RAC Auditor Profits

When your business revolves around what the government has created…you end up being the tail that is wagged.

HMS Holdings, one of the largest RAC auditing companies profits drop from $9.82 million to $7.04 million dollars.

Let me hear all the docs in unison: boo hoo, we feel so sorry for you!

There are not too many better business models that can be built.

The government has you scour the books, and for every mistake you find, you get a percentage of what is recovered.

This “plummet” in profits is blamed on “…challenges faced by our clients and carriers in adopting several new CMS-mandated claim transaction formats.”  Once again I know there are many docs out there feeling sorry for these guys.

Note that total revenue increased from $82.5 million to $107.3 million!

These guys are just printing money, on the back of physicians.

You better have a defense plan in place when the RACs really start coming after physicians

Food for Thought

On July 28th, a report (see REPORT ) was sent to the Centers for Medicare & Medicaid Services (CMS) from the Inspector General’s office that will have widespread attention in the near future.  And it’s without question a physician issue, not a hospital one.   If you’re a doctor it will affect your wallet or purse, so you might want to know this.

The report resulted from a study of coding errors causing overpayments to physicians.  Medicare payments were made for patient encounters at non-facility locations that actually took place at hospital outpatient departments or ambulatory surgical centers (ASCs).   As everyone knows, non-facility encounters reimburse at a higher rate than if the encounter was at a facility such as a hospital in order to help cover the overhead expenses of the physician.

Straight Quotes from the Report

“Physicians are required to identify the place of service on the health insurance claim forms that they submit to Medicare contractors. The correct place-of-service code ensures that Medicare does not incorrectly reimburse the physician for the overhead portion of the payment if the service was performed in a facility setting.”

The report continues.    “Our audit covered 484,218 nonfacility-coded physician services valued at $42,385,710 that were provided in calendar year 2007 and that matched hospital outpatient or ASC claims for the same type of service provided to the same beneficiary on the same day.”

In this study, “Physicians correctly coded the claims for 10 of the 100 services that we sampled. However, physicians incorrectly coded the claims for 90 sampled services by using nonfacility place-of-service codes for services that were actually performed in hospital outpatient departments or ASCs. The incorrect coding resulted in overpayments totaling $4,710.”

“Based on these sample results, we estimated that Medicare contractors nationwide overpaid physicians $13.8 million for incorrectly coded services provided during calendar year 2007. We attribute the overpayments to internal control weaknesses at the physician billing level…”, etc.

But That Was from the Year 2007

Yes it was.  But think about it.   In their random sampling, 90% of the time the place-of-service codes were wrong!   The first thing I’d want to know if I were a physician is whether the coding in my office is being done correctly in 2010.    Am I sure my in-house biller or billing company is doing it right?     If not, could I be setting myself up for a RAC Audit?    Could they discover a “pattern of abuse” that then triggers a ZPIC investigation?

Your RAC Is On Its Way

Trust me when I say this – even if your RAC hasn’t yet audited you or a doctor near you, it’s coming.    Just in the past 30 days, physician audits have increased in pockets all over the country.   In fact, we’ve learned of more physician audits in the past month than the previous six months combined.

If you sense that maybe it would be wise to check into your office’s compliance with Medicare guidelines, you’re probably right.   Help is as close as an email away.

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 winston@nbsoga.com for questions or comments.

Medical Necessity Has Arrived

Brace yourself and get ready for a rough ride.    For over a year now, whenever the subject of medical necessity has been raised, the standard response from CMS has been “medical necessity is not being reviewed at the present time”, or close variations thereof.    “At the present time” gave goosebumps to those who follow the RAC auditing program closely.   The other shoe would fall, we just didn’t know when.

Medical Necessity is a BIG issue.   About 40% of all funds recovered in the initial RAC demonstration project came from medical necessity recoupments.

The Stage is Now Set

Well, it’s finally here.   CMS has now approved Medical Necessity reviews.   But here’s the scary part.

One of the concerns of medical providers has been the question of whether ADR (Additional Documentation Request) claims that have been audited for DRG issues could also be audited for Medical Necessity once such audits would be approved.   The fear was that with all the documentation already in the possession of the RACs, it would be so quick and easy for them to turn right around and audit those same claims again, this time for Medical Necessity.  Double jeopardy!

In  their response to the question, CMS said in their FAQ section on April 13th  of this year “at this time, if the RAC has already requested documentation and issued a review results letter to the provider for a DRG validation, the RAC will not be allowed to re-review the claim again for medical necessity.”  (Note again those troubling words – “at this time”)   They went on to explain that RACs could conduct both DRG validation and Medical Necessity reviews simultaneously on claims where the ADR was made after Medical Necessity was approved.

Now Let’s Connect the Dots

The recent ruling by a federal judge in the case of Palomar Medical Center (see our “Doctors Beware!” article) essentially renders Medicare guidelines meaningless.   It sets the stage for the RACs to take more and more liberties with the law.   With this precedent, how long do you think it will be before a RAC decides to ignore the CMS guidelines, take the path of least resistance, and reopen a previously audited claim for medical necessity?    For those who think this won’t happen – did I ever tell you about this beautiful alligator-free marshland I have for sale down in the Florida Everglades?

Physicians Won’t Escape

Basically, here’s the deal.   Hospitals are going to be hit hard with Medical Necessity takebacks.    However, it’s doctors who send patients to hospitals.   If a RAC audit finds there was no medical necessity for hospitalization, will the physician who made the decision in the first place get to keep his fees?   Of course not!

It’s time – past time actually – for many physicians to get deadly serious about this RAC thing.   Do something now.   Be proactive.   The rules of the game really haven’t changed – it’s just that now consequences will be felt by those who aren’t listening.

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 winston@nbsoga.com for questions or comments.