With rising healthcare costs and the number of Medicare beneficiaries growing rapidly nationwide, the pressure on the federal government to recover improper Medicare payments will only increase. A recent opinion piece in Forbes, written by a spokesperson for the Council for Medicare Integrity, presents a view of the prevailing thought in some circles:

“It’s very simple – if the new administration wants to tighten federal spending, here is the low-hanging fruit that can put an additional $40 billion back into their hands each year. Get the RACs (Recovery Audit Contractors) back to work auditing a higher percentage of Medicare post-payment claims.”

Given this line of thought, it is a good bet that the Medicare RAC program is here to stay, and will possibly broaden in the future. It is important to note that RACs receive a percentage of the money they recover for Medicare: anywhere from 9 to 12.5 percent, depending on the geographic region. Consequently, they are incentivized to call charges into question. This means if there is the slightest doubt an error has occurred, an audit could be triggered.

Audits Are on the Uptick

RAC audits were stalled for several years due to a lawsuit filed in 2012 by the American Hospital Association (AHA) concerning the backlog in RAC appeals. Providers can dispute RAC findings at five different appeal levels, and during the process, payments under scrutiny are suspended. The sudden increase in these cases created a bottleneck in the appeals process, with some matters backlogged for years despite the statutory deadline of 90 days for third-level appeals.

In early 2015, the decisions in question had been pending for an average of 572 days, tying up working capital for an inordinate amount of time. The AHA eventually won the lawsuit, resulting in a judge’s order for the appeals backlog to be reduced. By early 2016, the dust had settled, and auditing activity ramped up once again. It continues at a rapid pace today.

Tips to Avoid an Audit

While there is no way to guarantee that an organization will not be audited, there are many things practices can do to prevent charges that could be a red flag.

Be Proactive with Internal Audits

The No. 1 thing practices can do to avoid a RAC audit is to be proactive with their own internal audits while also utilizing outside consultants on occasion to support the internal process. It is important for organizations to know what their documentation and charges look like, and to identify errors internally. It is also very helpful to have a second set of eyes review the data to make sure nothing is being missed. This will give an organization insight into what a RAC auditor might find.

Insufficient documentation is one of the main reasons claims are denied, and repeated denials can trigger an audit. It is essential to make sure that providers are correctly documenting their services. Unfortunately, documentation is often deficient or missing entirely, so in this case, when an audit occurs, there is no proof the services were performed.

The results of internal audits should be shared with administrative staff, and the data used to establish a baseline for how providers are performing in documenting services. This information can be extremely helpful in identifying areas for improvement.

Examine Evaluation and Management (E/M) Levels

Look closely at E/M levels to see how they compare with peers. E/M levels for outpatient services are divided into five different levels based on acuity, with an increase in reimbursement for each successive level. Auditors check to see if a provider’s percentages at each level match those of their peers in the same region across the same specialty. Providers that fall significantly outside of this bell curve could be a red flag to auditors. Unfortunately, once auditors identify incorrect billing trends for E/M levels, the door is open to evaluate all services the provider performs, potentially impacting everything the practice is billing.

Pay Attention to Details

There are many minuscule details in the documentation and billing process that can trigger an audit if there is an error. The following are a few items that warrant a second look:

  • The principal diagnosis on the claim form should correlate to the reason for the visit in the medical records.

  • Medication reports should include the start and stop times for drugs. Additionally, claims should include the correct number of units, an issue which has become a major problem as it pertains to Medicare overpayments. Drugs have different amounts that are supposed to be given, and each billing unit corresponds to a certain quantity of drug. Confusion occurs because one billing unit does not always equal one milligram or microgram of the drug.

    For example, Neulasta, a medication commonly given to cancer patients, is six milligrams for each billed unit, so for every six milligrams administered, one unit should be billed. Unfortunately, many oncology practices were billing the number of milligrams administered instead of the number of units, creating overpayments. Since drugs can represent as much as 80 percent of an oncology practice’s charges, a large number of drug denials can dramatically impact working capital.

  • Closely examine the most expensive charges, and make sure those are being documented, coded, and billed correctly. Once that is done, check charges that may not be as expensive per item, but are billed out at a great frequency.

  • Have a dedicated staff member or consultant regularly check to ensure that billing software is functioning properly. Many practices use hard-coded entries for billing, wherein the code is entered by a person simply clicking a button, automatically billing the charge through the software. While computers are invaluable in today’s care delivery, they can create some grievous errors that would be identified quickly by a person. Every practice needs to have a process in place for a set of human eyes to regularly review these charges to ensure that the software is not running amok, incorrectly billing claim after claim. If the practice cannot afford a dedicated person, consider a consultant.

What to Do if Your Organization Is Audited

While the goal of every organization is audit avoidance, unfortunately, many providers will face an audit at some point. The appropriate RAC will send the organization a letter informing it that its charges exceeded the norms for physicians in their specialty in their area, and that supporting documentation must be presented. Generally, auditors start small and then try to identify bigger problems once they have a foot in the door.

Practices facing an imminent audit should solicit the help of outside billing and coding specialists. If these reviews have not been done proactively, now is the time to call in a professional who can identify the problem areas auditors will find. This will prepare the practice for what is coming so administrators know the risk they are facing, as there is no way of stopping the audit once it has been initiated. When the specialists complete their work, the provider then can determine whether the audit is valid and if the payments in question can be defended. There are several opportunities to appeal RAC decisions, but providers must act quickly if they want to dispute the findings, since there are various deadlines to initiate the process (depending on the appeal level).

Internal Audits as an Investment

Proactive internal audits performed by skilled staff and outside professionals are an investment in the ongoing success of a practice. They are a way for a provider to pay a little now to avoid potentially paying a lot more later. If a practice is proactive in minimizing errors, improving provider documentation, and correcting suspicious billing trends, it will not be easy prey for RAC auditors.

W. Brad Howard, CPC and AHIMA Approved ICD-10 CM/PCS Trainer

W. Brad Howard is an advisor for Audit and Education, Innovative Practice Services at McKesson Specialty Health. He is a Certified Professional Coder (CPC) and AHIMA Approved ICD-10 CM/PCS Trainer with two decades of experience in claims reimbursement and provider audits, within multiple segments of the healthcare industry including inpatient hospital, outpatient clinic, and ambulatory surgical centers. Brad is an active member of both the AAPC and AHIMA.

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