Spartanburg Regional Medical Center: Finding the Silver Lining in a RAC Audit

Tracy Thomsic
September 20, 2011 — 1,238 views  
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Gearing Up for a RAC Experience

As the first round of audits in the Centers for Medicare & Medicaid Services' Recovery Audit Contractor (RAC) program got under way, we suspected that we might be included in the second round of the demonstration program. Sure enough, Spartanburg Regional Healthcare System (SRHS) was tapped to participate in a RAC audit.

Of course, going through an audit – just by the nature of the beast – can be a trying experience. And to no one's surprise, our RAC audit presented some real challenges. First, in October 2007, we had to respond to audit requests for "piles" of records. The RAC requested 270 charts for complex review.

Six months later in April 2008, the RAC identified 104 overpayments, representing $1.3 million in revenues. We had only 30 days to submit appeals, or the money would be lost. We gathered the documentation needed to make our case and submitted our rebuttals and first-level re-determination to the audit findings.

It was an arduous process, but we found there was a silver lining. While the RAC could have delivered a knockout punch, we came through it not only standing, but better off for the effort. How so? By leveraging the technology we already have in place, we have been able to meet the requirements of the RAC audit. A positive bonus from our focus on clinical documentation and coding is an improvement in our bottom-line results.

Keys to a Successful RAC Audit

As one of the RAC demonstration hospitals, we had to take a reactive approach to the audit. However, hospitals following us can be more proactive. The following tips can help hospitals more successfully navigate through RAC audits.

Get rid of paper. At Spartanburg, we consider ourselves fortunate because we operate in an electronic environment. Access to patient information via McKesson's Horizon Patient Folder™ online patient records system makes it much easier to secure the information needed to satisfy the requests of RAC auditors. In addition, online access to the patient record makes it easier for case managers to direct care and assign the appropriate diagnosis-related group (DRG) codes on a day-to-day basis.

What's more, having electronic access to outpatient records online makes it possible for hospital-based clinicians, such as emergency department physicians, to make the most appropriate care decisions when patients present for treatment. With access to such information, for example, it is sometimes possible to determine the right level of medical necessity and admit a patient to the hospital instead of merely treating the individual on an observational basis.

Create a RAC response team. In mid- to late 2006, a dedicated multidisciplinary team met regularly to develop a plan for responding to the RAC project. We found that it was important to assign primary responsibility for the development, oversight and coordination of the RAC process to a single point person. An RN-RAC coordinator was designated to fulfill these duties. We also found a tracking system for the RAC process is vital to managing the day-to-day process to ensure that all data is received, RAC decisions are addressed and appeals are processed.

Zero in on key areas. While we were not really sure what the RACs were looking for at the outset, it has become clear that the auditors are focused on a few "red flag" areas:

Discharge disposition codes of Skilled Nursing Facility (SNF) were data mined and compared to Medicare claims processing for a bill from a SNF. In one case, the patient and family did not remain in the SNF overnight; therefore no bill was submitted to Medicare by the SNF. In other cases, the SNF billed sources other than Medicare for the stay.

Auditors were keenly focused on patients classified as an inpatient for a short stay rather than observation.

DRGs indicating a symptom diagnosis were also targets for review.

Knowing that these are potential areas of concern, hospital staff members should ensure that clinical documentation is complete and thorough enough to support the DRGs. Failing to do so will result in further scrutiny from the RAC.

Code for maximum reimbursement. The RAC process has prompted our organization to focus on clinical documentation and coding more than ever before. As a result, we have discovered that we have been "undercoding" many patient encounters. So, while it is important to make sure that clinical documentation matches the DRG codes assigned, there is no need for hospitals to shy away from seeking the deserved reimbursement.

RAC Results and Beyond

By accessing information in our online systems and focusing on clinical documentation and coding, we have been able to increase Medicare reimbursement "three-fold" in a six-month period. In addition, our automated patient records system has made it much easier for Spartanburg to comply with the RAC. We have been able to submit appeals to 97 of the overpayments cited by the RAC. So far, 23 of these denials have been overturned in our favor. And, we expect that we eventually will be able to recover about $1.2 million of the $1.3 million that the RAC collected from us.

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Tracy Thomsic