The RAC is Connecting the Dots: Are You Ready?

January 29, 2010 at 12:00 pm Leave a comment

Did you ever wonder about the insanity of separate billing for the hospital and a hospital-based physician?  The requirement was put in place to simplify Medicare’s accounting system and keep track of which trust fund the payments came from.  Separate billing is demonstrably redundant, wasteful and confusing to patients – and recently CMS announced plans that will likely add insult to injury.

RAC (recovery audit contractors) efforts have been expanded into complex case reviews.  Hospitals in RAC region C (Connolly Healthcare) are starting to compare inpatient DRG assignments to physicians’ reports, especially in the area of surgery.  Although the patient, the procedure and the diagnosis are the same in actuality, there is little coordination of billing and coding between the surgeon and the hospital to ensure that they are billed and coded similarly. Coding and billing are independent processes for each party. This is the weakness that the RAC will be attempting to exploit.

The newly approved issues for review released by Connolly included the following phrase: “DRG Validation requires that diagnostic and procedural information and the discharge status of the beneficiary, as coded and reported by the hospital on its claim, matches both the attending physician description and the information contained in the beneficiary’s medical record.” The RAC will be reviewing all procedures that affect the DRG assignment for inclusion and accuracy on the claim form.  This presents two major problems:

Firstly, physicians know little about DRG classification and its complexities.  The presence or absence of a simple word or phrase can have a dramatic financial impact.  The complex review process makes it imperative that the surgeon’s operative report be monitored for completeness of documentation.

Secondly, and perhaps more worrisome, is the challenge of consistency.  What will happen when the RAC compares the procedure and diagnosis codes between the surgeon’s claim and the hospital claim?  Although we can all agree that they should be the same, there are no controls or monitors in place to assure consistency.  The billing-coding processes are almost always handled independently.   My guess is the claim with the more complicated procedure and diagnosis will be denied.

I am a former healthcare CFO and confess to being out of touch with the realities of billing and reimbursement so I tested my hypothesis with three former associates to gain their reaction.  At first I was advised I was “overreaching and giving too much credit to the RAC.”  RAC audits for hospitals would focus on hospital medical records which include the operative report and not the surgeons’ claim forms.  The RAC audit would not extend to the surgeons’ claims where the coding disparities could be identified.

However, my last contact enlightened me to a new acronym I had not previously encountered.  I was educated to the existence of MAC’s, Medicare Administrative Carriers.  I was informed that MAC’s combine the functions of Medicare fiscal intermediaries and the claims processors.  MAC’s process claims for both hospital and professional claims.  This means that they can readily compare the coding of the separate claims.

This provoked a little research on my part.  I discovered that during the timeframe that the RAC evaluation program reported collecting just under $1 billion in overpayments, the MAC program in the same three trial states denied claims on $1.8 billion prior to payment.  MACs also have more powers to impose administrative penalties like payment suspension, 100% pre-review of all submissions and statistical sampling to estimate overpayments.

I then revisited my informal advisory group and posed the question: “What happens if the RAC’s and MAC’s connect the dots and share resources?”  This would be daunting and not really necessary to create major problems.  Inconsistent coding can be identified without complex reviews or be used as triggers to initiate complex reviews.  The MAC could readily implement a comparison program without the RAC’s involvement.  The difficulties of getting physician documentation would be compounded immensely if professional services coding is part of the challenge.   Then they all asked if I had any openings for former healthcare CFO’s.

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