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With each passing year, the number of bodies auditing healthcare providers grows. What started as a recovery contractor demonstration project launched by Medicare in 2005 has blossomed into an increasingly complex alphabet soup of agency acronyms presenting financial risk. Many of these recovery contractors threaten to take back revenue; a few do not.

As we enter 2013, it is important to identify which federal and state auditors present financial risk and to understand the extent of that risk. This month’s article summarizes those topics and also outlines four types of audits that are troublesome and labor-intensive, but won’t take a bite out of cash flow.  Revenue-Threatening Federal and State Audits 

The two types of most daunting revenue-threatening audits are those that focus on Medicare payments to hospitals: These are conducted by Recovery Audit Contractors (RACs) and Medicare Administrative Contractors (MACs). The RAC “pay-and-chase” program has been live since 2008, and as such, RAC risk generally is fully understood by healthcare providers. However, organizations must remain vigilant in defending against such risk.

We advise organizations to monitor regional RAC activity continuously via the RAC websites. Also, shore up clinical documentation improvement (CDI) programs with an eye on known RAC targets and documented issues. Finally, centralize the management of RAC audits across all locations, including owned physician practices, medical groups and clinics. As discussed in my December 2012 article, “RACs Expand into Physician Practices, Adding Pressure to Existing Audit Burdens,” the RACs are planning reviews of practices and medical groups in 2013. 

A similar approach is suggested in dealing with MACs. MAC prepayment reviews can represent an even more serious revenue risk since payments are held back before, rather than after, reimbursement. One HealthPort customer, INTEGRIS Health, has been experiencing MAC prepayment reviews since 2009 and advises others to focus on timely submission of medical record documentation as a key step in mitigating revenue takebacks. Beyond RAC and MAC activity, there are seven other types of audit providers should know about and understand fully.

Other Forms of Revenue Risk

Other revenue-threatening audits to recognize and discuss with internal teams include the following:

  • Quality improvement organization (QIO) audits
  • Comprehensive Error Rate Testing (CERT)
  • Medicaid Integrity Contractor (MIC) audits
  • Medicare HMO/Advantage Plan audits
  • Zone Program Integrity Contractor (ZPICS) audits
  • Payment Error Rate Measurement (PERM)
  • Disproportionate Share Hospital (DSH) audits

Of these, the Medicare HMO/Advantage Plan audits in particular are creating heightened concern among healthcare providers in 2013.

Spike in Medicare HMO/Advantage Plan Audits Expected

For providers with large populations of Medicare HMO/Advantage patients as compared with traditional Medicare patients, Medicare HMO/Advantage Plan audits can be numerous, laborious and costly.

Currently, the actual plan carriers are conducting these audits, but in 2013 we expect that Medicare Part C RACs also will begin auditing Advantage Plan encounters, as the RAC program was expanded to include Medicare Part C under the Patient Protection and Affordable Care Act. The possibility of both the health plan and RACs looking at cases means there is a high probability for duplication of audits.

In 2013, keep an eye on these Medicare HMO/Advantage Plan audits and use some type of electronic audit tracking tool to identify duplicates. If a duplicate audit is identified, providers are encouraged to dispute the duplicative request. Standard “dispute letter” templates can be created to use in these situations.

DSH Audits are Rare, but Deadly

DSH audits are triggered by very specific events and typically involve scrutiny of existing cost reporting tools along with hospital cost reports and audited financial statements. While DSH audits don’t occur often, when they do occur, they represent a very serious matter.

One large, multi-location health system experienced a 2009 DSH audit in which more than $3 million was paid back to the Medicaid program. Large organizations should gather additional information regarding these audits and should be fully aware of their specific triggers. Additional information on DSH audits can be found online at the national Medicaid website.

Non-Revenue Threatening Audits can be Equally Laborious

As mentioned, there are three other types of audits to keep in mind in 2013 (Medicare risk adjustment audits, HEDIS and Medicare Advantage Plan quality audits). While no revenue is taken back through these audits, the burden to staff and internal cost to prepare medical records and send information along certainly lends a comparison to the revenue-threatening audits mentioned above. Volumes of these three types of audits also often are considerable, further burdening staff and audit management teams. In addition to familiarizing yourself with these matters,, it’s important to be aware of any internal audits your organization may be performing in the coming year.

Cost to Comply is Your Biggest Risk in 2013

Provider focus should be concentrated in five areas in order to effectively reduce these costs over time:

  • Prevent audits before they occur through strong CDI, coding and revenue integrity programs.
  • Centralize audit management to make the most of focused resources, and identify duplicate audits.
  • Implement technology to track, monitor and manage audits as they occur.
  • Take advantage of electronic requests and electronic delivery when available.
  • Learn from your experiences, creating a feedback loop for future audit prevention initiatives.

Time and motion studies demonstrate that there are formidable costs associated with audit compliance, regardless of audit type. Both revenue-threatening and non-revenue threatening audits demand FTEs, paper production, postage, shipping, tracking, monitoring and appeal management.

About the Author

Lori Brocato, HealthPort Audit Product Manager, has over 16 years of experience in the healthcare technology industry creating product lifecycle plans and executing product strategies. Ms. Brocato frequently serves as an audit expert sharing audit management trends and best practice guidelines as a regular presenter for industry events and webinars.  She is the author of HealthPort’s audit Insights Blog and provides expert input for many trade publication articles each year. Ms.Brocato holds the distinction of being RAC-certified by the Medicare RAC Summit and is a member HIMSS, HFMA, and AHIMA.

Contact the Author


To comment on this article please go to editor@racmonitor.com


The INTEGRIS Pre-Payment Audit Experience: https://healthport.com/campaigns/prepayment_reviews_article.aspx

DSH Audit Information: http://www.medicaid.gov/Medicaid-CHIP-Program-Information/By-Topics/Financing-and-Reimbursement/Downloads/General_DSH_Audit_Reporting_Protocol.pdf


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