How to make your nursing facility RAC-ready

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Bryan Baird
Bryan Baird
As skilled nursing facilities adjust to the changes to Medicare that arrived early last month, they must be ready for Recovery Audit Contractors. RACs are independent auditors for the government that are preparing to audit every facility that has submitted Medicare claims.

Specifically, RACs investigate past improper payments to Medicare providers, which may include incorrect payment amounts, non-covered services (those that are not reasonable and necessary), incorrectly coded services or duplicate services.

This auditing program dates back to 2005, when the Department of Health and Human Services initiated a demonstration program to detect and correct improper payments in the Medicare program for skilled nursing facilities. The program was so successful in showing millions of dollars in Medicare overpayments that Section 302 of the Tax Relief and Health Care Act of 2006 was enacted — to make the RAC program permanent and expand it to all 50 states by 2010.

RACs are here to stay

The permanent RAC program started slowly in 2010, but RAC activity ramped up in 2011 — since the Medicare Payment Advisory Commission voiced concerns about improper billing for therapy. MedPAC said the current system “encourages skilled nursing facilities to furnish therapy, even when it is of little or no benefit.”

Plus, the Office of Inspector General's “Questionable Billing by Skilled Nursing Facilities” report, released in December 2010, identified a number of problems with billing for Medicare payments. The report found that skilled nursing facilities increasingly billed Medicare for higher paying resource utilization groups (RUGs) from 2006 to 2008, even though beneficiary characteristics remained largely unchanged.

Plus, the report found that payments for ultra-high therapy had increased by nearly 90% from 2006 to 2008 — rising from $5.7 billion to $10.7 billion.

What RACs mean for skilled nursing facilities

Following the OIG Report, skilled nursing facilities have seen increased scrutiny by auditors. The main target is overutilization of therapy. Facilities that have gone through the RAC process say that auditors are zeroing in on:

* RUG placement and whether or not care is provided/billed at the appropriate level

* Medical documentation to ensure residents are not overstaying the necessary time

* Therapy services, to ensure therapy is proven medically necessary and reasonable

The OIG predicts that the following issues also will receive attention from RACs in the near future:

* Failure to submit requested documentation

 If there is insufficient documentation for the services billed, the claim may be considered an overpayment, and the provider may be requested to repay the payment to Medicare.

* Bundled payment discrepancies

Different regions focus on different issues, but generally, regions are requiring that the majority of services provided under a covered Part A SNF stay are included in a bundled prospective payment and are not billed separately.

* Three-day hospital stay criteria

This could become a potential issue since a “qualifying stay” is becoming more difficult to prove.

7 steps to a RAC-ready environment

When a RAC demand letter arrives at your door, there is a short timeframe in which to act. Payment must be made within 30 days of receiving the demand letter to avoid interest from accruing. To help your facility prepare, here are seven steps to creating a RAC-ready environment, presented by Sue Acquisto, MS, RN, NEA-BC, Risk Management Consultant with OmniSure Consulting Group, LLC, and president of Regulatory, Risk, Compliance Specialists, Inc.

1. Identify a RAC coordinator. Designate a person to be accountable for coordinating and communicating with the RAC. His/her responsibilities should include:

* Serve as the liaison between the facility and the RAC.

* Be the recipient of RAC communications, monitor requests and responses.

* Oversee and maintain the RAC request data; assist with the timeliness of the response/submission of records.

* Coordinate an internal review of all records with relevant departments.

* Coordinate the RAC team committee.

* Coordinate the facility's decision to appeal, and track each medical record appealed.

* Assist Chief Compliance Officer with communications to external legal counsel or auditors.

* Report regularly to the Corporate Compliance Committee the status of the RAC initiative, findings, appeals, total dollars recouped and recovered, and opportunities for improvement.

2. Identify the RAC team. Senior leaders should appoint a RAC Committee, and RAC team members should be representative of the departments likely to be impacted by audit activities. A sample team might include a team leader, compliance officer, DRG coordinator, coding manager, case management, Chief Medical Officer or designated physician, financial services, rehab unit coordinator, case manager and HIM/release of information manager.

3. Create RAC preparedness tools. A RAC readiness checklist is the ideal self-auditing tool. Your checklist to review operations and ensure compliance should include:

* RAC Process

* Physician Process

* Nursing Process

* Utilization Review Process

* Focus Area – Observation/Short Stays/Condition Code/PEPPER (Program for Evaluating Payment Patterns Electronic Report)

Other tools include: following RACTRAC findings from the American Hospital Association (AHA), spot-checking records (especially high-risk areas), reviewing Medicare Compliance updates, and watching the RAC website for updates.

4. Conduct internal risk assessment internal audits. If you discover your problem areas first, you can correct them before an outside auditor discovers them. Methodology may include document collection and preservation, witness interviews and the use of statistical sampling.

5. Ensure all appropriate staff know the determination of “Medical necessity.” There is a broad and relatively vague definition from courts, CMS and the AMA regarding what is medically necessary. Therefore, a complete medical record is essential. Ensure all treatment is documented to the highest specificity to show that treatment was medically necessary.

6. Conduct RAC education and training. Training and education should include executive, board and staff level. Conduct meetings, seminars, show presentations, and hand out literature. Know the RAC overpayment collection process and the RAC appeals process.

Conduct billing and coding re-training. If you need to pay back an overpayment, use this as an opportunity to educate your physicians on better clinical documentation or your billing department on better billing practices.

7. Establish a relationship with your RAC. Proactively contacting your regional RAC and staying in contact helps your facility to be prepared, should you receive a RAC demand letter.

Expansion to Medicaid?

Although RAC expansion to Medicaid has been delayed, it is just slower than originally expected. We will see Medicaid RACs in the very near future, so keep an eye out for CMS's Final Rule and begin to prepare.

Bryan Baird is president of K&B Underwriters, LLC, an insurance program administrator providing values-based risk solutions to the senior living industry.

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