Closer eye on RAC
Report warns of need to watch for overpayments
Arecent federal report underscores the need for hospitals and the CMS to step it up in preventing the most significant types of errors identified by the Recovery Audit Contractor program, industry experts say.
The RAC program allows third-party auditors hired by the CMS to keep 9% to 12.5% of provider payments they identify as improper. The program was pilot-tested in several states from March 2005 to March 2008, recouping more than $992 million in overpayments to providers. The CMS’ goal is to have a permanent program operating in all 50 states this year, with four contractors each having jurisdiction for one-quarter of the country.
Some issues remain, however, in the federal government’s handling of service-specific errors or “vulnerabilities” that result in improper payments under the RAC program, the Government Accountability Office determined in a report released April 5.
The GAO in its research found that an adequate process for taking corrective action or sufficiently monitoring or controlling these types of errors or “vulnerabilities” was missing from both the demonstration project and in the planning for the national program.
Specifically, the agency has yet to implement corrective actions for 60% of the most significant RAC-identified vulnerabilities that led to improper payments during its demonstration project, “a situation that left 35 of 58 (of these vulnerabilities) unaddressed,” the report found.
“I definitely think the main concern the GAO highlighted was the CMS hadn’t taken the necessary steps to address these types of vulnerable areas and prevent them from happening,” said Don May, vice president for policy with the American Hospital Association.
Specifically, the CMS hasn’t taken steps to address those vulnerable areas by changing payment models, or software to prevent errors, such as drug dosages or preventing a payment for obvious errors such as multiple appendectomies on the same patient, he said.
It is the CMS’ responsibility to maintain good computer systems, an agency staff RAC spokeswoman conceded. However, it is also important to note that many of the improper payments identified during the RAC demonstration would not be caught by a system audit, she said.
“Many required review of the medical record. This is where it is important for the hospitals to assume some of the responsibility. Hospitals need to ensure that they are billing correctly, know the billing rules and document the services provided in the medical record,” she said.
The watchdog agency recommended that the CMS improve its corrective action process by appointing responsible personnel to evaluate and swiftly address these service-specific errors. The CMS agreed with the GAO’s recommendations.
The RAC program has recently taken on new significance, highlighted as a model by the Obama administration to crack down on fraud, waste and abuse in federal programs. Also, provisions in the new health reform law will expand the RAC’s reach beyond Medicare fee-for-service into Parts C and D and to Medicaid by the end of this year.
Hospitals in the meantime are doing their part to prevent errors, May said. “We spend millions of dollars in compliance activities, to prevent errors in the coding area, in the admission review process, to address vulnerabilities, but the CMS has some responsibility as well,” May said. If the agency knows its software is letting certain errors go through, and that number is high enough to be highlighted in a report—and the agency still hasn’t addressed these vulnerabilities two years after the demonstration has ended, then it’s to everyone’s benefit to improve the system, May said.
“I think providers get frustrated because, in most cases, they think they are doing things correctly because they get paid, but then with audits such as RAC, issues get identified that should have been identified much sooner in the process and they are asked to refund their payment,” said Lori Brocato, revenue-cycle-management product manager with HealthPort, a technology company that consults on the RAC program.