Being prepared is your best defense when RACs request records

Complete documentation, a rapid response plan are both necessary

Now that the permanent Recovery Audit Contractor (RAC) program has gone into high gear, hospitals can lessen their vulnerability to losing revenue if they know how to respond and what to expect, says Deborah Hale, CCS, president of Administrative Consultant Services LLC, a health care consulting firm based in Shawnee, OK.

The RAC process puts hospital billing and documentation under closer scrutiny than ever before, Hale adds.

"Now that the permanent RACs have begun their record requests, case managers should be more careful than ever before to make sure that the documentation in the medical record accurately reflects the services their patients receive and that it supports the medical necessity of inpatient admission," Hale says.

The RAC requests for records, which started as a trickle in many hospitals, are now coming fast and furiously, she adds.

The RACs have to get approval from the Centers for Medicare & Medicaid Services (CMS) before auditing for potential overpayments by demonstrating why the issue is worth examining, Hale says.

The permanent RACs have been approved by CMS to conduct validation reviews of almost every DRG and have been reviewing records for DRG validation since spring, Hale says.

The list of targeted medical necessity issues approved by CMS for RAC review continues to grow, she adds.

"Hospitals across the country are finding a wide variety of issues under review. There are a lot of commonalities among the regions in medical necessity issues they want to examine," she says.

She advises case managers and other hospital officials to scrutinize the issues that CMS approves for the RACs in each region of the country because there is bound to be a lot of overlap.

At Lutheran Medical Center in New York City, Lori Dempsey, vice president of financial compliance, is carefully monitoring the RACs in other regions to see where they are focusing.

For instance, in Region C, CMS has approved MS-DRG validation reviews that seem to correspond with similar DRG groups for which they are looking at medical necessity.

Among the RAC targets across all regions are MS-DRG 313 (chest pain) and MS-DRG 312 (syncope), Hale says.

If a patient is admitted as an inpatient with DRG 313 or DRG 312, the auditors are zeroing in on medical necessity and addressing whether the documentation in the record supports the fact that the patient needed to be in the inpatient setting, she says.

"The belief is that patients who have these symptoms with no underlying cause documented in the medical record could be outpatients with observation services while they are being worked up to determine the cause," Hale says.

Since there is a significant difference in what Medicare pays for an observation stay versus an inpatient admission, the agency believes that the vast majority of patients with chest pain or syncope could be outpatients with observation services and could likely be discharged from observation, according to Hale.

In cases where patients have syncope or chest pain, case managers and coders should determine whether a physician knew or suspected a particular underlying cause and should make sure it is documented in the final progress note or discharge summary, Hale says.

"Making the documentation clearer with regard to physicians is likely to change the DRG and reduce the risk of an audit," she says.

Case managers should make sure that each medical record has a signed and dated admission order to avoid problems when the RAC auditors access the records, Hale says.

"The order has to be dated, timed, and signed legibly. The time and date of the order is the time and date of admission. This puts hospitals in a shaky position if they are using a case management protocol for admissions because the admission doesn't count until the physician has signed and dated the level of care order," she says.

CMS says case managers can help the physicians determine whether a patient is an inpatient, an outpatient, or an outpatient with observation services, Hale points out.

"But the physician has to make the final decision. The order has to have a physician signature," she adds.

Hospitals that use the case management protocol would be wise to look at their average length of stay in observation and make sure they aren't missing medically necessary inpatient admissions when the length of stay exceeds 24 hours even though they do not strictly meet inpatient screening criteria, she advises.

Make sure the order accurately reflects the services that the patient actually received, adds Brian Pisarsky, RN, MHA, ACM, CPUR, director, case management services, DCH Regional Medical Center and Northport Medical Center, located in Tuscaloosa, AL.

"You blow the appeal upfront if you have an order that says 'observation,' and the case was billed as an inpatient admission. It doesn't matter if the patient meets medical necessity criteria, if the order says 'observation' and it was an inpatient stay, the hospital is going to lose," he says.

To prepare for the permanent RAC initiative, Lutheran Medical Center rolled out a documentation enhancement program in the fall of 2009.

"We used some of the lessons learned from the RAC demonstration project as a map for our clinical documentation team to use to address the opportunities going forward associated with the RAC demonstration project outcomes," Dempsey says.

For instance, where there is a debridement service, the clinical documentation specialists made sure the documentation includes the areas the RAC focused on during the demonstration project, namely the appropriate nomenclature, the size of the wound, and the type of instruments used to address the wound, Dempsey says.

The hospital participated in the RAC demonstration project and had about 18 months between the end of the demonstration project to the roll-out of the permanent RAC to get internal processes in place.

In early 2009, DCH Health System formed a RAC committee that included the CFO, physicians, financial representatives from the individual facilities, and representatives from medical records, case management, and compliance.

"We went to seminars to learn about the RACs, analyzed what happened in the RAC demonstration project, and sent our RAC coordinator for intensive training," Pisarsky says.

The team alerted each department in the hospital as to what the RACs were looking for in the demonstration project, developed audit processes for each department, and asked for monthly reports.

