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Much of the recent healthcare industry news coverage of government audits has focused on Medicare RAC determinations, and with good reason. Now 40 months into the RAC program, providers are well aware of the substandard work of some RAC contractors. However, the administrative costs of multi-level appeals, as well as of the provision of medical records, remain inordinately high.

On March 26, 2012, the Centers for Medicare & Medicaid Services (CMS) instituted a reimbursement maximum of $25 per medical record for providers forwarding additional documentation requested by a Medicare RAC contractor. This stands as the only direct remuneration to providers for the Medicare RAC process, save for any underpayments identified by audits.

The Medicaid RAC program, to put it mildly, is markedly different.

I received a comment from one of the readers of my blog indicating that the Medicaid RAC program will not reimburse providers for medical records. Continuing the conversation offline, the reader provided me with a host of links from Medicaid RAC programs across the country indicating that the contractors are not required to pay providers for medical records. This topic also is distinctly absent in the Medicaid RAC Final Rule put forth by CMS.

Expanding my search into the world of professional contacts, it turned out that this pattern does not stop with the RAC program. Medicaid Integrity Contractors (MICs) also decline to reimburse providers for medical records, and are not mandated to do so. The prevailing argument that has been brought to my attention in multiple states is that payment for the provision of provider records for any Medicaid audit is included in the provider’s reimbursement for the original service billed.

With this information in hand, we need to take a moment and compare the Medicare and Medicaid RAC programs side by side. For the Medicare RACs, CMS sets documentation request limits for all contractors. On the Medicaid side, things are different. The Medicaid RAC Final Rule left it up to states to determine the limits to documentation requests of providers. In addition, unlike in the Medicare RAC program, Medicaid RAC contractors are not required to publish a list of approved issues.

Because of my focus on the physician side of the equation, I’ll throw something else out there for you to digest. CMS made it very clear at the beginning of the Medicare RAC program that if physician E/M services were to be audited, physician specialty societies (such as the American Medical Association, or AMA) would be notified. Yet I find no such language in the Medicaid RAC Final Rule. It is left up to the reader to draw his or her own conclusion about what may lay ahead, based on that information.

It may be the most poorly kept secret in the world that Medicaid reimbursement represents the worst of all major insurance carriers. The situation we are faced with at this moment can be summed up rather briefly. Medicaid pays the provider community poorly, and payment includes the cost of sending records to any Medicaid audit entity. On the cusp of the Medicaid population expanding nationwide in 2014 due to the Patient Protection and Affordable Care Act, to say nothing of the expansion of audit activities, short of dropping out of your state’s Medicaid plan, there is nothing you can do to stop it.

Even if you have seen no Medicaid RAC activity yet, I must insist that the Medicaid RAC Statement of Work in your state be reviewed thoroughly (if you can find it). Know your RAC contractor and begin a dialogue. Familiarize yourself with the Medicaid appeals processes in your state, as considering the provider-friendly overturn rates of the Medicare RAC program, mistakes will more than likely be many.

Most importantly, track the costs of providing records to audit entities and compare them to the reimbursement of the services for your Medicaid patients that are being audited. If the two numbers are very close to each other, I would say that an affected provider has a very important decision to make regarding continuing participation in the Medicaid program.

Nationwide, it appears that Medicaid RAC activity is picking up. According to providers in North Carolina, HMS began medical necessity review of short hospital stays as of March 1. This mirrors the activity of Connolly, the Region C Medicare RAC. And this is occurring despite the fact that outreach on this issue has not been very forthcoming on the Medicare RAC side, either from Connolly or Palmetto GBA, the MAC for North Carolina.

In the state of Indiana, HMS has begun to target DRGs for septicemia (DRGs 416, 417 and 584), OR procedures unrelated to diagnosis (DRGs 468, 476 and 477) and tracheostomy (DRGs 482, 483 and 700, with ICD-9 procedure codes 31.1 and 31.29). Also in the crosshairs is excisional debridement, billed with ICD-9 procedure code 86.22.

The introduction of the Medicaid RAC program in Wisconsin was rather clumsy. ForwardHealth released a two-page memo to providers on Feb. 20 explaining the Medicaid RAC process and referring all questions to HMS’ 800 number for audit feedback, as well as HMS’ established Medicaid RAC information site. These HMS sources currently contain no information relative to any audit activity in Wisconsin. In addition, the Wisconsin RAC Statement of Work cannot be located at all via the Internet.

Much like their Medicare counterparts, it would appear that Medicaid RAC contractors are off to an inauspicious start.

About the Author

J. 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 six 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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