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The RAC Counterattack


Here's my prediction: your practice will be audited in the next 24 months and asked to return overpayments.

Here's my prediction: your practice will be audited in the next 24 months and asked to return overpayments. The writing is on the wall.

Recall a few facts from my June 2011 Pearls article "Medicare's Fraud and Abuse Program":

• Medicare estimates that more than 10 percent of its expenditures are for fraudulent claims (a whopping $60 billion per year).

• The Department of Health and Human Services (home to Medicare) has calculated it receives $1.55 for every $1.00 it invests in healthcare fraud policing.

• The Patient Protection and Affordable Care Act allocated an extra $350 million to combat healthcare fraud.

• Medicare's fraud contractors are paid on commission. The more "fraud" they identify, the more dollars they receive.

Recovery Audit Contractors, or RACs, are perhaps the most prominent anti-fraud contractors established by Medicare. There are four private contractors designated as RACs - Diversified Collection Services; CGI, Inc.; Connolly, Inc.; and HealthDataInsights. Each has been assigned a section of the country. You can visit the Recovery Audit Program website for the RAC jurisdictions and website addresses. RACs identified $289.3 million in improper payments in the most recent quarter, nearly as much as they collected in the previous two quarters combined and more than three times as much as they collected in FY 2010.

RACs focus on overpayments and, to a much lesser degree, underpayments. This imbalance has brought the ire of the Medical Group Management Association, the American Medical Association, and others. Their collective efforts may be making a difference, as nearly 20 percent of RAC adjustments for the most recent quarter were for underpayments. This is a significant - and hopefully growing - shift. However, another shift we will be seeing is an increased focus on the outpatient setting. Until recently, the RACs focused most of their efforts on the inpatient setting, where the dollars are higher and their return on investment greater.

Here are several things your practice can do to prepare:

Visit your RAC's website regularly. Medicare approves and requires each RAC to post a list of all areas of fraud scrutiny. Know what your RAC is investigating.

For instance, Connolly (the RAC for my home state of Virginia) is looking at a number of areas of possible import to a physician practice. Their foci include:

• Billing of E&M codes during the surgical global period

• Use of a New Patient E&M code for patients seen within three years by the same provider or within the same practice (same specialty)

• Multiple Surgery Payment Reduction billing errors

• Medical necessity of hospital admissions (for many specific diagnoses)

• Duplicate claim submission

• Excessive billing of infusion supplies

Review your billing and documentation for each applicable RAC focus. Do not assume that everything is being done correctly. Even if you trust your staff completely, I still recommend having an outside set of eyes conduct spot audits. Many billing and payment errors have nothing to do with how well you practice medicine. Besides, peace of mind is a good thing.

Have a certified professional coder conduct regular audits of your billing and documentation. An audit should include a broad sample of E&M services (inpatient, outpatient, new patient, follow-up visit) and any non-E&M services for every provider. Have the coder compare each provider's billing/coding/documentation to the group's and to national benchmarks. Finally, meet and discuss the findings as a group. Discuss anomalies and - if they are not supported by the documentation - use them as a learning tool to improve the practice's billing practices.

Pull your compliance plan off the shelf. The majority of practices have one - somewhere. Review what the practice has committed to do in the compliance plan. If those things are not being done, do them. Failing to live by your own published compliance standards is a mistake.

Review and heed evidence-based guidelines for your specialty. I believe the RACs will increasingly incorporate evidence-based guidelines into the selection of their areas of focus.

Finally, I urge you to document your thought processes and actions - you want any potential reader to understand what you did and why you did it. Your documentation should be your best protection.

My advice is pedestrian, no doubt. Most physicians do not commit fraud intentionally, but here's the key: what you and I think of as fraud is not what the RACs will discover in your practice. Do not think your practice is immune just because you are good and honest. Be pedestrian, and prove my opening prediction wrong.

Lucien W. Roberts, III, MHA, FACMPE, is vice president of Pulse Systems, Inc. For the past twenty years, he has worked in and consulted with physician practices in areas such as compliance, physician compensation, negotiations, strategic planning, and billing/collections. He can be reached at

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