On February 4th, it was announced that the parties involved in the appeal withdrew their appeals, thus lifting the stay on the RAC program. The RAC program floodgates have opened, with many states beginning their reviews on March 1. So what to do now?


Don’t Be a RAC Ostrich!

That is, you cannot bury your head in the sand about the RAC program and think it will go away on its own. Members of your hospital board and management team have a fiduciary responsibility to deal with this major Medicare billing take- back issue, and to ensure the financial viability of your facility. Everyone, including those hospitals that have until August 1 of this year or later, should prepare or continue on the course of RAC preparedness. That includes assessing deficiencies, quantifying the take-back risk and establishing a tracking mechanism. Here are three recommended best practices to follow:


1. Identify systemic coding and clinical documentation problems within your organization.

By conducting your own internal audit of patient record documentation and billing coding practices, you should have a good sense of the level of accuracy within your system. If there is indeed a high level of inaccuracies or consistent miscoding of documents, this is an issue that needs to be addressed immediately! If you don’t, it will ultimately lead to regular RAC take-backs year after year, if the RAC program does not end in 2009! Moreover, you will have a huge compliance issue to address and control. Education is the key component here, and it is incumbent on the hospital to put together a permanent multi-disciplinary RAC committee to deal with the RAC issues on an ongoing basis.


With limited resources already fighting the daily fight of documenting good quality care and getting paid appropriately for it, outsourcing your internal audit function is an option many facilities are exploring. With the current high demand for accountants and internal auditors, it can be more efficient and cost effective to draw upon resources from outside the facility. The hospital can, in effect, “borrow” high cost and scarce resources that would not otherwise be available. Even if you have a strong in-house internal audit department, hiring an outside internal auditor to provide an objective opinion, as well as lend additional experience, can prove to be extremely beneficial in these circumstances.


2. Clearly state your financial position.

In addition to assessing coding accuracy levels, your internal audit should also identify the risk level of potential take-backs your facility may endure. It is important to understand that you need to project your cash flow based on the potential RAC take-back, as not doing so could affect your financial position, including meeting your bond covenants. For example, lending institutions and bonding authorities are well aware of the potential RAC take-back issue and will want to know what actions the hospital has taken to ensure the accuracy of their cash flow position and remain compliant with existing covenants.


3. Implement the right software to assist in the clean client documentation.

There are many established companies and consultants who offer software solutions that can manage your clinical documentation for Medicare compliance, your coding accuracy, as well as financial assessments, potential RAC exposure, and RAC response and appeals management. Having these tools in place can greatly enhance your staff’s ability to be more responsive when it comes to preparation and fighting the inevitable fights that will come along with the RAC program.


So, don’t be an ostrich! Being aware and proactive with regard to the RAC program will put you in a much stronger position, so when the RAC audit contractors descend upon your facility with first wave of RAC Demand Letters, surprises are minimized.




About the Author

Leo Paul. D’Orazio, MBA, FACHE, is Director of Healthcare Services Group, based in the New Brunswick, NJ, office of WithumSmith+Brown, Certified Public Accountants and Consultants. He has directed many consulting engagements for hospitals and physicians, home healthcare, mental health and addictive disease and outpatient treatment facilities, and is a Fellow in the American College of Healthcare Executives. Leo can be reached at 610-737-7962 or ldorazio@withum.com.


Mr. D’Orazio is the Managing Director Healthcare for Withum Smith + Brown

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