For instance, since the RAC demonstration project targeted medical necessity for one-day and two-day stays, the hospital system reviewed a percentage of its one- and two-day stays to verify that the order for inpatient status was on the chart; that medical necessity criteria were applied; that the coding and documentation were accurate; and that in cases where there was a question, the chart was reviewed by the physician advisor.

The Power of 'Because'

The clinical documentation staff and the case managers at Lutheran Medical Center in New York City have hit on a one-word solution to the challenge of getting physicians to fully document in the medical record.

That word is "because," according to Lori Dempsey, vice president of financial compliance.

"This simple word helps prompt the physician to add information to the medical record to support his or her clinical decision making. Using the word 'why' seems to be challenging. Instead, say, 'You did this because...' and ask the physician to write the 'because' in the medical record," she says.

"One simple word can open a floodgate of clinical decision-making to support the physician's action. It suits every situation — to admit or not to admit, to order a test or procedure, or to support their assessment and plan," she says.

"This gave us an idea of where we stand and enabled us to develop action plans to make improvements in what we were doing," Pisarsky says.

Hospitals must have a team of internal experts to prepare for the RACs and deal with requests, Dempsey says.

Lutheran Medical Center's interdisciplinary RAC committee includes representatives of departments that naturally tie into the RACs, including compliance, patient accounts, medical records, appeals management, case management, and the director of clinical documentation, Dempsey says.

The committee operates under a charter that outlines roles and responsibilities of each team member.

"The people on the RAC committee are senior staff in each department and have the ability to make changes in real-time if necessary based on RAC requests and outcomes," Dempsey says.

Dempsey cautions people working with RAC requests to immediately assess what resources are needed to meet the request and not let individuals get overloaded.

"If the workload gets overwhelming, I want people to let me know immediately to avoid having details fall through the cracks and missing deadlines and opportunities," she says.

Develop a detailed process to ensure a timely response, Pisarsky suggests.

"One of the lessons learned from the RAC demonstration project is that hospitals need a designated place for requests to go. In some cases, the requests were sent all over the hospital. Hospitals in the demonstration project lost out on a lot of appeals because they couldn't respond in a timely manner," Pisarsky says.

DCH Health System established a post office box dedicated to the RAC reviews and made sure the RAC contractor had the appropriate address. The team designated a person to go to the post pffice box every day and hand-deliver the mail to the RAC coordinator.

The RAC coordinator enters the RAC request in the computer system and notifies the proper department by e-mail of the request. She tracks the RAC request throughout the entire RAC process, Pisarsky says.

"Depending on the RAC request and the issues, the RAC coordinator forwards the request to the individual department and continually follows up to ensure that the department responds by the deadline date," Pisarsky says.

After the permanent RAC contractor was decided for her region, Dempsey worked with health care trade organizations in New York to develop a RAC vendor communication contact list to ensure the prompt delivery of requests to the appropriate contact person.

"This is extremely important because the clock starts with the demand letter date. You don't want to waste time having a letter go through unnecessary channels until it gets to the right person. In preparation, we set up a special fax line strictly for the RAC letters," Dempsey says.

Despite her efforts, the first two RAC demand letters came by mail and the hospital lost seven calendars days before it got to Dempsey.

Hale advises hospitals to appeal all questionable denials from the RACs and keep appealing through the prescribed process.

'Keep appealing'

"On the DRG validation requests, so far, we've noticed that the RACs don't always get it right. Sometimes they approve things that should not have been approved and deny things that are supported by coding. This means the hospitals have to keep appealing," Hale says.

Medical necessity appeals may not be overturned until they get to the administrative law judge, she adds.

"Hospitals shouldn't get discouraged if they don't win on the first two levels of appeal," she says.

Hospitals should appeal anything they believe is incorrect, even if they get an overpayment, Hale adds.

"It may be tempting to let an overpayment go, but the ultimate goal is an accurate payment," she says.

If they get a denial and are appealing, hospitals need to make a decision whether to return the money or risk having to pay interest if they lose the appeal, Pisarsky points out.

Take advantage of the discussion period following the denials, Pisarsky advises.

"We've been successful in talking with our RAC to find out what additional information they need, sending it to them, and ending the denial right there," he adds.

DCH health system takes a proactive approach to the appeals process.

When the RAC requests a record to review it for medical necessity, the RAC coordinator alerts the individual case manager so he or she can review the case and determine why they made the decision that the patient met inpatient criteria.

"If we appeal, we already have information on why the decision to admit the patient was made," he says.

Lutheran Medical Center used an outside vendor to conduct appeals during the RAC demonstration.

"This vendor was able to get 97% of our appeals overturned, most of which were appealed at the administrative law judge level," Dempsey adds.

[For more information, contact: Lori Dempsey, vice president of financial compliance at Lutheran Medical Center, e-mail:; Deborah Hale, president of Administrative Consultant Services, LLC, e-mail:; Brian Pisarsky, RN, MHA, ACM, CPUR, director, case management services, DCH Regional Medical Center and Northport Medical Center, e-mail:]