By Bill Gompers

 RACaphobia is defined as an intense and persistent fear of an RAC Audit.  As we have all become aware, RAC is an acronym that stands for Recovery Audit Contractor.  These contractors are charged with the responsibility of implementing the Centers for Medicare & Medicaid Services’ (CMS) program to mitigate overpayments to providers.  In addition to physicians, virtually all healthcare providers who bill Medicare and Medicaid, such as hospitals, durable medical equipment companies, home healthcare organizations and nursing homes, are the targets of these audits.

The RACs are extremely motivated to uncover overpayments to the healthcare providers they audit because a large part of their remuneration is based on the amount of improper payments they unearth.  In fact, many sources have likened RACs to “bounty hunters” being paid a contingency fee of between 9% and 12% on the recovered overpayments.

Among the findings reported during the demonstration program conducted in Arizona, California, Florida, Maine, New York and South Carolina were:

    •    Nearly $1 billion of overpayments were identified based on about 525,000 overpayment determinations.
    •    Approximately 20% of the overpayment determinations were appealed, with less than 5% of the reviews being overturned.
    •    Only $38 million of underpayments were identified.
    •    The costs for running the program were about 20% of the funds recouped.

Because of the demonstration program’s great success, the RAC program was mandated across all 50 states in 2010.  As part of the 2010 Patient Protection and Affordable Care Act, the RAC program has been expanded to include Medicare Part C, Medicare Part D and Medicaid.

In order to limit exposure, many experts recommend the following:
    •    Know what the RACs are looking for and assess whether these issues occur within your practice. This information can be found on each governing RAC website.
    •    Conduct internal audits to identify potential overpayments and develop a corrective action plan to reduce the risk of future overpayments.
    •    Consider moving toward and utilizing an Electronic Medical Record (EMR).
    •    Utilize certified billing and/or coding experts on a yearly or biennial schedule to conduct reviews, ensure compliance, update templates and train staff on issues involving coding and billing.
    •    Make sure your billing staff is properly qualified, trained and provided with continual training/updates as to the audit process, applicable Medicare and Medicaid guidelines, and coding and billing practices.
    •    Select a higher-level point person within your practice who will handle all RAC requests and future communications. This will ensure that the process goes more smoothly.
    •    Understand the appeal process in order to ensure that no deadlines are missed.

As part of their planning process, many providers are looking for ways of defraying the costs of legal defense, fines and penalties associated with RAC Audit determinations.  Insurance coverage to help meet this need can now be purchased in the marketplace.  This coverage is very inexpensive and should be considered to alleviate sleeplessness associated with “RACaphobia.”

After a year of audit expansion, providers can expect to see increased audit activities as we move further into 2011. Since almost all providers will be involved with an RAC audit, it is important that they prepare and address these issues with their trusted advisors.

Bill Gompers is a medical malpractice insurance specialist with Danna-Gracey, a boutique insurance agency specializing in medical malpractice and workers compensation for Florida’s medical community., 800-966-2120; bill@dannagracey.com.