The upswell has been approaching steadily and in its wake it has left an extra tangle of knits and furrows on the brows of hospital executives and supervisors around the country.

Indeed, RACs are coming. Like some acute portent, their arrival has spurred organizations to examine their practices and scour their extensive limbs of decision-making and claims-filing in order to avoid the backlash of improper Medicare payments.

While RACs—short for recovery audit contractors, which have engaged with Medicare to review documentation and processes within hospitals—have begun operating in many regions across the U.S., their full phase-in will occur on January 1, 2010.

A Brief History

While Medicare audits are not new in principle, the concept of independent agencies contracting with the government insurance program—and gaining a percentage of flawed reviews—became practice with The Medicare Modernization Act of 2003, which established RACs in a demonstration project. Under this program, RACs could review claims in a variety of service types, like durable medical equipment, hospital inpatient and outpatient, and skilled nursing facility. Evaluating medical necessity and medical records, among other criteria, the RACs recovered more than $990 million of overpayments, according to a 2008 CMS report.

In 2006, The Tax Relief and Health Care Act made the program permanent, with 2010 the deadline for national adherence. With the foreknowledge of this expansion, many organizations have begun developing internal systems to not only handle the workflow that a RAC audit demands but to emplace tools that will prevent reviews from upturning inconsistencies in the first place.

“Most hospitals have organized a RAC committee to look at roles, responsibilities and processes,” says Jeanine Tome, RNC, MSN, ACM, chief clinical officer of the hospital solutions group at Allscripts Care Management, who regularly educates health care staff through digitaland onsite programs around the country.

Some of the tools available, including RAC-centric systems from Allscripts and dozens of other companies like Ingenix and Compliance 360, involve software applications designed to enhance workflow, limit oversight, and control the audit process.

“For an institutional RAC process, organizations need to have assessed their risk internally for potential areas of denial,” says Tome. “They need to design an efficient audit workflow and appeal process, and most importantly they need to determine a collective action to prevent any future denials.”

Tome advises those who think their standard systems will be effective to reconsider. “Traditional workflows will not work,” she says.

Depth by Detail

The RAC expansion operates under a four-quadrant breakdown of the U.S.—northeast, south, midwest and west. Each section is covered by a permanent contractor, which can conduct two kinds of reviews on a targeted organization. The automated review, which has been in practice since early in 2009, is based on claims data that show obvious signs of irregularities, like impossible numbers or duplicate billing. Complex reviews, the more anxiety-provoking and labor-intensive kind, will begin in January in what will typically involve the unveiling of medical records. Contractors can request up to 200 records per national provider identifier every 45 days.

Two areas that will continue to be prevalent in denials are medical necessity and coding, the former of which may play a key role in day-to-day case management activity. “The individual case manager needs to know that any documentation that they do could be reviewed through a retrospective audit,” says Tome, who also urges case managers to ask themselves several questions to make sure they comply with Medicare guidelines and, just as important, obviate a RAC interposition:

Does the patient meet the guidelines for medical necessity? Is the patient at the right level of care? And finally, what is the plan of care moving forward?

Close adherence may, in the end, spell something less baleful.