RAC audits to increase; Goal: cut Medicare costs

© 2009 The Medical-Legal News

By Dan Clifford, publisher

The U.S. government’s Recovery Audit Contractor program has been made permanent, after a lucrative three-year demonstration period under which the RAC program contractors initiated the return of almost $700 million in Medicare overpayments to the government.
During the demonstration period, three-fourths of denied claims from healthcare providers were either a result of “incorrect coding” or a lack of medical necessity.
In a recent article titled “RAC to the Future: What Can Medicare Providers and Suppliers Expect from the Recovery Audit Contractor Program?”, which was published in the December issue of the ABA’s The Health Lawyer, lead author Andrew B. Wachler, Esq., noted that by August of this year, all Medicare providers and suppliers in all 50 states will be subject to RAC review.
The article reasoned that Medicare providers and suppliers will need to be vigilant in their compliance programs to survive RAC scrutiny.
The article noted that RAC program contractors will be hiring nurses and therapists to make determinations of medical necessity, and certified coders will be required for coding determinations. The RACs are not required to engage doctors in the medical review process, though they must have a medical director who is a doctor. 
A criticism of the RAC program is that because the contractors are compensated on a contingency fee basis, they are arguably more motivated to find overpayments than underpayments. Wachler’s article thus discussed defense strategies for providers to recoup denied claims. Wachler is principal of Wachler & Associates in Royal Oak, Mich.
Angie Tobias, a legal nurse consultant and owner and partner of Nightingale Consulting, LLC, which provides healthcare consulting and LNC services to attorneys and healthcare clients, said of the RAC program, “There are potential opportunities for LNCs on both sides of this issue — on the healthcare industry side in assisting facilities in defense against RAC auditor findings and on the RAC side in providing RAC review services with the RAC contractor.”
According to the article, contractors may find impropriety from 1) incorrect payments, 2) services that are not reasonable or necessary, 3) services that are coded improperly (including DRG miscoding) and 4) duplicate services.
In terms of dollars, the article said the largest billing infractions found by the RACs resulted from surgical procedures that were “medically unnecessary” when performed in-patient as opposed to out-patient. In numeric terms, the biggest group of denied claims came from medically unnecessary physical therapy, occupational therapy and speech-language pathology services. •