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be they RACs, MACs (Medicare claims Parts A & B), or ZPICs (Medicare advantage plan claims), are looking to nab whatever Medicare funds they can from provider healthcare billing claim errors.

But it is not ending there. Hospital billing scrutiny is going to continue as a normal course of business; it’s not a one-time lightning-strike event. You and your facility should take every measure to be prepared and compliant for the next lightning bolts to strike.

First Medicare; Next Bolt of Lightning… Medicaid

Look out for the RAC counterparts – the MICs (Medicaid Integrity Auditors). This past July, the Centers for Medicare & Medicaid Services (CMS) held a special open-door forum to discuss the Medicaid Integrity Program (MIP). According to recent reports, CMS representatives stated that nearly 500 Medicaid audits are being performed in 17 states, and the program will roll out to the entire country by the end of the year. The process is expected to be very similar to that which currently is going on with the RAC program.

Private Insurers… Lightning Strikes Again

Yes, private insurers will come calling, too. If you find this hard to believe, consider a June 30 announcement released by the Philadelphia-based Independence Blue Cross (IBC) that stated, “in 2008, IBC’s Corporate & Financial Investigations Department (CFID)… recovered nearly $52 million in overpaid claims resulting from fraud, waste, or abuse. Since 2004, CFID has recovered more than $192 million in overpaid claims, and referred 325 cases to law enforcement and regulatory authorities, resulting in 86 fraud charges and 65 convictions.”

That’s not to suggest that all overpayments made by providers result from fraudulent intentions. My point here is that these insurance companies are very aware of the potential for hundreds of millions of dollars to be recouped by conducting claims audits. They are watching the RACs very closely, you can be sure.

Fear the FERA

President Obama signed the Fraud Enforcement and Recovery Act of 2009 on May 20, thus offering up many amendments to the False Claims Act in order to make it easier for the government to pursue any person or company suspected of having benefited from government reimbursements via bogus claims.

Considering that hospitals, physicians and durable medical equipment (DME) companies are the major providers of services eligible for reimbursement by government-funded programs such as Medicare and Medicaid, the Department of Justice just may pay a visit to your facility – not only to ask for patient records, but e-mails and other related documents in order to determine if any fraud has taken place.  Imagine the time and energy it would take to defend your facility and staff? It would be extremely burdensome on both personnel and finances, and yet another bolt of lightning in this storm.

Be in a Position of Strength

Billing compliance and audit preparedness for claim reviews should be permanent parts of your facility’s DNA. Do what needs to be done in order to be prepared and compliant.


  • Educate hospital medical record staff on how insufficient documentation or improper coding could impact the hospital’s bottom line, then develop policies and procedures to ensure accurate physician clinical documentation and coding;

  • Determine your hospital’s RAC preparedness by examining written policies and procedures covering operational efficiency in expediting RAC demand letters to a successful conclusion. This process will prove useful for future insurer claim reviews;

  • Have written internal control policies and procedures in place to avoid future clinical documentation and coding errors that could result in lost reimbursement;

  • Keep yourself updated on potential risk areas and issues;

  • Respond promptly to internal complaints and regulatory inquiries – watch out for enforcement trends, ripple effects and old issues resurfacing;

  • Respond appropriately and thoroughly the first time, for you may not get a second chance;

  • Get counsel and subject-matter experts involved early;

  • Knowledge is power: use data mining and analytics to collect and protect data.

Stormy Weather Ahead

As the economy scuffles and the tills become smaller, the scope of claim reviews is becoming bigger.  Medicaid is replicating what is going on with Medicare claim recoupment, even as the other major payers – the Blues and the commercial insurers – are conducting audit programs of their own.

Your facility could experience a second and even third lightning bolt of claim reviews. Be as prepared and compliant as you possibly can, becoming a lightning rod that will ground the shocking current of recurring claims reviews.

About the Author

Leo Paul. D’Orazio, MBA, FACHE, is director of Healthcare Services Group, based in the New Brunswick, NJ, office of WithumSmith+Brown, Certified Public Accountants and Consultants. He has directed many consulting engagements for hospitals and physicians, home healthcare, mental health and addictive disease and outpatient treatment facilities, and is a fellow in the American College of Healthcare Executives.

Contact the Author

Leo can be reached at 610-737-7962 or ldorazio@withum.com.


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