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nbeckleyAutomated reviews of outpatient topics and/or DME topics are underway across most of the country, and Connolly Healthcare, the RAC contractor for region C, in the first week of December released a set of 24 approved issues for DRG and discharge validation.

The Recovery Audit Contractor program was delayed earlier this year due to bid protests, but then finally rolled out with informational sessions and town hall meetings followed by the August posting of the first CMS-approved issues for automated review.

With the holidays upon us, do we really have time for all of this right now? According to some of my colleagues who took part in the RAC demonstration, there is no time like the present to make your lists, check them twice, and then check them again.

Let’s take a look at a few examples from two providers significantly impacted by the RAC program during the demonstration project (both have granted me permission to report on their data on the condition of anonymity).

A mid-size hospital with a 28-bed IRF (inpatient rehabilitation facility) unit reported that it received 440 requests for IRF medical records, from which eight cases were approved by the RAC and 336 cases denied, resulting in a recoupment of $4.3 million. The facility appealed all of the denied cases and 100 percent subsequently have been overturned – primarily at the ALJ level, although three were overturned at the FI and 36 at the QIC.  After two years of appeals, $4.2 million has been returned, with the only exception being three pending ALJ cases. This provider reports that redetermination in some instances took as long as six months, when according to CMS, the process should be completed in 60 days.

Another mid-size hospital with a 12-bed IRF unit reported these statistics: 96 percent of all audits at their hospital involved inpatient and outpatient rehab. Recoupment was at 95 percent, totaling $2 million. Twelve cases were overturned at redetermination, and 100 percent of those appealed to the ALJ were overturned.

Both providers reported being blindsided by the process when it started. In one instance the clinical director wasn’t in the loop on the denied claims until well into the process, and the other provider noted that communication systems, both external and internal, were not optimized to produce timely responses to the RAC when the process began.  Both providers reported that they since have been testing and continually retesting their internal systems to ensure their RAC teams are assembled and that internal and external communication systems are precise and functional. Both have gone so far as to mail a dummy demand letter to their hospitals for the purpose of tracking its course.

In the permanent RAC program, Florida providers who appealed denials (RAC demand letters) on the CMS-approved automated issues now are receiving denials on their first round of appeals. A rehab provider dinged for billing two untimed codes on the same day (which is not prohibited) received its demand letter too late to take advantage of the 15-day discussion period. The letter floated in their system for a few days, and then it took additional time to research the denial before determining it needed to be appealed – a decision that was reached because it did not involve a CMS-approved issue and there was no known prohibition against billing the two untimed codes in question on the same day.  “Boom,” the 15 days were up: no time for discussion, so straight to first level of appeals, and now on to the second level. At this level of appeals on the first claim, the provider will be upside-down when its appeal is successful – the question is by how much, if they have to continue beyond the second level?

Now that 24 inpatient issues have been approved for DRG and discharge validation, it is time to make your list: what is your facility’s financial exposure risk? Are denial prevention strategies in place? Do audit teams have criteria to determine appeals strategy for the posted issues? To facilitate a timely response to a review of those ADR requests to determine DRG and discharge status, be sure to update your Commonplace Scrapbook (include corresponding CMS regulations on each of the issues along with local coverage determinations, plus a listing of the discharge codes with the status from the period 10/2007 to current), and give the “champion” for each area an update on the current issues and an encouraging pat on the back. Then start reviewing each of the 24 issues posted.

With more than $6 million in recoupment from the aforementioned facilities affected by the RAC demo, and two years of appeals to get their money back, it should go without saying that both providers are skeptical about the CMS statement that the RAC program will have “limited financial impact on most providers.” The American Hospital Association estimates cost of appeals to range from $2,500 to $7,000 per claim. So it likely would cost a provider anywhere from $840,000 upwards of about $2.35 million to appeal 336 cases.

So let me ask my question again: “with the holidays upon us, do we really have time for all of this right now?”

About the Author

Nancy Beckley is a co-founder and president of Bloomingdale Consulting Group, Inc., providing consulting services to the rehab professional. Nancy is certified in healthcare compliance by the Healthcare Compliance Board, and serves on the Part A and Part B Provider Outreach Education and Advisory Panel for First Coast Services Options (Florida Medicare). She previously served on the CMS Professional Expert Technical Panel for Comprehensive Outpatient Rehabilitation Facilities.

Contact the Author



Nancy J. Beckley, MB, MBA, CHC

Nancy Beckley is founder and president of Nancy Beckley & Associates LLC, providing compliance planning and outsourced compliance services to rehab providers in hospitals, rehab agencies, and private practices. Nancy is certified in healthcare compliance by the Healthcare Compliance Certification Board. She is on the board of the National Association of Rehabilitation Providers and Agencies. She previously served on the CMS Professional Expert Technical Panel for Comprehensive Outpatient Rehabilitation Facilities. Nancy is a familiar voice on Monitor Mondays, where she serves as a senior national correspondent.

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