The RACs are coming.


With no clouds yet in sight, a gloomy gray light hangs over everything. The RACs are coming. Everyone knows it. And they expect it to be bad. They expect to lose.


I went to Dallas last week to attend the Texas Organization of Rural & Community Hospitals (TORCH) Annual Conference, and to try to find out more about the Texas RAC, Connolly Healthcare, a well-known recovery audit contractor, used by CMS and four of the largest six insurance payers. The conference was attended by TORCH member hospitals (typically of 150 beds and under) from all over Texas. Most of the attendees were CEOs or CFOs of small Critical Access Hospitals (CAH) or Rural status facilities.


Expecting the Unknown


As I walked from one session to another, the really striking thing was the lack of visibility of the RACs. The RAC for Texas, Connolly, is not expected to start doing audits until after May 16, when the last of the scheduled CMS Outreach Conferences for Texas providers will be held in Houston. But everyone knows the RAC is out there, just waiting to get started. Texas was not a part of the RAC Demonstration Project, so providers have no experience with the RACs. They don’t know what to expect,  but they expect to be hit hard.


Standing quietly in the corner of the exhibition hall, a lone woman smiled at me as I approached the exhibit table for the Dallas office of the Centers for Medicare & Medicaid Services (CMS). The table was covered with mounds of handouts and CDs … about all the active CMS programs, regulations, resources and tools. Except the RACs. There was nothing about the RACs. Nada. There was also nothing about Connolly which, in addition to being the RAC contractor for Texas will be working 14 other states, representing 38 percent of all annual Medicare disbursements.


Texas: Lot of Ground to Cover


I asked the woman, who was very polite and friendly, if she was getting a lot of questions about the RACs; and if so, what did she have to give to people. She told me that she didn’t really have much information about the RAC, since that was all being handled out of the main CMS offices in Washington, D.C.


She did have a copy of the published outreach schedule, the same as what is available on the CMS Web site. I then asked if she had any more details about the scheduled sessions in Texas in May. She said she’d be happy to help me if she could, but she only had the schedule, and suggested that I contact the Texas Hospital Association, which should have had all the details.


I looked around the exhibits a little longer, still finding almost nothing about the RACs. I then stepped outside the hall and called the Texas Hospital Association (THA). I spoke with THA’s education department representative, who was helping organize the outreach sessions for providers in Texas only. The THA representative explained that they had negotiated with CMS to conduct more than one “outreach session” for the state of Texas, due to its geographical size and the large number of hospitals in the state (over 620 – almost as many as California and New York combined). CMS is only required to conduct a single outreach session before their RAC contractor can begin doing audits in any state, but through the efforts of THA, CMS agreed to do more than one for Texas: one audio tele-conference, and then three face-to-face conferences with providers in three different cities – Dallas, San Antonio and Houston.


If you are a Texas hospital, you can only attend these conferences if you pre-register online for them at the THA website: Also, keep in mind that a facility only needs to register and attend one of these sessions, as the information will be the same at each one.


The CMS-published schedule for these conferences (get it here) gives the impression that Connolly will be participating in the conferences, but this could not be confirmed by THA. The Fiscal Intermediary for Medicare claims in Texas, Trailblazer Health Enterprises, has also been invited to participate by THA. So far, neither firm has confirmed to THA that it will be present or participate in any of the outreach conferences.


Since the RACs operate under contract to CMS, they are not controlled by CMS. Under the umbrella of their contract and the RAC Statement of Work (SOW), they can use their own methods and techniques to conduct their audits of provider claims. While the SOW does require a RAC to participate in “provider outreach,” they are not allowed to educate providers, and there is no requirement for them to participate in these specific outreach sessions being hosted by CMS.


Carrying the Torch


The TORCH Foundation, a nonprofit affiliate of TORCH, focused on creating a telecommunications infrastructure and network for rural hospitals in Texas, just began offering a series of educational Webinars, called TORCHcast Webinars, focused on many different current subjects and issues for rural hospital providers. Within the next two months, they do plan on offering some education about how to handle RAC audits.


At the TORCH Conference, most of the attendees were CEOs or CFOs of small Critical Access Hospitals (CAH) or Rural status facilities. A CAH typically has fewer than 50 beds and short inpatient stays (less than 96 hours). “Rurals” are not much larger. The number of patients they both treat are far fewer than their urban counterparts, and so are their revenues. Still, their smaller “size” does not offer much protection from what one CEO called, “the coming RAC Attack!”


Shared Reaction: Concern


Many attendees told me that they were hoping the RAC would go after the “big guys” first. But since the RACs do their analysis of the claims data without provider identities attached, the RAC won’t know who it is or how “big” they are until the decision to do the audit has already been made. So those hopes are not likely to materialize.


Several CEOs made the same comment to me, when asked if they thought they were ready for the coming RAC audits. One said, “This is a very scary situation. I don’t know what to expect, and that bothers me.” He explained, “All I hear about are horror stories from folks I know in the demonstration states.”


More than one also remarked, “I get lots of calls from vendors.” he said. “There really seems to be a whole new industry of people offering to help us with this. I’m just not sure what’s real, yet.”


The CEO for a Rural facility told me, “I’ve been at my hospital for 29 years. It’s tough to keep the doors open, to keep it running. Every year our grants and payments get cut, and now… here come the RACs. The only thing I’m sure about is that I’m going to lose.”


Another CEO had just this to say: “We’re going to see a lot of hospitals close over this.”


One of the other exhibitors told me, “The smaller facilities are pretty scared about the RACs,” she said. “They’re getting lots of offers for all kinds of RAC products, but not much about education. Your courses are really needed, out there.”


After talking to executives from over 20 facilities, only two expressed to me that they really felt ready and had formed and organized their own “RAC Attack Committee.” And even those two wanted to know what was available to further educate their staff.


The clouds are beginning to roll in.

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