Unfortunately for medical practices, hospitals and other healthcare facilities, “they” are a team of government auditors. With all due respect to “Field of Dreams,” many administrators would find it preferable to deal with the ghostly specter of a long-dead baseball team than to face the flesh-and-blood auditors sitting in the waiting room … now that’s truly scary.

Adding to the nightmare is the sheer volume and scope of audit options – Zone Program Integrity Contractors (ZPICs), Recovery Audit Contractors (RACs), Program Safeguard Contractors (PSC), Carrier and Fiscal intermediary (Part A/B MAC) Program Integrity units, Office of Inspector General (OIG) auditors, state Medicaid Integrity Contractors (MICs), and coming soon state Medicaid RAC programs. The expansion to the RAC program was to be implemented by the beginning of this month. However, on Feb. 1, the Centers for Medicare and Medicaid Services (CMS) offered a temporary reprieve.

Section 6411 of the Affordable Care Act requires states to establish Medicaid RAC programs. States were to have outlined a program and contracted with a RAC (or filed for an exemption) by Dec. 31, 2010 and should have been ready to implement programs by April 1, 2011. However, comments elicited during the Notice of Proposed Rulemaking coupled with concern over states fully complying with provisions of the final rule, which has not yet been published, led CMS to push back the timeline. The federal agency has now decided not to set a new implementation date until the final rule is issued, most likely before the end of 2011.

Donna Thiel, a shareholder based in the Washington, D.C. office of the law firm of Baker Donelson, said the Medicare RAC program continues to evolve so it comes as no real surprise that the final rule for the state Medicaid rollout is still in flux. For example, Medicare RACs originally were allowed to keep their share of the overpayment even if the judgment was ultimately overturned. Now, she said, “They do not get to keep the incentive payments if the denials are reversed on appeal. RACs still have an incentive to identify overpayments, but less of an incentive than if they got to keep the money even if overturned on appeal.”

In the demonstration program, RACs corrected $1.03 billion in payments. Of that figure, 96 percent were overpayments to providers. In only 4 percent of the cases did the RAC find the government had underpaid. A CMS evaluation of the demonstration project appeal process through Aug. 31, 2008, the latest data available, found 22.5 percent of the determinations had been contested. While CMS boasts only 7.6 percent of overall claims overpayment determinations have been overturned, the reality is a little more than one-third of the appealed cases have resulted in a favorable decision for the provider. It’s all in how you look at the numbers.

The demonstration project resulted in 525,133 overpayment decisions. Of that figure, 22.5 percent or 118,051 cases were appealed at some level. Upon appeal, 40,115 cases culminated in a decision that favored the provider contesting the RAC determination. Therefore, it’s true that only 7.6 percent of the total determinations were reversed, but it’s equally true that of the 118,051 contested cases, 34 percent of them wound up in favor of the provider.

The bottom line, however, is squarely in favor of CMS recouping overpayments and potentially avoiding future problems as providers learn from past mistakes. Therefore, any healthcare entity accepting Medicare and/or Medicaid payments should fully expect robust auditing activity to continue.

Thiel noted a RAC audit isn’t really different from other audits, and there is no magical formula to get ready. “I think some providers have a sense you can cram for this exam,” she said of one of the great myths surrounding RAC. “Providers … and anyone who takes Medicare … have always been subject to audit or review of claims,” she pointed out. “When the RAC auditors come in, they’ll ask for, let’s say, 100 claims. Unless you’re going to go back and look at every one of your files, how would you ever know which ones they’ll pick? You can’t. It’s a random check.”

Instead, Thiel counseled, “Make sure on a day-to-day basis documentation is thorough, available, and all sound.”

Thiel noted CMS publishes a complete list of issues the RAC is authorized to review. “A provider could do their own review of those targeted codes and claims. It would let a provider know where they should do some homework and make some changes,” she said. However, she cautioned, “There are no ‘do-overs.’ Whether you identify a claim in a self-audit or when the auditors request a patient file, you can’t backdate records. Attempts to ‘fix’ faulty records could be criminal,” Thiel said, whereas the audit is for civil penalties. “If supplemental evidence is needed to defend a claim, you can submit   information obtained after the care was rendered, but it must be appropriately dated,” she continued.

Thiel said the benefit of conducting a pre-RAC audit is that you can identify problem areas. Finding mistakes on your own might not change the outcome of an audit, but it should help you avoid repeating the mistake. Thiel pointed out that while there are no ‘virtue coupons’ awarded to providers who identify issues, correcting an error is important because RACs have the authority to make serial requests.

One step providers could and should take in advance of any audit, she said, is to have a staff rapid response team in place. Thiel advised, “Once you get a demand for records, don’t miss any deadlines.” She noted the time frames for turning over voluminous records and filing appeals could be confusing and added outside consultants often are hired to help providers manage the process.

Once a record request is made by an auditor, Thiel continued, it’s a good idea to add a narrative to each of the files submitted in response outlining key points in the care plan and the factors that guided the caregiver.

Because ‘medical necessity’ is at the crux of many overpayment decisions, Thiel said any narrative explaining the steps from diagnosis through treatment could be helpful to the RAC. “When an auditor looks at whether or not a particular treatment was medically necessary, he’s looking back after the fact. When a doctor was deciding on treatment, he didn’t know what the end of the story was.”

Using an example of rehabilitation, Thiel said an auditor might see that after three months of therapy, Ms. Smith is still on the walker without any appreciable gains. However, that doesn’t automatically mean a provider was overpaid for unnecessary services. Instead, Thiel pointed out, “The analysis is what was her rehabilitative potential on day one.” Outlining the thought process in a cover letter could potentially help avoid having to defend a treatment plan in the appeals process.

When it comes to determining medical necessity, Thiel said, “There are no secret protocols; the same Medicare rules and regulations that apply on a day-to-day basis apply in audits. There are, however, differences from auditor to auditor.

“Keep a copy of everything for your records. Even if you get an extension, make sure you get it in writing such as by e-mail. Document, document, document everything,” Thiel stressed.

Finally, she noted, attitude is important. “The auditors are acting as government contractors and should be treated with respect. Even though an audit request may feel like an accusation, it is just an inquiry.”

Chances are that everyone who accepts Medicare and Medicaid will undergo numerous audits over the years and will be faced with overpayment demands at some point. “You could be the most squeaky clean practice in the world, and could they find something to deny? It sure seems that way … nobody bats 1,000. It is the rare provider that has every claim perfectly documented, but you can do pretty well,” Thiel noted. Keeping thorough records on a daily basis is the best way to ward off unpleasant surprises. “You’re much less likely to have denials, and if you do have denials, they’ll be smaller and more limited,” she concluded.

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