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As the Recovery Audit Contractor (RAC) program is now fully unleashed across the nation, more and more hospitals are searching for solutions to avoid countless claim denials. Thankfully, solutions do exist to help hospitals take preventative action, and successfully appeal RAC audits.
RAC Defined
The RAC program was designed to help the Centers for Medicare and Medicaid Services (CMS) identify improper payments made by Medicare. The RAC contractors are private entities that are retained by the government to identify and recoup overpayments or underpayments made to hospitals, physicians and other healthcare providers. According to the latest CMS figures, overpayments collected from providers have reached upwards of $993 million, while underpayments were substantially lower at $38 million.
For healthcare entities still transitioning to electronic medical records (EMR), formulating effective appeals can be even more problematic. With hybrid paper/electronic records, compiling a medical record for an appeal can easily become a challenge. Simply missing one piece of a record has the potential to cause continued denials and longer appeals.
RAC's Five Levels of Appeals
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1st Level Appeal
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There are 120 days to file the first appeal, which is also known as the
"redetermination phase." Redeterminations are conducted by Medicare Administrative Contractors (MACs). If the overpayment is upheld at the redetermination level, providers have 180 days to appeal to the 2nd level.
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2nd Level Appeal
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Second level appeals are referred to as "reconsiderations." Reconsiderations are conducted by Qualified Independent Contractors (QICs). If the overpayment is upheld at the reconsideration level, there are 60 days to appeal to the 3rd level.
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3rd Level Appeal
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At the third level of appeal, an Administrative Law Judge (ALJ) will review the case. If the overpayment is upheld, a provider has 60 days to appeal to the 4th level.
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4th Level Appeal
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At the fourth level of appeal, an HHS Department Appeals Board will review the case. If the overpayment is upheld, there are 60 days to appeal to the 5th level.
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5th Level Appeal
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At the fifth level of appeal a Federal District Court will review the case.
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 Once providers understand why the RAC program was created and how to fundamentally appeal RAC audits, it is important to keep in mind practical tips that can enhance the success rate of an appeal. Below are three rules that providers should always remember:
Rule #1: Don't assume the RAC denial is accurate
If you believe you can defend how you billed a claim, defend it by writing an appeal.
Rule #2: Stop automatic recoupment of payment
Always meet appeal deadlines at the 1st and 2nd levels of appeal that stop an automatic recoupment of payment. Any appeal that is received after the 30th day at the 1st level of appeal or the 60th day at the 2nd level of appeal will result in recoupment of your original Medicare payment.
Rule #3: First do your homework, then write your appeal
Write your 1st level of appeal at a 3rd level standard. At the 3rd level the appeal, an Administrative Law Judge will review your case. New evidence cannot be presented at the 3rd level; therefore, you should take the time and resources necessary to defend your position fully at the first attempt of appeal.
Putting a Model into Action
Hospitals enacting the following policies will significantly increase the likelihood of successfully appealing RAC audits and potentially saving millions of dollars in revenue. The following is a five step approach with critical success factors for a successful RAC appeal:
1) Medical Record Inventory
To ensure a complete record is submitted to RAC or any other audit agency, it is recommended that each facility with a hybrid medical record system document an inventory of where all records are presently stored. With a master inventory, your administrative team will be able to easily locate and assemble all portions of the record in order to meet RAC request deadlines.
2) Check-off Sheet
A check-off sheet should be prepared for any type of record that could possibly be requested. Checking-off a complete record verification form will help staff in gathering all the key components of the record that tell the story of services provided and billed in every medical record submission.
3) Distinguish and Differentiate Between Diagnosis-Related Groups (DRGs)
In addition to the basic components of a medical record (discharge summary, records, progress notes, consultations, physician orders, lab, radiology, all diagnostic and therapeutic services, nursing notes, assessments, vital signs, medication administration records, etc.) staff preparing records should print the coding sheet to identify diagnosis. Administrators should also ensure the documentation that supports specific scenarios is present prior to sending records.
4) Follow-up
If key components of a record are missing, policies should be in place to define who will follow-up to find the omissions. Policies also must be in place to request an extension, if needed.
5) Details
To continuously improve effectiveness and efficiency, an attention to detail that will support a successful model is needed. Taking the time to assure medical records are complete will prevent unnecessary denials and decrease the risk of lost revenue due to incomplete documentation. In addition, organizing the information in chronological order will insure orderly documents.
Karen Bowden in the president of consulting services for ClaimTrust Inc. During her 25 years of hospital administrative experience, Bowden managed fiscal and clinical operations in large academic teaching facilities in Pittsburgh and Boston. She has developed and implemented denial management systems to track, report, prevent and appeal denied claims.
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