Updated on: June 22, 2012

RAC Auditors are Thirsty… Be a Dry Well!

Original story posted on: May 20, 2009

leodorazio120dsBy Leo Paul D'Orazio, MBA, FACHE


The RAC auditors are thirsty.  They are looking for that long, cool flow of cash wherever they can find it.


And if your facility is a geyser of improper claims payments that are dripping with recoupment opportunity, then beware, as they will want to tap into it again and again, year after year.  However, you can be proactive in order to turn off the spigot.  Your facility must have the right process improvement and internal control policies and ongoing education programs in place in order to dramatically reduce such exposure.  Be a ‘dry well' to the auditors, and they will likely move on to the next fresh source they can find.


As hospitals go through this RAC process, it is so vitally important that they take the time to document policies and procedures in order to minimize the risk.  Here's a five-step procedure for these facilities to follow:


  • Develop Policies and Procedures to ensure accurate physician clinical documentation and accurate coding by Hospital Medical Records Staff.


  • Determine the Hospital's RAC preparedness by written policies and procedures that outline the operational effectiveness of efficiency expediting "RAC Demand Letters" to a successful conclusion.


  • Have Hospital's written Internal Control Policies and Procedures in place to avoid future Clinical Documentation and Coding Errors that would result in lost reimbursement.


  • Develop workflow management policies and procedures to optimally respond to "RAC Demand Letters".


  • Select and implement a RAC Tracking System to monitor all RAC findings and appeals. There are many software programs available for purchase, but a simple Excel spreadsheet can even do the job. Just be sure to have someone appointed to monitor and update the sheet as often as needed.


Following this five-step process can put you ahead of the game and will help mitigate current and future Medicare RAC audits.  However, just as important is having a formal education program in place at your facility for the attending physicians and the hospital medical records staff.

Clinical documentation for Physicians


It all starts here with the patient records.  It is highly recommended to implement a "refresher course" for physicians on how to accurately document the clinical treatment that was given to the patient, in order for the hospital to be properly reimbursed by Medicare.


2) Accurate coding practices for Hospital Medical Records Staff


There are thousands of codes in every annual edition of the Billing Codes manuals, with many new ones coming out each year.  Yet, only a handful of codes are routinely used.  Ongoing education for your staff on accurate coding and billing procedures is paramount in the fight against RACs.


Finally, it is our opinion that all other payers will soon follow suit with similar RAC-type audits.  It seems individual states are preparing to roll out their own Medicaid integrity programs with MICs (Medicaid Integrity Contractors) conducting the audits.  And not far behind will be the private insurers such as Blue Cross/Blue Shield, Aetna, United and Signa.  It will be a continuous battle, for sure.


So, don't be a spring of eternal cash flow for the RACs.  Instead, be a dry well.  If you haven't already done so, get your process improvement and internal control policies in place today.


About the Author

Leo Paul. D'Orazio, MBA, FACHE, is Director of Healthcare Services Group, based in the New Brunswick, NJ, office of WithumSmith+Brown, Certified Public Accountants and Consultants.  He has directed many consulting engagements for hospitals and physicians, home healthcare, mental health and addictive disease and outpatient treatment facilities, and is a Fellow in the American College of Healthcare Executives.   Leo can be reached at 610-737-7962 or ldorazio@withum.com.

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