So far in 2010, RAC reviews have been manageable and far less burdensome than expected. That's the good news. The bad news is that the RAC workloads will definitely increase when medical necessity reviews kick-in later this fall. In this month's audit advice column, three leading HIM directors provide a mid-year report on RAC and make predictions about the year to come.

Automated Denials Focus on Units of Service, Outpatient Labs
For Diane Setty, RHIA, CPHQ, corporate director, health information, at Ohio Health, automated denials for units of service charged is a top RAC issue so far in 2010. The organization has seen automated denials for IV hydration and Oxaliplatin, an alkylating agent in anti-cancer, chemotherapy treatments. Stan Padfield, system director and HIM & patient information privacy officer at Lee Memorial Hospital in Florida also reports denials associated with number of units billed from the chargemaster.  Finally, Kim Wheeler, HIM director, reports that automated denials for outpatient laboratory tests charged inappropriately is the biggest RAC issue thus far in 2010 for Munroe Regional in Ocala, FL.

Ongoing chargemaster reviews and updates are strongly recommended to reduce the number of automated denials. Furthermore, the personnel responsible for capturing charges should be continually educated about proper charging and the impact on RAC denials. Denial data should be used to supplement training efforts, improve processes and mitigate risk. While the dollar amounts for automated denials are low and often unworthy of appeal, preventative measures are a highly effective way to reduce your risk.  

Complex DRG Validation Audits Focus on Acute Renal Failure, Complicated Appendectomies and Other Digestive Diagnosis
From the inpatient perspective, three specific DRGs have been identified by HealthPort customers as key issues so far in 2010. These include acute renal failure, complicated appendectomies and other digestive diagnosis (MS-DRG 432). RAC denials for excisional wound debridement have also been reported.

All hospitals stated that fewer cases are being requested by the RAC, but more dollars are at risk. Cases have typically represented larger reimbursements and higher dollar amounts than those requested during the demonstration project.

Appeals Faring Well, Reflect Need for Better Documentation
For Lee Memorial, 95 percent of appeals are being overturned. However, long shot appeals are being denied. Lack of complete physician documentation is usually the culprit when an appeal is lost, thereby reinforcing the need for a strong clinical documentation improvement (CDI) program and an integrated, cohesive team.

For Munroe Regional, all appeals have been won thus far in 2010. This is welcome news for Wheeler because the organization was destroyed during the demonstration project. A strong CDI program, implemented after the initial RAC demonstration project, has been instrumental in winning appeals.

RAC Blunders and Bloopers in 2010, Predictions for the Year Ahead
Some of the RAC problems in 2010 caught providers by surprise as they originated with the RAC, not the hospital. Redundant patient records have been requested by the RAC, i.e. the same patient but different stays. Also, RACs have denied receiving records even when proof of delivery is confirmed. These minor mishaps are expected to continue as the permanent program expands and medical necessity reviews are introduced later in 2010.

Secondly, requests are expected to dramatically increase with medical necessity reviews. This will drive an increase in workload and HIM departments must be prepared to increase levels accordingly. The Midwest and Southeast regions are predicted to see the largest volume of activity. 

To prepare for medical necessity reviews, RAC teams should review inpatient admissions protocols, particularly for surgical procedures that are typically performed in an outpatient setting. Significant physician documentation must be in place to warrant inpatient admissions, otherwise reimbursement will be denied.

Finally, another type of "review" has emerged warranting HIM attention. Pre-payment reviews, currently conducted only by Medicare Administrative Contractors (MACs), deny reimbursement up-front vs. taking revenue retrospectively. Pre-payment denials will have a dramatic impact on an organization's cash flow and receivables.

So far in 2010 the RAC permanent program's bark has been worse than its bite. However, this is expected to change quickly when complex reviews for medical necessity are introduced.  HIM professionals are advised to stay tuned and keep informed. Information is an important tool in the RAC preparedness arsenal!

Lori Brocato is audit and RCM product manager for HealthPort.