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Over the past ten to fifteen years, hospitals, integrated delivery systems, and clinics have developed compliance programs in response to the urging of federal agencies such as the Office of the Inspector General (OIG). Compliance guidance in the form of Federal Register entries has addressed most types of healthcare providers and also highlighted special areas of concern such as laboratory services or dispensing of durable medical equipment. While all types of compliance issues have been discussed, a very large majority of these issues revolve around payment for healthcare services. In other words, the overall coding, billing and reimbursement cycle is a major element for compliance programs.


With the advent of CMS fully implementing the RAC program, all healthcare providers-particularly hospitals, clinics and integrated delivery systems-need to take a long, close look at their CBR compliance activities. Over the years compliance activities have probably geared up and then declined based upon shifting objectives and the organizational commitment to maintaining CBR compliance activities. Now is the time to carefully review your organization’s CBR compliance program. What kinds of issues apply to your particular setting? What do you need to do to get ready?


Turbo-Charge Your CBR


We will use a simple planning model for discussing ways in which to adapt your current CBR compliance program into a program that can withstand the RACs. In many respects, you will be turbo-charging your program to give more horsepower for addressing the many vulnerabilities in the coding, billing, and reimbursement world. Here are four very basic steps:

1. Determine exactly where you are today,

2. Determine where you would like to be,

3. Determine anticipated changes in the planning horizon,

4. Develop an action plan to move toward your goal.


A planning horizon of five years is suggested although you may want to consider different time periods. How long the RAC program will be in effect is difficult to predict. As long as there are perceived overpayments, we should expect that someone would take the contingency payment to identify any and all such overpayments.


Look in the Mirror: Where Are You Today?


Take a look at your compliance program and, more specifically, the portion of the program devoted to coding, billing and associated reimbursement issues. Assess the number and type of personnel involved in any of the different compliance areas. Do you have internal auditing staff? Do you use external consulting firms? How many audits to you perform a year and what issues do these audits address.


The answers to these questions will vary considerably based upon the size and scope of services provided by your organization. A typical hospital will have routine annual or semi-annual audits for DRGs (inpatient) and APCs (outpatient). Internally there may be auditing staff reviewing special areas such as drug charge capture and documentation. Identify the internal and external audits that have been performed over the past year or two. This will give you an idea of the scope of activity and the number and types of issues being studied.


If your organization established a baseline audit at some point in the past, then you will have annual reports of all the activities for each year, and you should be able to gauge progress in meeting specific coding, billing and reimbursement compliance imperatives. Baseline audits should also include information on how the organization itself is changing which may include quantitative and qualitative data. For instance, you may want to assess how the medical staff organization is changing, growing or how many non-physician practitioners are being used. A hospital may have established or expanded provider-based clinic activities. New service area may have been created or expanded. The larger your organization, the more likelihood there is that there will be an increased number of potential problem areas.


You will need to assess your current staff relative to coding and billing issues. How many staff members do you have? What are their levels of competency and experience? Also, think about external resources. What consulting firms do you use to conduct audits? Will you be able to use them to assist with RAC related issues? What are their levels of competency and what specializations do these external firms represent?


How many staff members do you have? What are their levels of competency and experience? Also, think about external resources. What consulting firms do you use to conduct audits? Will you be able to use them to assist with RAC related issues? What are their levels of competency and what specializations do these external firms represent?


Bottom-Line: Expect that you will need to undertake significant planning and implementation efforts to increase both internal resources and to retain external resources in order to meet the RAC challenge. You should be able to use your current CBR compliance program as a starting point. The most important aspect of assessing your current situation is to be objective. Also, be prepared for some organizational pushback because of the costs. Be prepared to gear up using a modular approach so that you can implement in stages as necessary. You should anticipate cost-benefit arguments to justify the needed changes and additional resources.


Where Do You Want To Go?


