As a refresher, the seven elements of a model compliance program are as follows:

  • Designation of a compliance officer and compliance committee;
  • Development of compliance policies and procedures, including standards of conduct;
  • Development of open lines of communication;
  • Appropriate training and education;
  • Internal monitoring and auditing;
  • Response to detected deficiencies
  • Enforcement of disciplinary actions


A very important element to all of your compliance efforts should always demonstrate your actions as they relate to responding to detected deficiencies in a properly effective and efficient manner. With regard to your RAC preparation, it is important to have in place policies to assure your detected deficiencies have been responded to and corrected appropriately.


To help understand this element of your compliance plan, let’s review what the Office of Inspector General’s Supplemental Compliance Program Guidance for Hospitals (published January 31, 2005) states with regard to a hospital’s response to detected deficiencies. It reads, in part, as follows:


“By consistently responding to detected deficiencies, hospitals can develop effective corrective action plans and prevent further losses to Federal health care programs.

Some factors a hospital may wish to consider when evaluating the manner in which it responds to detected deficiencies include the following:

• Has the hospital created a response team, consisting of representatives from the compliance, audit, and any other relevant functional areas, which may be able to evaluate any detected deficiencies quickly?

• Are all matters thoroughly and promptly investigated?

• Are corrective action plans developed that take into account the root causes of each potential violation?

• Are periodic reviews of problem areas conducted to verify that the corrective action that was implemented successfully eliminated existing deficiencies?

• When a detected deficiency results in an identified overpayment to the hospital, are overpayments promptly reported and repaid to the FI?

• If a matter results in a probable violation of law, does the hospital promptly disclose the matter to the appropriate law enforcement agency.”


Implications for your RAC Preparation

Since the DHHS-OIG Compliance Program Guidance is published to offer hospitals the framework to demonstrate that their compliance efforts show a good-faith commitment to ensuring and promoting integrity, it is also a very good reference to utilize when preparing for RAC review within your institution.

One of the areas in which I believe this compliance framework applies is that of protecting your institution against even the thought of an extrapolation of review findings by a RAC. Recall that Recovery Audit Contractors (“RACs”), as well as other Medicare contractors, are authorized to audit only a “small” sample of provider or supplier records.

If the RACs find a “pattern or practice” of consistent overpayment, they may consider extrapolating the finding to the providers’ or suppliers’ patient populations. Of course this only can happen if the RACs engage in statistically valid random sampling methodology in deriving an error rate from the review. If this occurs, the RACs theoretically would be entitled to extrapolate the review findings and subsequently to keep their contingency fee based upon the findings.

Since the RACs are limited in the number of medical records they can audit per 45-day period, for both providers and suppliers, it would be a challenge for a RAC to perform a statistically valid sample. However, providers still must be aware of the potential risk in increasing use of statistical sampling and extrapolation.

Of course, one of the open questions with the ensuing RAC program is the issue of, if a review is performed that demonstrates a “pattern or practice” of improper payments, will this potentially result in a subsequent extrapolation of the findings by the RAC or someone else?   There are numerous defenses to such an extrapolation, like a lack of a statistical sample utilized in the review or charts being “cherry picked” for review and thus making any error rate artificially inflated.   These arguments are a good start against extrapolation. However, all such efforts will require time and resources, which equate into additional expense for a healthcare provider. Thus any and all proactive efforts to reduce the percentage of improper payments should eliminate the need for your organization to worry about extrapolation. Better yet, before the RAC letters begin arriving in the mail, consider performing your own reviews of high-risk areas and responding appropriately (including making any repayments) to any deficiencies. If you have done so in the past, per the DHHS-OIG Guidance (above), extrapolation concerns should not impact you.

The learning from this topic is “if you have responding properly to detected deficiencies in the past it should eliminate your extrapolation concerns with RAC in the future.”



About the Author

Bret S. Bissey is a nationally recognized expert in healthcare compliance. He is the author of the Compliance Officer’s Handbook, published in 2006, and has presented at more than 40 regional and national industry conferences/meetings on numerous compliance topics. He has over 25 years of diversified health care management, operations and compliance experience.

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