Do the Math

Just last week I spoke with a hospital Utilization Chairman from Indiana who is concerned about ZPIC and its relationship to RAC denials.

In the course of our conversation he mentioned the challenge he is facing in trying to get other physicians to get serious about RAC.    He wants to alert his colleagues to the danger of assuming the RACs won’t affect them.  A lackadaisical attitude toward RAC issues could expose them to ZPIC investigations, which in turn could result in serious consequences up to and including imprisonment.

Our Prediction

It has long been our belief that it’s only a matter of time until the RACs will be coming after physicians.   Mainly it’s an issue of manpower and priorities.   At present, they’re auditing hospitals because they represent big-ticket claims with the highest commissions.   But it won’t always be that way.  Here’s why.

Do the Math

Everybody knows that hospitals receive the lion’s share of Medicare payments.   The figure we hear most often is that 17% of Medicare claims are paid to doctors.   That sounds like such a small, insignificant amount doesn’t it?   Only 17% – surely the RACs won’t bother to audit physicians, right?

Wrong!   Think about it.  Medicare’s budget is about $500 Billion dollars a year.   RACs can look back 3 years.   Three times $500 Billion comes to about $1.5 Trillion, and if about 17% of this is paid to physicians, that figures out to $255,000,000,000.00.   Two Hundred and Fifty-Five Billion dollars is a lot of money!

Now … Just a Little More Math

Did you ever play “What If”?   What if the RACs were able to recoup only say one dollar out of every 25 that was paid out to physicians?   That would be four percent.   Four percent of $255 Billion would come to $10,200,000,000.00.   And while RAC commissions vary from 9% to over 12%, just using a conservative average of 10% would result in $1.2 Billion of commissions paid to RACs.

When the dust settles, will you as a physician be left with 24 out of every 25 dollars you were paid by Medicare?   I can’t answer that – nobody knows.  If you’re honest – like most doctors – I hope you do better than that.

Once you understand the magnitude of the commissions involved, how could any thinking person still believe that RACs won’t audit physicians?    And if they’re going to audit you, wouldn’t it be wise to seek professional help and see what your exposure is?   If you’re concerned, e-mail me and let’s discuss it.

Winston Creath is an independent healthcare consultant working in the compliance and revenue cycle management arenas on behalf of physicians and clinics.  He serves as President of National Business Solutions of GA, LLC.  He can be reached at for questions or comments.

Reading the Flags

Clay Spencer builds custom rifles that win benchrest shooting matches all over the world, where the winner puts five shots into one hole less than a tenth of an inch over bullet diameter at a distance of 100 yards.   After competing for 35 years, he knows the sport and the big names in it.  Speaking of an upcoming match in Ohio, he said there are nearly 500 competitors, but only about 75 capable of winning – meaning they have both the rifle and the skill needed to win.

He explained that shooters judge wind direction and velocity by observing flags along the side of the shooting range.   It’s called “reading the flags”, and you simply won’t win if you’re not extremely good at it.  In fact, he said the winner of the Ohio match would be the one person who did the best job of reading the flags when it came his turn to shoot.

How does “reading the flags” apply to us?

As our readers know, RACGURU is devoted to physicians, not hospitals.  Recovery Audit Contractors are presently focusing most of their efforts on hospitals, and thus there’s no shortage of hospital-oriented RAC sites.   We have maintained all along that the time is coming when physicians will feel the RAC bite, and when that time comes there will be a panic among doctors who thought RAC was a hospital thing.   We will be here to provide information and assistance when this happens.

Astute physicians are reading the flags, observing the changes taking place in their profession, government, and healthcare – and making corrections accordingly.   We are seeing more and more doctors awakening to the dangers posed by RAC, and our AAPC certified coders who perform Baseline Audits are doing more of them every month.

What can we learn from reading the flags?

Several things come to mind.  For one, have you noticed government getting a lot more aggressive toward recoupment?  Take the implementation of the RAC program itself for instance – turning loose private contractors paid a commission for every dollar they collect.   This is an unprecedented move, yet that’s exactly how RACs are paid.  Very aggressive indeed!   The trend in government is toward aggressive recoupment.  Just read the flags.

The leading edge of 76 million baby boomers starts turning 65 in 2011.  What does this mean?  Are we reading the flags?  Demographics will work against us – less people paying while more people use benefits.  What choice will government have but to tighten the purse strings even more?  Again, read the flags.

Reading the flags also tells us that insurance companies see the effectiveness of government Bounty Hunters, and will invent their own versions.   The rationale is that if providers are miscoding and over-billing Medicare, it’s probably happening to them as well.   We can look for insurance companies to step up their recovery efforts in the future.

How reading the flags should affect our actions

Just as reading the flags tells a shooter how to adjust for wind conditions, physicians who recognize the trend in recovery efforts – especially as related to RAC Audits – will want to arrange for an independent RAC Baseline Audit.  Click HERE for more information or shoot me an e-mail.

Winston Creath is an independent healthcare consultant working in the compliance and revenue cycle management arenas on behalf of physicians and clinics.  He serves as President of National Business Solutions of GA, LLC.  He can be reached at for questions or comments.

Red Flag Rules Delayed

Congress has once again delayed implementation of the Red Flag rules.

Now the Red Flag rules do not go into effect until Dec 31, 2010.

For many this is a big sign of relief…one more regulation we can delay worrying about.

Here are the realities:

  • Red Flag Rules parallel HIPAA Regulations – that is, it is about privacy and preventing identity theft
  • Red Flag Rules make business sense – OK, maybe as Congress write them they don’t make business sense, but the big picture makes sense.

I’m sure you’ve heard of some of these big companies having their credit card processing systems hacked into…you don’t want this to be you.

In our area, a local restaurant recently had to go on the news and announce their credit card processing system had accidentally transmitted card info and all patrons over a certain period should go get new credit cards.

This is BAD PR.

We understand that the acceptance of credit cards, is  not in and of itself, make a business subject to Red Flag rules, but it all falls under the similar philosophy – protect your customer’s information!

Will Red Flag rules help prevent this?

In theory they should, but Congress could blow this effectiveness out of the water.

We’ll follow this up with some “common sense” steps to help you move toward Red Flag compliance without the pain.