The overall goal is basically constant. Healthcare providers want to provide quality services, code and bill correctly for those services and then be appropriately paid. This is the overarching, constant goal. What about the more specific goal relative to the RACs? The goal relative to the RACs is to code, bill and be paid in such a manner that there are no situations in which overpayments are occurring. More specifically no situations in which the RAC can claim there is an overpayment.


Given the subjectivity of some of the overpayment situations that the RACs investigate, meeting the goal of properly filing claims and being correctly paid is not necessarily easy to obtain. More importantly, how can you know that you are not being overpaid? One of the most frustrating parts of some RAC issues is that there is no real metric by which you can objectively judge the correctness of a claim and the propriety of the payment.


For instance, you may have a short-stay inpatient admission that meets standard admission criteria (e.g., Milliman and/or InterQual), you file an appropriately coded claim and you receive the MS-DRG payment. However, the RAC may maintain that this should have been an observation stay, not an inpatient admission.


RAC Judgment is Subjective


While the RAC judgment is subjective, the real questions are that of what standards or metrics can you use to judge whether you are correctly providing services and being appropriately paid? The one real tool that auditors always need is a good set of metrics by which to judge what is being audited.


Thus, in establishing your overall goal relative to the RACs, you may need to broaden your statement to include the subjectivity that you will encounter in certain circumstances. What this means is that you will have to place yourself in the shoes of a RAC auditor and try to envisage what they would question and what sort of judgment they will make. As usual, this is a difficult process and also an ever-changing process that can change over time.


Defending Yourself Against RAC Assertions


While your overall CBR compliance goal is constant, that is, coding and billing correctly along with proper payment, you may need to modify your goal slightly for the RAC issues to include coding and billing in such a way that you can defend yourself against RAC assertions of overpayments. This may require altering the metrics by which you judge your processes including changing policies and procedures.


For instance, in the brief example above that involves a short-stay inpatient admission, you may want to alter the process by which this type of situation is judged. In order to meet possible RAC demands, you may want to institute a utilization review of the case (and cases of this type) just before the actual discharge to determine if the case should be observation instead of an inpatient admission.


What Kinds of Changes Are Taking Place?


The third step in our four-step approach is to determine what is changing and how changes will occur during the planning horizon. The rate of change for healthcare payment systems trends towards chaos. Even if we delimit our scope to just the Medicare payment systems, the number of new systems and the rate of change with current systems is almost phenomenal. For the RACs, a major concern is when, where and how their functions will expand in the future.
While we can compile lists of possible RAC investigations today and the assertions of overpayments, we must be very concerned about what will happen in the future. Identifying possible future RAC overpayment issues is a significant undertaking, but one that we must all carefully consider.


Today the areas that the RACs can investigate are somewhat delimited, but what about the future? Will the RACs be allowed greater liberty in the issues and areas that they can address? What about all of the issues surrounding the many Medicare payment systems? Will CMS make decisions and then issue guidance on some sort of a retrospective basis? Will decisions made through the RAC appeals process provide precedence as we go forward?


Thus, the overall question is how will things change over the planning horizon? If we use five years as the planning horizon, circumstances can and will probably change dramatically. Consider the current implementation of APCs relative to the status of APCs in 2004. During the last five years there have been enormous changes in APCs. The same can be said about DRGs or now the MS-DRGs. While DRGs represented a fairly stable payment system for a number of years that has very much changed in recent years. For that matter the last five years have seen brand new Medicare payment systems.


Thus, the whole process of trying to determine how various payment systems will be structured and all of the associated coding and billing requirements, rules and regulations is a significant challenge. Looking forward five years is difficult with the current rate of change in the payment systems themselves and sometimes incomplete guidance that healthcare providers have on exactly how the payment systems are to work, and how coding and billing is or is not supposed to be happening.


