How many times have you said that as the current year winds to a close and you continue trying just to catch up (or catch your breath)?


2010 has been “one of those years” for healthcare providers and professionals, and as we reach its end I’d like to share some perspective that will take us into 2011 and some “new beginnings.


2010 in Review


So who are the CMS claim review contractors, which include the RACs, and how have they done for CMS (and the U.S. taxpayer)? Let’s review an excerpt from a recent (October) CMS publication:


“The overall goal of CMS’ claim review programs is to reduce payment error by identifying and addressing billing errors concerning coverage and coding made by providers. The Improper Medicare Fee-For-Service Payments Report (November 2009), shows that 7.8 percent of the Medicare dollars paid did not comply with one or more Medicare coverage, coding, billing, or payment rules. This equates to $24.1 billion in Medicare overpayments and underpayments annually.” (emphasis added)


Obviously, $24.1 billion is a pretty big number, and the U.S. Department of Justice and the Department of Health and Human Services have made certain that the steps they were taking in fraud prevention and recovering improper payments certainly were getting attention.


In addition to the activities of agencies typically tasked with fraud prevention, there is renewed focus on how the government can use all available resources, including outside contractors, to find more of those lost tax dollars. In February the OIG released a report citing the lack of potential fraud cases referred to CMS by the RACs during the RAC Demonstration Project. Here are two excerpts from the report:


“RACs are not responsible for reviewing claims for fraudulent activity; however, they are responsible for referring to CMS any instances of potential fraud that are identified during their reviews.”


Only one RAC reported referring two cases of potential fraud involving specific providers to CMS during the 3-year demonstration project. However, CMS reported that it received no specific provider referrals from RACs during the demonstration project. While it did not make formal referrals to CMS, another RAC notified CMS of numerous claims it identified involving improper payments. The third RAC did not refer any cases of potential fraud to CMS during the demonstration project.”


CMS did not provide RACs in the demonstration with formal training regarding the identification and referral of potential fraud. CMS did provide the permanent RACs with a presentation about fraud, which discussed the need for the RACs to be knowledgeable about fraud in Medicare, the definition of fraud, and examples of potential Medicare fraud. CMS is planning to provide the permanent RACs with further education and training on the identification of potential fraud. In addition, two of the three RACs reported providing informal training to their staff regarding the identification and referral of potential fraud.”


The OIG later recommended that CMS implement a database system to track fraud referrals and also require RACs to receive training on the identification and referral of fraud. CMS concurred with the OIG and agreed to implement both recommendations.


The OIG later in the year also published a report on a study it conducted concerning physician place-of-service coding. This refers to the practice through which Medicare reimburses physicians at a higher rate for certain services they perform in offices, urgent care centers or independent clinics, versus what it pays (as overhead to facilities) when physicians perform those services in hospital outpatient departments or ambulatory surgical centers (ASCs). The study reported a 90 percent error rate and encouraged CMS to pass on the findings to its post-payment auditing contractors, especially the RACs. To date only two of the RACs have been approved for this kind of review, but it certainly seems likely that the others will follow suit.


The four RACs began to move from the “automatic” claim review and recoupment process (launched in late 2009) to the “complex” claim review phase in 2010, which saw the posting of CMS “approved issues” on provider websites. These have included DRG validation (coding and documentation accuracy), physician order accuracy, medical necessity and other various issues.



Newly approved issues often are not easy to identify on some of those websites, causing provider staff to waste huge amounts of valuable time trying to track what a RAC is doing in a given region or state. With no explanation or notice, states sometimes suddenly appear or disappear as targets for an issue. Also, the lists posted by the RACs not only are edited at will, but at times have been shown to be inaccurate and inconsistent, even within a single day’s edits or additions.


Many providers have resorted to trying to use spreadsheets to track the RACs’ new issues with varying degrees of success. In Region C, the Connolly Healthcare list has been tracked for more than a year through a joint effort of the North Carolina and South Carolina state hospital associations. eduTrax has worked closely with Diane Paschal of the South Carolina State Hospital Association to refine and improve this list, and to develop more like it for the other three RAC regions.


