Audits of skilled nursing providers are likely to increase this year, with a growing number of federal and state recovery audits adding to specialized compliance reviews announced last year.

In 2023, regulators instituted audits of facilities using potentially inappropriate diagnoses of schizophrenia, as well as a new, five-claim audit of every US nursing home that was specifically meant to root out improper payments.

Now, routine audits run by the federal Medicare Fee for Service Recovery Audit Program and states looking to ensure payment accuracy through the Medicaid program are roaring back to life.

“While RAC audits practically halted during the COVID-19 pandemic, activity has picked up substantially following the end of the public health emergency,” attorney Amy Fouts wrote in BakerHostetler’s Healthcare Industry 2023 Year in Review published Thursday.

While some of the Recovery Audit Contractor activity is moving toward outpatient services, she warned inpatient providers such as skilled nursing operators to stay vigilant for more scrutiny.

So, too, does Sabrena McCarley, director of clinical Reimbursement for Transitional Care Management.

While she won’t go so far as to call any 2023 increases in RAC activity an “explosion,” she said her company and others who provide billing and compliance support to nursing homes are seeing “an increase in audits of everything.”

“The floodgates, essentially, have opened,” said McCarley, secretary of the National Association of Rehabilitation Providers and Agencies. “When you just talk about the RAC audit, people think, ‘Oh I’m totally excepted. I don’t take Medicare. I’m never going to see an audit.’ … They kind of get in this trap. They’re in a bubble, and then they don’t know what to do when their bubble bursts.”

The pressure is on

Regulatory agencies have made clear that they intend to more actively pursue audits and clawback overpayments.

Even the Centers for Medicare & Medicaid Services itself came under additional pressure last summer. That’s when the Government Accountability Office said the agency needed to do a better job of recouping overpayments through state Medicaid programs and cited allegedly “lenient” processes that let states opt out of the federal auditing program.

States that elect to use the federal recovery audit contractors to review their managed care programs, however, have reported collecting millions annually, including one state that recouped $177 million, according to the GAO.

And states have more information at their fingertips now as they begin to convert their Medicaid rate systems to align with Medicare’s Patient Driven Payment Model. McCarley said that led to a burst of activity at the state-level in Illinois, where Transitional Care Management is based.

One of the major problems providers experience is not knowing who all the audit firms are at either level of government, or recognizing those working on behalf of private managed care companies. Audit requests might be mailed, emailed or even faxed, and sometimes they appear to be bills rather than additional documentation requests. 

It’s critical, McCarley said, that nursing home staff have a process for collecting any requests for medical documentation and involving the interdisciplinary team when responding to them.

“It’s so frustrating,” said McCarley. “All these audits are a game. The game that has to be played is, we work incredibly hard for every penny. Even if you’re going to deny us a penny, that’s our penny.” 

Keeping pace amid staff shortages

McCarley said she’s seen providers submit requested information and then quickly pay up  should an auditor find a lack of support for a diagnosis or treatment code. That’s a reality for some, given the administrative burden of fighting appeals.

But still, she encourages providers to use documentation best practices to ensure they can appeal for fair pay even in an increasingly challenging oversight environment. 

Her tips for turning the tables on auditors:

  • Build in accountability before ever being audited by assuming every claim can and will be audited. Don’t silo the MDS coordinator, but ensure medical records support any diagnoses and services captured there with details from the physician, therapists or other members of a care team.
  • Make sure the staff member or firm responding to an audit on your behalf is familiar with the Resident Assessment Instrument and can cite from the manual to explain or link services to care. McCarley often highlights pertinent passages for a claims reviewer.
  • Pay attention to all the “buckets” represented under PDPM. An MDS coordinator who is more well-versed in nursing might not accurately capture therapy or other coding areas. Stress the importance of having support for any service, code or section total (i.e. Section GG) that could net additional payment.
  • If you hire a new and improved MDS coordinator, be ready to defend any resulting increase in PDPM rates that could trigger an audit. A previous coder may have not been capturing services accurately, and your new funding is appropriate. But you must be able to prove that on a patient-by-patient basis.
  • Use existing resources from associations and provider organizations that can help guide an audit response.