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Recovery Audit Contractor (RAC) and Private Payer Audits: Ten Things Physicians Can Do To Protect Their Medical Practices

 

     The pressure on both governmental and private payers to reduce the cost of healthcare and the often mistaken, but real, public perception of rampant Medicare and Medicaid fraud have caused both public and private payers to increase audits of all medical providers, including physicians.  For example, the Recovery Audit Contractors (“RAC”) audit program was implemented by Congress to identify and collect Medicare overpayments and was subsequently expanded to encompass Medicaid audits.  Private payers similarly use audits to attempt to identify and collect alleged overpayments. 

     Although these audits can be burdensome to a physician practice and may sometimes result in large demands for repayment, there are several things that physicians can do to protect themselves from adverse outcomes from medical audits.  The list below is by no means exhaustive, but should serve as a starting point for physicians to consider in preparing for and protecting themselves in the case of an audit.

1.     ASSESS THE RISK OF AN AUDIT BEFORE IT OCCURS.

RAC contractors and private payers use software programs to compare physicians with others in their specialty to identify physicians who may be over-utilizing certain CPT® codes, such as the more intensive level Evaluation and Management codes (CPT 99214 and 99215).  Physicians should use one of the readily available commercial products or information available on CMS’ website (www.cms.gov) to determine if their billing is out of line with others in their specialty, thereby putting them at risk of an audit.  Physicians should also review Medicare’s Comprehensive Error Rate Testing (CERT) report to determine if they are billing codes commonly found to have been improperly paid by Medicare and ensure that they are properly using and documenting these codes.  Physicians who do not conduct such an analysis are doing themselves a grave disservice.  Not only are such reviews a standard component of an effective fraud and abuse compliance program, but they also serve to show physicians how they are being viewed by payers.  The results of a benchmarking analysis can therefore provide physicians with information critical to tailoring a defense to an audit or a repayment demand.  Of particular importance, physicians should understand the proper benchmark for their practice – the more sub-specialized the practice, the more aberrant the physician’s coding may appear when compared with other physicians, even within his or her specialty.  For example, a trauma surgeon’s billing and coding will vary dramatically from that of a general surgeon, but a payer’s audit software may compare all surgeons regardless of sub-specialty.  Physicians armed with such knowledge before an audit or demand for repayment are better equipped to effectively respond when faced with an audit.      

2.     ENSURE THAT CODING AND BILLING PRACTICES COMPLY WITH CODING RULES AND RELEVANT MEDICAL POLICIES BEFORE AN AUDIT OCCURS.

Physicians should regularly conduct random audits of their coding and billing practices to ensure that they comply with CPT and other coding rules and the relevant medical policies of the payers to whom they submit claims.  As previously stated, the mere fact that a physician’s utilization of a particular code is out-of-line with his or her specialty does not mean that he or she is coding inappropriately.  It may simply reflect that particular physician’s patient mix or subspecialty.  Nonetheless, it is incumbent on physicians to ensure that their coding and billing practices are compliant.  In addition, payers are increasingly performing pre-payment audits.  Although pre-payment reviews can be burdensome, physicians can use them to ensure that their coding and billing practices comply with a payer’s rules and medical policies, and, occasionally, to challenge and potentially correct a payer’s application of CPT.

3.     BE AWARE THAT A REQUEST FOR MEDICAL RECORDS MAY BE THE PRECURSOR OF AN AUDIT AND ACT ACCORDINGLY.

While a payer’s request for medical records may simply be for a purpose in the ordinary course of business, a request for medical records could also stem from a review of a physician’s utilization of services or from some other suspicion that a physician has been overpaid.  Consequently, physicians should be mindful that a request for medical records may be the precursor to an audit and act accordingly.  Some of the steps physicians should consider taking upon a request for medical records are discussed in this article.

4.     DETERMINE ON WHOSE BEHALF AN AUDIT IS BEING CONDUCTED AND THE SCOPE OF THE AUDIT BEFORE SUBMITTING ANY DOCUMENTS.

 Third party payers frequently contract with outside vendors to review medical records and to conduct audits.  Unfortunately, these companies do not always identify the payer on whose behalf they are working or the type and scope of the audit – critical information which physicians have the right to know.  If either the name of the payer or the type and scope of the audit are not readily apparent from a communication requesting medical records or initiating an audit, physicians should ask and should document the answers.  Such information is essential not only for physicians to know what type of audit they are facing but also to confirm that the entity seeking access to the records is legally authorized to access them under HIPAA or any more stringent state law.

