Updated on: June 22, 2012

RACs’ Strengths and Weaknesses Versus Providers: Who’s Winning at Mid-Year?

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Original story posted on: June 23, 2009

bbissey120dsBy: Bret S. Bissey, FACHE, MBA, CHC


As the summer quickly approaches, it might be a good time to assess what we have learned about the RAC efforts to date. I'd like to suggest we analyze RAC and provider efforts at mid-year 2009 via an evaluation from a time-tested management evaluation tool: the SWOT analysis. For those of you not familiar with the SWOT, it is an acronym for "Strength, Weakness, Opportunity and Threat." Let's look at each from the vantage points of both providers and RACs.

 

Strengths

 

Many providers have begun efforts of examining  their risks and performing root cause analysis studies to determine cause(s) of their risk. The primary way to determine if you have risk connected to complex reviews is to perform chart reviews that compare the documentation of a service to what has been billed and paid for by your fiscal intermediary. Following that effort with focused education, process changes and additional reviews should lessen the financial impact a provider might feel. Of course, accountability also needs to be assigned to those responsible for the critically important tasks of making sure your documentation and coding standards result in compliant billing practices.

 

For RACs, we are seeing a fundamentally systematic approach in their attempts to identify improper payments. By all indications their data mining capabilities are becoming more sophisticated and their FTEs and other related resources more potent. In a "return on investment" business model, the RACs appear to be gearing up to be efficient and focused in order to achieve profitable returns for their investors.

 

Weaknesses

 

For providers, it is a grim reality that the most significant economic downturn in a generation is causing financial calamity within many hospitals around the country. There is hardly enough money in hospitals to fund necessary capital expansion, purchase state-of-the-art equipment, support IT or building infrastructure, pay vendors and meet payroll. Thus the challenge for many hospitals to hire dedicated RAC coordinators, have physicians appropriately educated, staff knowledgeable personnel and perform all of the necessary preventative RAC efforts is very daunting.

 

If you are a hospital CEO, do you use your limited dollars to support direct patient care or perform a RAC review? Think about it: addressing RAC concerns is important, but lack of funding puts some hospitals in a predicament of not being able to prepare adequately. This lack of preparation could result in draconian financial moves within these hospitals.

 

For RACs, they are entering a marketplace in which providers and their state associations hopefully are in "making it as difficult as possible" mode when it comes to identifying and recouping overpayments. Also, the RACs are dealing with one of the most complex payment systems ever devised.

 

Their learning curve on the specifics of documentation, coding and billing reimbursement will need to extend far beyond their data mining capabilities to be successful in the long run. One example: in speaking to a client hospital in the Midwest recently, a member of their C-Suite stated that they were told by their RAC that improper inpatient coding cases will result the loss of the entire MS-DRG payment, not the difference between what was paid and the recoded amount. At the writing of this article the hospital had a call into the RAC for clarification. If this is true, clearly the education of this RAC staff is not at the level it needs to be, because no one has ever stated or implied that improper MS-DRG coding can place entire payments at risk. Can you imagine the financial consequences of this type of decision? This issue is much different from the financial impact of losing an entire DRG payment if the admission was denied entirely due to lack of medical necessity. Does this RAC know the difference? Stay tuned, but if I were this hospital, I would be all over this RAC, stating "they do not know what they are doing."

 

Opportunities

 

For providers, there is power in numbers. In some states, hospitals are banding together in order to mount a collective effort to battle the potential of their RACs making bad decisions and putting hospitals at significant financial risk. It is no secret that, when it comes to at-risk claims, your ability to begin to implement corrective actions (chart reviews/assessments, education, follow-up reviews, subsequent changes) in those areas is a very good strategy that ultimately lessens your risk.

 

For RACs, unfortunately there still are providers who think "they will never review us" or "everything is ok - we don't have anything to be concerned about or prepare for." These providers who have not undertaken the proper proactive initiatives will end up being very valuable, revenue-generating clients of the RACs.

 

Threats

 

From my perspective, the biggest potential threat for providers is the unknown of extrapolation. If the RAC identifies a "pattern or practice" of improper payments, what happens then? Even being in healthcare compliance full-time since 1997, I honestly can tell you that I do not know the answer to that question. But what I can tell you is that if a provider knows he or she has a problem, having failed to follow strong compliance efforts (please see my last six articles for RACmonitor.com) to identify, resubmit and correct these issues, the data-mining efforts of the RACs could be very dangerous. Another risk for providers is the lure of different ways to avoid or trick the RACs that could be in direct contrast to the Medicare Conditions of Participation and/or hospital policies. Be careful of any tactics that the government could argue constitute a scheme or attempt to alter records in a fraudulent manner in order to reduce or eliminate overpayments. If it sounds too good to be true, it probably is!

 

For RACs, if the American Hospital Association, state hospital associations, the American Medical Association and other groups band together to make public any errors or misjudgments they make,  it could create a public outcry that the "RACs don't really know what they are doing." This threat may be the reason for some of the delays (medical necessity reviews having been postponed until early 2010) we have seen in the program rollout.

 

Conclusion

 

The second half of 2009 should be very revealing in regards to the RAC rollout. Hopefully by taking appropriate, proactive efforts the RACs will not find many overpayments within your facilities.

 

About the Author

 

Bret S. Bissey is a nationally recognized expert in healthcare compliance. He is the author of the Compliance Officer's Handbook, published in 2006, and has presented at more than 40 regional and national industry conferences/meetings on numerous compliance topics. He has more than  25 years of diversified healthcare management, operations and compliance experience.

Contact the Author: bbissey@ima-consulting.com

Bret Bissey, MBA, FACHE, CHC

A veteran in healthcare compliance (since 1997), Bret Bissey has served as senior vice president and chief ethics compliance officer at UMDNJ in Northern New Jersey. The author of the Compliance Officer’s Handbook, he has been a thought leader and popular speaker at industry conferences and meetings for many years. Bissey has more than 30 years of diversified healthcare management, operations, consulting, and compliance experience.

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