Avoiding Confusion


For instance, one general area of confusion is separating the coding/billing/claims filing process from the claim adjudication/payment process. Particularly with the Medicare program, we sometimes receive unusual guidance on coding and billing in order to accommodate claim adjudication and payment. With the development and implementation of the HPIAA TSC (Transaction Standard/Standard Code Set) rule, all healthcare providers should be able to file a single standard claim for any given service to any third-party payer. Now, back to reality! However the question and, hopefully, the trend for coding, billing and claims filing is that we can move away from special requirements being made by third-party payers, including Medicare, to meet the demands of their payment systems.


What Can You Do To Reach Your Goal?


Now that we have determined where we are, where we would like to go and the anticipated changes in healthcare payment systems over our planning horizon, we now come to the fun part, that is, what action steps should we take to address the overall RAC challenge. The answer to this question will be different for every organization. The answer will depend on the size of the organization, the scope of services being provided, volume of services, the current CBR compliance program, and identified RAC issues along with anticipated RAC issues.


Most likely you will need to beef up your current CBR compliance program to meet the RAC challenge. In some cases you may feel that you are really starting all over! No matter who you are, consider the following concerns.

• Conducting special internal audits focusing on RAC issues

• Having external audits conducted on RAC issues

• Developing internal data mining and monitoring processes to identify applicable RAC issues

• Recruiting and training internal auditing staff

• Reviewing and revising coding, billing, chargemaster and associated policies and procedures

• Developing internal resources to track RAC appeals

• Contracting for external consulting and legal expertise

• Developing an internal RAC training program for the entire organization

• Developing financial assessments and projections for possible recoupments


You will need to add to this list as appropriate. Another challenge that you will face is that you can plan for a perfect scenario, that is, presume that all of the resources needed will be made available to you. However, turbo charging your current CBR compliance program with additional staff, new computer software, new policies and procedures along with contracting for additional external resources may not be that easy. Keep in mind that your response to the RAC issues is a process of keeping monies that you have already received, that is, you are reducing the risk that the monies will be recouped. Asking for an increase in resources along with the fact that there will be some recoupments may be a hard sell to upper management. Also, the degree to which your organization will subjected under the RAC program may not really be known until the RACs start their work.


Therefore, an incremental or modular approach is recommended. Add staff judiciously. Use external resources first to determine the scope of possible problems. Use computer technology to your advantage for data mining to determine if your claims exhibit unusual or suspect patterns. Review and revise existing policies and procedures to address RAC issues. Develop plans for additional personnel and the development of procedures for possible RAC appeals.


There is no simple, one size fits all solution for your organization in order to address the RACs. You will need to consider many different issues and constraints, both internal to the organization and external to the organization. Addressing the RACs will be an ongoing process that will span multiple years. However, enlarging your current CBR compliance program this time can assist in mitigating unusually large recoupments. Also, you should already have some organizational structure in place from which you can build.

About the Author

Duane C. Abbey, Ph.D., CFP, is an educator, author and management consultant working in the healthcare area. He is president of Abbey & Abbey, Consultants, Inc. that specializes in healthcare consulting and related areas. His firm is based in Ames, Iowa. Dr. Abbey earned his graduate degrees at the University of Notre Dame and Iowa State University.

Ed Note: For more information on establishing a coding, billing and reimbursement (CBR) compliance program see the author’s second edition of Compliance for Coding, Billing & Reimbursement: A Systematic Approach to Developing a Comprehensive Program published by Taylor & Francis, ISBN=9781563273681.


About the AuthorEMail the Author


Duane C. Abbey, PhD, CFP

Duane C. Abbey, PhD, CFP, is an educator, author, and management consultant working in the healthcare field. He is president of Abbey & Abbey Consultants, Inc., which specializes in healthcare consulting and related areas. His firm is based in Ames, Iowa. Dr. Abbey earned his graduate degrees at the University of Notre Dame and Iowa State University. Dr. Abbey is a member of the RACmonitor editorial board and is a frequent guest on Monitor Mondays.

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