5.     PAY ATTENTION TO DEADLINES AND PROCEDURES.

Physicians should designate an individual responsible for responding to medical audits and for keeping the physicians informed of its progress.  Among other things, this individual should calendar all deadlines and document and retain all communications between the practice and the auditors.  If a request for medical records or an audit letter includes a deadline for providing the requested information, the practice should either timely respond or immediately seek an extension.  In addition, if the request does not specify the deadline, the designated responder should ask.  This individual should also verify how and where records are to be submitted.  For example, can they be submitted electronically, or, must paper copies be provided?  If the practice elects to retain an attorney or other consultant, the practice’s designated individual can also be the point of contact for communications with these outside professionals.   

6.     ENSURE THAT MEDICAL RECORDS ARE COMPLETE AND RETAIN COPIES OF ANY RECORDS SUBMITTED.

Before submitting medical records for review, physicians must verify that the records are complete.  This is critically important because many payers do not allow physicians to supplement the records after the fact, which can result in overpayment demands based on incomplete information.  In supplementing the record, however, physicians should keep in mind HIPAA’s requirements to disclose no more than the “minimum necessary” amount of identifiable medical information.  Finally, as noted above, the individual designated to oversee the audit should retain copies of all records submitted to ensure that any requests for repayments or audit findings are accurate based on the records submitted.

7.     CONSIDER SUGGESTING AN AUDIT OF 100% OF RECORDS.

If an auditor or payer is demanding repayment based on an extrapolation of a sample of a physician’s records and the physician believes there are other claims that have been underpaid, a physician should consider suggesting a 100% claims’ review.  Although this can be burdensome for both physicians and payers, it can prevent unfair extrapolation from a small, possibly unrepresentative claims’ sample, and can also help identify underpaid claims, thereby reducing the amount demanded, or, in some cases, eliminating the demand altogether.

8.     VERIFY AUDIT FINDINGS.

Audit findings are often erroneous.  In fact, almost 45% of all appealed RAC contractors’ findings of alleged overpayments are overturned at the third level of appeal (the ALJ level).  Therefore, physicians should never assume that an auditor’s findings are accurate.  Rather, they should verify the substance of any findings - for example whether a particular code was billed correctly, whether a patient’s diagnosis supported a particular procedure, or whether a required pre-authorization was obtained.  They should also check the auditor’s math. When faced with a demand for repayment, physicians often believe that it is easier to just pay the amount demanded.  Although that may save time in the short-run, physicians taking that path not only pay more than is legitimately owed, but also may be subject to continued demands for re-payment for the same reason in the future.   Therefore, if a physician disagrees with the auditor’s findings based on this verification process, he or she should strongly consider filing an appeal. 

9.     UNDERSTAND APPELLATE RIGHTS AND PROCEDURES AND APPEAL ALL ERRONEOUS ADVERSE FINDINGS.

 Physicians should understand a payer’s appeals procedures and should timely file any appeal of an erroneous audit finding.  Understanding a payer’s appeals procedures is important and can have a significant impact the ultimate result of the audit.  For example, the RAC program allows physicians 120 days to file a first level of appeal from a demand for overpayment (the “redetermination” level of appeal).   However, unless the first level of appeal is filed within 30 days, the physician will be subject to automatic recoupment of the amount demanded, even if an appeal is subsequently filed. Therefore, physicians who believe they have a strong case on appeal should consider filing it within 30 days to avoid recoupment.  As a further example, the RAC appeals process allows for informal discussions as a supplement to the formal appeals.  These informal discussions can be useful in having audit findings overturned without having to complete the formal appeals process.  Even when audit findings are not changed as a result of informal discussions, they can be useful in understanding the RAC contractor’s reasoning.  Physicians should be aware, however, that these informal discussions do not alter any of the deadlines for filing appeals.

10.     CHANGE ANY IDENTIFIED CODING AND BILLING PROBLEMS.

There are times when an audit identifies genuine coding and billing issues.  In such cases, physicians should take immediate steps to correct the identified issues and show the payer the remedial measures that have been implemented.  For example, a staff member or electronic medical record system may have applied an incorrect code in certain instances.  Depending on the payer, the situation of the physician practice, and the circumstances of the demand for repayment, payers may be willing to negotiate reduced payment amounts and/or a plan allowing payment over time.  Therefore, if a physician can identify the source of a problem and fix it, a payer may be satisfied that the issue will not recur and as a result be more willing to negotiate a reduced re-payment amount and/or a reasonable payment plan.  

RAC and medical audits should be considered a regular part of the business of practicing medicine and physicians should prepare accordingly.  The attorneys at WhatleyKallas, LLP are skilled and experienced in addressing these issues.  If you are interested in speaking with one of our attorneys for more information, please contact us at 1-800-745-8153 or by email at This email address is being protected from spambots. You need JavaScript enabled to view it.

 

NOTICE:  The information provided in this article constitutes general commentary and information on the issues discussed herein and is not intended to provide legal advice on any specific matter.  This article should not be considered legal advice and receipt of it does not create an attorney-client relationship.

© WhatleyKallas, LLP 2013