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Shub & Associates

Medicare Recovery Audit Contractors

As always, we at Shub & Associates, P.C. appreciate the opportunity to reach out to our clients and anticipate any needs that may arise as health care markets shift and evolve. We are writing to inform you of some developments in the field of Medicare billing and encourage you to evaluate your own policies and procedures to ensure compliance with the current laws. Any health care provider can take steps to prevent billing errors and avoid penalties, and with that in mind, we would like to update you on the current Medicare Recovery Audit Contractor concerns that may affect your practice.
 
Medicare Recovery Audit Contractors (RAC’s) are independent contractors who investigate Medicare billing records. When the RAC finds an overpayment or improper billing, the RAC reports this incident to the Center for Medicare and Medicaid Services (CMS), which then seeks reimbursement for that overpayment. Over the past five years, RAC’s have reported overpayments to CMS totaling over one billion dollars. RAC’s are mainly investigating billings that occurred in absence of medical necessity, sufficient patient information, or proper coding.
 
Thus, every provider should consider how it may reduce its errors in billing to avoid investigation by the local RAC. Once CMS is aware of an overpayment, a provider may have to return that payment to Medicare, pay penalties, or even forgo its participation in Medicare and other federal programs altogether.
 
We would like to offer some suggestions to address the risks of overpayment. Providers can prevent overpayments by applying proper billing policies according to coverage determinations, self-auditing their own records, and “self-reporting” overpayments before an RAC discovers them. The best ways to accomplish these tasks and reduce your risks are to appoint a compliance officer and implement an electronic medical records (EMR) system.
 
Compliance officers are experts in anticipating the risks of overpayments and will have specific advice on how to prevent overpayments in your practice. A compliance officer will analyze your current system and make suggestions to reduce mistakes and increase the accuracy of billing information. As RAC’s publish long, comprehensive lists of their auditing targets, a provider can greatly benefit from having a compliance officer to understand these lists and apply the relevant target items to the provider’s practice. When you have a compliance officer you can turn to with questions, your billing practices will be more accurate and compliant with current standards, and you can bill without devoting large amounts of your time to the minutia of coding.
 
A valuable resource for billing risk management, EMR systems reduce errors and standardize billing procedures. Though EMR implementation may seem like a daunting task, there are many benefits that come with the use of EMR’s. Because so many reportable errors in billing occur due to incomplete information, an EMR can reduce errors by aggregating all patient information in one place. The centralization and increased accuracy of information may also increase the likelihood that patients are only treated according to medical necessity. In the event that an RAC has reviewed your billing history with CMS and has found a suspect transaction, the RAC may request patient files from you, which must comprehensively illustrate medical necessity and correct coding. With EMR, that information will be easier to provide and will be more likely to demonstrate proper billing because the file will be complete.
 
Knowing that RAC’s are stepping up their investigations, we suggest that you take some time to consider the efficacy of your billing practices and how you can better manage the risks of overpayment. We are always at your service to provide further information about how you can address your risks and improve your compliance efforts. If you should have any questions about RAC’s, overpayments, and what you can do to address your practice’s needs, please give us a call at 617-367-0333.
 

Background

 
Medical Necessity Recovery Audits began in Massachusetts in 2007 as part of a nation-wide CMS investigation conducted to identify over-billing by providers and overpayment by payors, especially Medicare.  The auditors who perform the investigations, Recovery Audit Contractors (RAC’s), apply the practice standards published by CMS and identify situations in which providers have failed to meet those standards when billing Medicare. The RAC’s used CMS payment data dating back several years to identify overpayments and contact the providers who authorized the payments.
 
As a result, the RAC’s have uncovered many areas in which providers generally make error in billing Medicare: chest pain admissions are a primary example. Rather than following specific Medicare treatment guidelines, providers have been frequently admitting patients due to chest pain, which is far more costly than performing simple diagnostic tests that Medicare guidelines require. After uncovering this trend in billing, Medicare has been able to save millions of dollars by considering some chest pain admissions as improper billing or overpayment.
 
Unfortunately for providers, a mistake leading to an overpayment may subject the provider to larger penalties, as well as jeopardizing their accreditation with JCCAHO.  Thus, while the audits have uncovered savings for Medicare, they have also exposed many providers to liability for overpayments, which the providers have not had the opportunity to anticipate or correct on their own.
 
The best ways to address the RAC audits and avoid penalties are to
  1. prevent the overpayments,
  2. self-audit billing to government payors, and
  3. self-report overpayments to CMS before the RAC’s discover them. 

Because the RAC’s are contractors hired by the federal government through a bidding process, the RAC audit information is available publicly online. A visit to any RAC’s website will reveal the current audit focuses, so a provider can predict which internal audits it may wish to perform to find any overpayments before the RAC does.   

To prevent overpayments, providers can adopt the standards of practice in CMS’s medical necessity and coding requirements for all provider services billed to Medicare. These guidelines are not meant to replace a physician’s professional judgment, but rather are meant to apply widely accepted medical standards to decision-making for the most cost-effective results. Many of the guidelines are accepted standards of care in proceeding with diagnosis and treatment, so often the greater problem is adequately labeling and documenting the patient’s information to the extent necessary for billing purposes. Thus, while a patient may have had a medical necessity for a treatment billed to Medicare, that billing may still be an “overpayment” when the provider never adequately documented the medical need.
 
To ensure that steps are taken to comply with medical necessity and coding requirements before the RAC’s uncover deficiencies first, many providers employ compliance officers. In “Region A”, which includes Massachusetts, Diversified Collection Services (DCS) is the RAC conducting the audits and has posted a long list of “issues under review” that DCS intends to address in its CMS audits. Included in these issues under review are: various surgical procedures, post-operation problems, chronic illness management, bundled services, equipment ownership, supply purchases, and ambulance services. Thus, almost any health care entity billing to government programs may be at risk for overpayment liability. A compliance officer can reduce the risk of liability by helping providers anticipate RAC audits and prevent reportable events in the first instance.  
 
Another valuable resource for billing risk management is electronic medical records (EMR) systems, which reduce errors and standardize the billing procedures. Though EMR implementation may seem like a daunting task, there are many benefits that come with the use of EMR’s. Because so many reportable errors in billing occur due to incomplete information, an EMR can reduce errors by aggregating all patient information in one place. The centralization and increased accuracy of information may also increase the likelihood that patients are only treated according to medical necessity. The administrative cost savings associated with EMR’s will greatly outweigh the costs implementing the new system. Finally, in the event that an RAC has reviewed your billing history with CMS and has found a suspect transaction, the RAC may request patient files, which must comprehensively illustrate medical necessity and correct coding. With EMR, that information will be easier to provide and will be more likely to demonstrate proper billing because the file will be complete. 
 

The Costs of Overpayment

 
If a provider billing Medicare has failed to demonstrate medical necessity or include correct information, Medicare may demand the return of payments on those covered services. Even if a provider has made a simple clerical error, Medicare may still seek recoupment of those payments and penalize the provider. This may occur months or even years after Medicare has paid for a provider’s billed service. Besides forfeiting partial or full payments from Medicare, a provider who knows of the overpayment may be subject to criminal penalties of up to $25,000 per overpayment. CMS may also suspend a provider’s participation in Medicare and other federally funded programs and may also exclude the provider from such programs altogether. Thus, if the RAC catches an overpayment, there may be monetary penalties and other sanctions that could damage a provider’s business.