Healthcare News & Insights

RACs target hospitals: Protect your facility from lost revenue

Guess which hospital area garnered 41% of the total $992.7 million overpayment collections made by Medicare’s Recovery Audit Contractors (RACs) during the demonstration phase?

“Wrong setting” denials – where a RAC audit determines that services were provided in a medically unnecessary setting.

So why are RACs targeting hospitals?

It’s simple – it’s lucrative. The Centers for Medicare & Medicaid Services (CMS) pays a contingency fee to RACs for finding and collecting overpayments. So they go after high-dollar inpatient services.

According to Craneware InSight’s whitepaper, RAC Best Practices: Utilization Management, many facilities make themselves easy targets for RACs because they only use one set of criteria to assess inpatient admissions.

To “RAC-proof” your facility’s admission screening criteria, industry expert Karen Bowden, RHIA, who has 25 years of hospital administrative experience, suggests hospitals use the following three steps to supplement published inpatient screening criteria:

  1. Adopt All procedures on “inpatient only” published lists from Medicare, payors with such lists, and ones in proprietary screening criteria.
  2. Have your utilization review committee develop and approve leveling criteria for all procedures that, depending on the circumstances, can be performed and billed as an in- or outpatient. When researching these procedures, look for diagnosis combinations that can increase the risk of complications and death, and require additional monitoring and/or interventions.
  3. Implement a second-level review by a case manager. The cases that should undergo a second-level review include those that:
    • don’t meet “inpatient status” admission screening criteria, but the case manager believes — based on clinical documentation — should be classified as inpatient
    • are categorized as inpatient, but the original case manager feels should be observation status. In these cases, if the second-level reviewer agrees, the cases go to a physician advisor before any status changes are made, and
    • involve observation patients in a nursing unit bed.




Subscribe Today

Get the latest and greatest healthcare news and insights delivered to your inbox.