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On the RAC

December 22, 2008
by Daphne Lawrence
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CIOs must work to make their organization's time with CMS Recovery Audit Contractors as painless as possible

Richard grundling

Richard Grundling

Though the Centers for Medicare and Medicaid Services (CMS, Baltimore, Md.) announced in November that it is postponing all activity involving the four permanent Medicare RACs (Recovery Audit Contractors) due to a protest and stay of performance, it continues to prepare for the permanent nationwide RAC program. So the pressure is on, as hospitals gear up for a new wave of audits. “The train is coming at them,” says Richard Grundling, a vice president at the Chicago-based Healthcare Financial Management Association. “I think you almost have to get to an IT solution to help.”

The RAC program, established by the Medicare Modernization Act of 2003 as a demonstration program to identify Medicare over- and under-payments by hospitals, utilizes contractors to identify improper payments in fee-for-service Medicare. RAC contractors, who are paid on a contingency fee basis and receive a percentage of the improper payments they collect from providers, can review the last four years of provider claims for hospital inpatient and outpatient, skilled nursing facility, physician, ambulance and laboratory services, in addition to durable medical equipment.
John halamka, m.d.

John Halamka, M.D.

Under the demonstration program operating in California, Florida and New York, RACs have been identifying potential payment errors in duplicate payments, fiscal intermediaries' mistakes, medical necessity and coding. During fiscal year 2006, the RACs collected $69 million in overpayments, and found $3 million in underpayments. In 2006, the Tax Relief and Health Care Act made the RAC program permanent, and authorized CMS to expand the program to all 50 states by 2010.

“Audits, whether RAC-inspired or other, add burden to the provider because they take time to research,” says John Halamka, M.D., CIO of Boston's Beth Israel Deaconess Medical Center and Harvard Medical School. “Another burden is being able to recall the specifics of a case to readily reconstruct the basis for admission, coding, or other decisions that are questioned by the auditor.” In the case of a RAC audit, the case may be more than a year old when it is questioned by the auditor.

Though the program won't be fully operational until 2010, CMS says that the RAC program as a demonstration project has recovered $1 billion in improper payments made since 2005, for a net gain of $693.6 million to the government.

The RAC program has been criticized by hospitals and members of Congress for being a “bounty hunter” initiative — and the RAC suspension is due to an appeal by contractors who say that the bidding process to become part of the program was unfair.

With so much controversy around the program, and so much money at stake, how can CIOs assure that they are doing all they can to help their hospitals in the RAC process, especially when many insist that the RAC audits are the CFO's responsibility?

“The CIO's role is to provide the data and the backup,” says Halamka, who has been through a RAC audit (Beth Israel is in Massachusetts, one of the states in the initial demo project). “I am the keeper of all the data for the organization — and that's where I'm involved.”

Rick schooler

Rick Schooler

Most agree that the CIO should take the lead in looking at improved coding systems to help physicians code or document more effectively. “It all comes back to the EHR,” Grundling says. “That, and being part of a team with the physicians, HIM and Finance.” He says CIOs should look at the RAC program on an ongoing basis — and pursue any IT solutions or systems that can help make the coding process more accurate.

Laurie johnson

Laurie Johnson

At Beth Israel, Halamka says he is responsible for the systems that store financial records, and the information systems that include everything that touches a RAC audit, from coding to case mix to support databases and business intelligence tools that will then be utilized by the CFO during an audit.

Rick Schooler, vice president and CIO of the seven-hospital Orlando Health network in Florida, agrees that the finance department is often perceived as the major player in an audit, but says that he thinks the CIO must be involved as well. “This deeply involves revenue cycle and HIM folks,” he says. “But if IT has not been applied appropriately throughout an organization's growth and development, it will surely show, along with an organization's compliance level with internal policy and regulations.”

Most say that CIOs should be involved in helping to create the policies and procedures for the hospital RAC team. “They need to work with their clinical and reimbursement staff,” Grundling says. “That way there can be procedures in place for notifying them of the request for the medical record, and determinations to monitor the remittances for reimbursements.” Grundling says maintaining the records of the RAC review request and all the subsequent documentation and communication is the CIO's principal role. “The CIO can really help put that in place in an efficient way,” he says. “Where I think the CIO can help make that process manageable is in how to submit the data.”