RevKeep Authors MGMA Article on RAC Audits

A study conducted by the American Hospital Association showed that on average, each hospital spent $1.7 million defending themselves against RAC audits.

Healthcare providers in Central Florida offer clinical services in exchange for payment from insurance companies. Similar to you being audited by the IRS, providers are subject to insurance recovery audits. Providers need to preemptible identify and correct the issues with the claims.

The post payment audit process is started with a demand letter requesting a review of a patients medical record.

5 Quick Facts about Healthcare RAC Audits

#1: Statistically 5% to 25% of claims are subject to post payment audits.

The vast majority of denials from RACs are overturned on appeal. A study by the Centers for Medicare and Medicaid Services (CMS) showed that between 2010 and 2011, 91% of denials from RACs were overturned on appeal. These only include Medicare fee for service plans.

In 2013, the Centers for Medicare and Medicaid Services (CMS) implemented a new policy that limited the number of claims a RAC could review in a single provider’s office to 10 per week. This policy was put in place to prevent RACs from being too disruptive to a provider’s office and business operations.

As Noted by Ed Roche

#2: Post Payment Audits increased over 900% in the recent years.

According to CMS, in 2013 there were a total of 474,325 healthcare recovery audits nationwide. As of 2018, that number has jumped to 4,720,322. These numbers do not account for private insurers, either – only Medicaid and Medicare Advantage.

The vast majority of these audits are conducted after the provider has already been paid. This can cause a significant cash flow problem for providers, as they may have to refund the overpayment (plus interest) to CMS.

It is conservatively estimated that private insurance payors (as a group) at least equal the amount of public PPAs.

#3: Florida Public Audits in 2016 = $42.3M

RACs have a financial incentive to find overpayments, as they keep a portion of any money that they recover. This can create a conflict of interest, as RACs may be more likely to find overpayments even when they don’t exist.

#4: The total amount of healthcare billing audits in 2021 is estimated at $846 million.

Based on a 900% increase (as stated above) 2021 Public Audits in Florida = $423M.

#5: The audit process is extremely profitable for Payors. The return on post payment audit process is 750%


Challenges with Recovery Audit Contractors (RACs)

There are a number of challenges that providers face when dealing with RACs.

  1. The RACs themselves are often poorly managed and lack adequate resources. This can lead to delays in the audit process, which can be frustrating for providers.
  2. RACs are paid on a contingency fee basis. They have a financial incentive to find overpayments, as they keep a portion of any money that they recover. This can create a conflict of interest, as RACs may be more likely to find overpayments even when they don’t exist.
  3. RACs often use aggressive tactics when conducting audits. They may request a large number of medical records, which can be time-consuming and expensive for providers to assemble. They may also threaten to withhold payments if providers don’t cooperate with the audit.
  4. RACs have been known to make errors in their audits. In some cases, they may improperly classify services as overpayments when they are actually allowable under Medicare guidelines. In other cases, they may fail to properly credit providers for services that were rendered.

CMS has released new and modified CPT codes for healthcare providers.

CMS has released new and modified CPT codes for healthcare providers. The updated codes for healthcare providers affect the reimbursement of pandemic-driven services services not traditionally offered.

  • For example, the telehealth geographical restriction was removed from Medicare.
  • As a result, telehealth sessions are now under increased scrutiny from recovery audit contractors. 

Simply put, healthcare providers do not have the time for increased post payment audits. This is especially true for smaller practices. Most healthcare organizations have entire departments to manage PPAs.

However, over 31% of healthcare organizations still use spreadsheets as post payment audit management system.

2022 Industry Insights

Medical necessity has become a hot new audit topic for recovery audit contractors. Home health care providers are the new target for 2022.

Companies performing these audits have leveraged big data and high powered computer programming to analyze provider billing records. Payors constantly changing response rules, short deadlines, and complexity.

The healthcare audit solutions being used by providers today are inefficient and/or expensive.

Healthcare providers only have a few options to resolve these requests: costly attorneys or consultants, insufficient in-house software solution.

Another point worth noting: post payment audits are often assigned to the billing and collections departments. Most healthcare organizations have overworked billing departments. Today’s times may be challenged in keeping up with current billing collections and all the other tasks.

Post payment audit totals for the state of Florida are difficult to calculate.

Post payment audit totals for the state of Florida are difficult to calculate. The totals for 2021 must be extrapolated since Medicare and Medicaid are the only public sources. Extrapolating 2016 (as reported to Congress)

Conclusion

The challenges with RACs can be significant, but there are ways to deal with them. First, it’s important to understand the RAC audit process and know your rights as a provider. Second, you should consider hiring a third-party consultant to help you manage the audit process. And finally, you should always appeal any overpayment determination that you believe is incorrect.

In some cases, RACs have been known to make errors in their audits. In some cases, they may improperly classify services as overpayments when they are actually allowable under Medicare guidelines. In other cases, they may fail to properly credit providers for services that were rendered.

By taking these steps, you can help protect yourself from the challenges of recovery audit contractors.

FAQs:

What is auditing in healthcare?

Auditing in healthcare is a process set up by CMS where claims in the past 3 years are subject to review. Post payment audits are double checking healthcare provider for improper payments. If a claim is flagged for review, there is an appeals process that both the provider and payer review the case details.

When did the RAC program start?

The Centers for Medicare and Medicaid services started the recovery audit contractor program in 2005. The program utilizes a recovery audit contractor company that conducts a review of patient claims, records and coding. Medicare recovery audit contractor pay is based on the amount of claims withdrawn.

What companies perform Healthcare Audits?

There are currently three Recovery Audit Contractors (RACs) working in Florida. They are: Cotiviti Healthcare, Connolly Consulting Associates, and Health Management Concepts.

What claims can be audited by CMS and Private Payers?

Any service provided in the last 3 years can be audited by Recovery Audit Contractor (RAC) program. In some cases, the recovery audit program timeline may be even longer.

Post payment audits can result in the payer residing payment for service. Healthcare providers have to pay back money that they’ve already earned.

This is because someone might audit them and say that they didn’t earn all of the money that they were paid. This kind of audit is called a “Post-Payment” or “RAC” Audit.

What is an additional documentation request (ADR)?

An ADR is a request form sent over from both private and public payers requesting supporting documentation related to a previously performed procedure. Payers search previously paid claim data looking for fraud, waste and abuse of the healthcare system.

Why are additional documentation requests denied?

The Majority of RAC denials are for medically unnecessary services.

How are recovery audit contractors paid?

Recovery audit contractors are paid a commission based on the amount of claims they can overturn.

It happens after the provider has already been paid. Insurance companies use independent companies to do these audits on their behalf.

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