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Based on our experience, it appears that hospitals fall within one of three categories when it comes to their levels of preparedness:

1. The “Patient on the Road to Recovery” Approach

Hospitals have conducted comprehensive data-mining analyses of Medicare claims in question. They have embraced the RAC concept and readied their revenue cycles, medical records, and physician advisory service departments by developing concrete policies and procedures, including state-of-the-art RAC tracking systems.

2. The “Apply a Band-Aid” Approach

Hospitals have attempted to ready themselves for upcoming RAC audits by performing randomly selected Medicare mock claim audits and putting together makeshift RAC-tracking systems with Excel spreadsheets. The hospitals have assembled loosely-knit RAC advisory groups, including those covering revenue cycle, medical records and physician advisory services.

3. The “DNR/Do-Not-Resuscitate” Approach

Hospitals basically have decided to spend their time monitoring recent goingson regarding the RAC process, but have not seriously developed any committees, policies or procedures to respond to the RAC audits and will take a reactive approach once they receive their first demand letters. If these patients – or, in this case, hospitals – go into cardiac arrest, they probably will not make it.

Based on input from 70 hospitals across the nation that have participated in the CBIZ R4® data-mining report analysis, the categories listed below are sure to be RAC targets.

  • Inpatient Coding
  • Short Stay/Medical Necessity
  • Inpatient surgery cases with outpatient procedures
  • Three-day discharge to skilled nursing
  • Outpatient Automated Denials

In addition, we have uncovered top DRGs in RAC target areas, identified as having potential for increased reimbursement:

  • 474/475/476 Amput for muskel and conn tissue
  • 180/181/182 Respiratory neoplasm
  • 984/985/986 Prostatic OR Proc unrel to PDX
  • 064/065/066 Intercranial hemm or cereb infarc
  • 551/552 Medical back problems

The following list reflects the top diagnoses and DRGs in RAC target areas that were identified as having the greatest potential for reimbursement:

  • Asthma/Pneumonia
  • CHF/Chest Pain
  • Dehydration/Diabetes
  • Back Pain
  • Abdominal Pain
  • Syncope Nervous System Disorders
  • Red Blood Cell Disorders

At-Risk DRGs (IP With OP Proc)

  • 585 Breast biop local excis and oth w/o CC/MCC
  • 227 Card defrib implant w/o cath w/o MCC
  • 512 Should, elb, forearm proc no maj joint w/o CC/MCC
  • 117 Intraocular proc w/o CC/MCC
  • 627 Thyroid, parathy, thyrogloss proc w/o CC/MCC

It is important that hospitals continue to take proactive and preemptive self-audit/process improvement approaches to the RAC audits. Members of your hospital board and management team have a fiduciary responsibility to deal with this major Medicare billing issue and to ensure the financial viability of your facility. Don’t wind up in the morgue.


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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