December 10, 2008

The Data Approach to the RAC: The Only Comprehensive Solution

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Old Solutions, Appellate Strategies No Longer Effective in Dealing with RACs

 

Sam Donio Chief  Executive Officer for CBIZ

As your facility starts to organize a RAC strategy, many firms will try and offer solutions to best deal with the impending audits.  But the RACs present a situation where the old solutions of random audits, software or appellate strategies will no longer be effective.

This article will examine these approaches and identify their inherent weaknesses in the new RAC environment.  We will then present a solution developed with our clients that provides the platform for successfully managing the RACs.


Audit…Audit What?

Every hospital knows how to do an audit.  With the imminent threat of the RAC, the notion of audit will be a Pavlovian reaction to many in the healthcare industry.  But what exactly is the efficacy of a random hospital-wide or department-wide audit when the RAC will be focusing on specific, selected records for review?

 

The RACs will be looking at inpatient coding errors, inpatient short stays, inpatient procedures that are not on the inpatient-only list, readmits into the hospital within 72 hours, three-day transfers to skilled nursing facilities and outpatient technical denials among other areas.  Doing a comprehensive audit or even a focused random audit of all these areas would result in the audit of at best hundreds of charts.  This approach will be costly and cumbersome and it will not provide you with the comfort that recoupments will be minimized.

 

Let’s say that you examine one of the inpatient DRGs by looking for coding or documentation errors.  This will only scratch the surface of the issue since the RAC will be looking at multiple DRGs with multiple potential errors.  Without a method to focus your efforts, your facility will spend a hefty sum on outside consulting fees or, if done internally, invest internal resources you most likely do not have available.

 

From a cost benefit analysis, the complete audit approach may require an investment greater than the average recoupments per facility around $500,000-$600,000 for the first year of RAC examination, not a wise return on investment.

 

For random audits, the first question is how do you ensure that the right charts will be reviewed?  Again, the RAC uses a data mining process for its targets.  For example, if your facility is incorrectly coding its debridement cases 20 percent of the time, a random audit might not be able to identify the specific cases that will come under review.

 

Furthermore, the existing auditing processes do not provide the proper context in evaluating how to best spend your resources.  For instance, if your hospital has a specific RAC area error rate that is significantly below geographical, bedsize and teaching status peers then this should not be the first area where your facility should audit.  Without taking into account how the RACs will prioritize their reviews, standard auditing practices will be just another example of Ready! Fire! Aim!



There Must be Software

In the past two decades, providers have become over-reliant on software scrubbers to correct poor coding and documentation practices; the peculiar quirks of the RAC do not make this, or a similar type of product, a viable alternative at this time.

 

Most software products scrub the claims at time of billing yet, the RACs ability to look back at your facility’s records to at least October 1, 2007 knocks out 99 percent of software applications on the market.  While the time delay factor is a problem now, as the RAC period progresses and the RAC targets evolve, facilities will be required to continually look back over an ever-expanding period of time.  These factors limit the ability of current software applications to address the RAC environment.

 

We’ll Win on Appeal

One of the most highly touted RAC strategies on the market is an appellate approach.  The appeal strategy is as follows: “You can’t stop the RAC letter from coming.  Because you don’t know what records they will be looking at, an audit is not effective.  Let’s wait for the letter and beat the RAC on appeal.”  Statement one is correct:  the letter is coming.  An appellate strategy, however, does not provide the mechanisms for revenue integrity for your facility.

 

An appellate strategy may help to minimize RAC recoupments once they occur, but it does not lead to better inputs or practices for your facility in a timely manner.  You may go three years before the letter arrives, continuing to make the same mistakes, foregoing the same revenue, incurring the same liability.

 

The average RAC appeal has been estimated to cost more than $2,000 per record.  Based on this rate your hospital could not afford to fight repeated low-dollar errors on its high volume procedures like X-Rays and Lab.   A hospital could risk losing tens or hundreds of thousands of dollars in these areas yet it would not be fiscally responsible to pursue these areas on appeal.  Overall, only 7 percent of total claims have been successfully overturned on appeal.  With these facts in mind, how much will your hospital continue to lose by not addressing your core processes before the RAC letter arrives?

 


The Data Approach

The approach that our clients use is a data-driven solution that provides them with the necessary tools to prioritize their resources and ascertain their real exposure to the RAC.  By setting up rigorous benchmarking which places these facilities’ data in the proper geographic, bedsize, volume and fiscal intermediary peer groups, they now have the ability to prepare for the RAC letter.

 

To facilitate this effort, we at CBIZ KA Consulting Services, LLC, have developed the RAC R4 Reports™, a comprehensive report set which examines a facility’s data through the prism of the RACs ever-changing list of targets.  We examine the targeted areas that the RACs are looking at and we help you place them in a proper context by using our proprietary peer group benchmarks.  Furthermore, we isolate the specific cases that cause flags in the data.


Finally, we give you the precise cases that you should be concerned with.  Again, there is no randomness.  By using the RAC criteria, you are able to focus your RAC efforts by selecting those records most likely to be called into question by the RAC.  After the R4 analysis, you may have only 50-60 pressing cases to look at for your entire facility instead of hundreds for an audit.

 

By following this RAC approach these three benefits are achieved:

  • You will stop hemorrhaging money.  The R4 will tell you were you may lose money from the RAC and it will also identify the areas whereby improvements can be made.
  • You will gain revenue.  The reward component of our approach focuses on areas on under-coding; thus there will be significant opportunities to increase your revenue.
  • You will better manage your resources.  The report set gives you a blueprint whereby you can best prioritize your organization’s preparation for the RAC.

 

In closing, the biggest piece of advice we feel we can offer our clients when dealing with the issues resulting from the RAC is approach it with a rational plan, randomness will only make things worse, a well executed plan will improve documentation and coding, which in the long run will only benefit the provider.

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Samuel A. Donio, Jr., is Chief Executive Officer for CBIZ

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Samuel A. Donio, Jr., MBA

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