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pspencer100On Tuesday, April 26 CMS placed an update on its Recovery Audit Contractor Web page, a development that can be seen as the launch of reporting efforts on the results of the permanent RAC program. A document entitled “2011 FFS Newsletter” sheds light on the RACs’ efforts.

The Numbers

In all, the RAC program has identified $365.8 million in improper payments issued from October 2009 through the end of March 2011. Of this figure, $313.2 million was overpayment and $52.6 million was underpayments returned to providers. This already reflects one key percentage change. Under the RAC Demonstration Program, roughly 96 percent of identified improper payments were overpayments. Thus far under the permanent program, the ratio is 86 percent, representing a decline, but not enough of one to make affected providers feel any better about the RAC process.

Of the total improper payments identified since October 2009, $184.6 million, or just more than 50 percent, was identified during the first quarter of 2011. This represents a nearly 114 percent increase in improper payments from the last quarter of 2010. Factor in the number of issues that have been added to RAC websites since the beginning of the calendar year and all trends point to the RACs rapidly expanding their activities.

The figures released Tuesday were collected during half the time it took to perform the entire RAC Demonstration Project. Interestingly, the improper payments identified through six quarters represent 35.5 percent of the total improper payments identified during the 12 quarters of the demonstration project. Considering the enormous jump in improper payments in the last two quarters, it is reasonable to expect that the quarterly numbers will continue to increase at their present rate.

The Big Problems

The one-page report identifies the most pressing RAC issues for each contractor. For Connolly Consulting and Health Data Insights, the respective Region C and D contractors, the top issue has been the billing and reimbursement of durable medical equipment used during inpatient stays, which is considered a bundled component of inpatient services. For Diversified Collection Services, the Region A RAC, the top issue has been the identification of coding errors related to improper calculations of the number of hours of ventilator support. CGI, the Region B RAC, has identified the improper surgical DRG being selected based on the severity of the primary and/or secondary diagnosis for a procedure performed during a stay. All of these problems are representative of the RACs’ current heavy focus on Part A services.

The Part They Left Out

While the grand totals offered by CMS are interesting, there are two sets of numbers that are glaring in their absence.

During the RAC Demonstration Project, 12.7 percent of claim determinations were appealed, with the rate of success being 64.4 percent. The one-page RAC results “newsletter” offers no indication of either the percentage of total claims appealed during recent quarters or the success rate of those appeals.

With this temporary data void, we are left to review the results of the American Hospital Association’s RACTrac report. The latest report from the final quarter of 2010 shows that hospitals taking part in the survey achieved success in their filed appeals 85 percent of the time. I eagerly await the final appeal totals from CMS to see if the numbers under the permanent RAC program are on par with these findings or perhaps show signs of improvement.

The other numbers that are missing have to do with the overall job performance of the RAC contractors. Provider Resources, Inc., the RAC Validation Contractor, is tasked with assigning a score to each of the four RACs, ratings that act as a grade to assess the quality of their work products. To date none of these scores have been revealed by CMS. While there have been anecdotes regarding reportedly less-than-adequate RAC performance across the country, in the context of the missing appeal numbers there is currently no way to determine the quality of the work being produced.

The design of this newsletter gives every indication that the report will be a quarterly offering from CMS. There are many conclusions to be reached from this first set of numbers, but it is also reasonable to assume that the Recovery Audit Contractors now officially have joined the pantheon of entrenched government programs.

About the Author

Paul Spencer is the Compliance Officer for Fi-Med Management, Inc., a national physician practice financial management company based in Wauwatosa, WI. Paul has over 20 years of experience across all facets of healthcare billing, including 6 years spent with insurance carriers. In his current role with Fi-Med, he acts as a physician educator on issues related to E/M level of service and documentation audits by CMS and other outside entities. Paul has carried the CPC and CPC-H credentials from the American Academy of Professional Coders since 1998.

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J. Paul Spencer, CPC, COC

J. Paul Spencer is a senior healthcare consultant for DoctorsManagement. Is the national correspondent for Monitor Mondays, the live Internet radio broadcast produced by RACmonitor.

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