Reform and Revision


The historic March 2010 passage of the Patient Protection and Affordable Care Act has highlighted the increasing degree of attention and funding for government investigations into cases of fraud and abuse, a trend further illustrated by the RAC program expansion and the furtherance of mandatory compliance expectations. Healthcare providers of every type, size, and geographic location have been impacted by one or more of the CMS claim review contractors. While not every state or provider type within individual states has interacted with a RAC yet, hospital providers still have ramped up staffing and expertise in anticipation of the RAC activity they will experience. The preparation efforts by providers, regardless of how much or how little they have interacted with the RACs to date, has been expensive in terms of staff time, new hires, process redesign, software addition, consulting and legal services.


The RAC program continues to be tweaked with revisions, as well as expansions, and keeping up with what’s new has been a challenge in 2010. To illustrate this, check out the Nov. 10 announcement below regarding the “maximum number of medical records requests” and what defines a “single organization.”


Additional Documentation Limits for all Medicare providers (except suppliers and physicians) as of Nov. 10.


In response to feedback from the RACs, providers/suppliers and their associations, CMS has modified the additional documentation request limits for the RAC program. These limits will be set by each RAC (CMS) and will establish a cap per campus on the maximum number of medical records that may be requested per 45-day period. A campus unit (defined below) may consist of one or more separate facilities/practices under a single organizational umbrella; each limit will be based on that unit’s prior calendar year Medicare claims volume.”


What constitutes a “campus?” Previously, the Zip Code of a facility or practice was proposed as a defining factor – if the buildings used the same Zip Code, they could be considered one campus. Now, however, according to the new document, only the first three digits of a Zip Code must match for a group of buildings to be considered a single campus.


Earlier in 2010, records requests were capped at 200 through spring 2011, but that number jumped to 300. The new document makes the revised cap “permanent” now (or as permanent as anything can be in this era.)


“3. Beginning November 2, 2010, the cap will be 300 additional documentation requests per 45 days for all providers (excluding physicians and suppliers).

Of course, exceptions can be made on a case-by-case basis, with permission from CMS. No, this is not new, but didn’t you find yourself hoping this clause would be left out? I did!  But alas, no joy so much for permanence!)


“4. In addition, CMS may give the RACs permission to exceed the cap. Permission to exceed the cap must receive CMS approval and may occur by CMS or by the RAC requesting permission to exceed the cap. Affected providers will be notified in writing.”



Finally, as 2010 winds down, CMS has created several publications  to address healthcare providers’ concerns and generally educate the industry regarding its goals and directions it is taking. These publications provide a good source of information, but are not designed to tell us how to run things: that is not CMS’s role, but uniquely ours!


2011 New Beginnings Overview


The momentum described above will continue in 2011 and aggressively will prompt healthcare providers into more new initiatives. Our industry must take note and take proactive action to allow us to be successful in our communities and organizational missions. New initiatives will cover the following areas:


1.   State Medicaid RAC program expansion


2.   RAC expansion into Medicare C & D


3.   Accountable care organizations


4.   Payment reform, bundled payment and value-based programs for payment


5.   “Meaningful use” plus provider EHR incentives and timelines


These “big five” new initiatives herald the ongoing change, consolidation and technology advances that eventually will take all healthcare providers and payers into a more streamlined, electronic, data-focused and data-“extracted” environment. In 2013, we will move into the era of ICD-10, which is to be the subject of an upcoming RACMonitor end-of-year webinar.


Many of us at this time of year wistfully imagine what might be seen in the crystal ball (if we had one) to help us navigate the new Year, planning strategies and budgets that would allow us to move ahead with confidence and a reality-based plan. But a real crystal ball can be found in subject matter perspective (past and present); openness to learn, adapt, and change with education training; and desire to succeed.


RACmonitor has been proud to serve for two years as a source of timely, relevant and credible information for the healthcare provider industry through articles, coursework, material content and webinars. In the post-healthcare reform era, everyone in your organization needs to become involved and committed. Thank you for your interest and support, and for seeking out our information in this challenging environment to continue to provide and develop services for your community and our families, wherever you may be!


About the Author


Patricia Dear, RN, has more than 30 years of experience in the healthcare industry, working within corporate healthcare entities, for-profit and non-profit hospital systems, legal defense and plaintiff counsel. She is a recognized national speaker on reimbursement and compliance. She is the president and CEO of eduTrax®.


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