Medicaid RACs coming your way in April

Hospitals need front-end gatekeepers for patients

If you're not already doing it, you need to start reviewing the cases of your patients receiving Medicaid benefits as vigorously as you do those of Medicare patients.

The Centers for Medicare & Medicaid Services (CMS) is requiring state Medicaid organizations to roll out the Medicaid Recovery Audit Contractor (RAC) program by April 1, 2011.

To prepare for the Medicaid RACs, case managers need to change their focus and make any patient with a government payer a priority, says Kimberly Gilbert, RN, case management consultant, clinical advisory services for Pershing, Yoakley and Associates in Atlanta.

"When the Medicare RAC program was rolled out, hospitals started focusing on Medicare patients to make sure the patients were in the right status and that the documentation was complete. Now, they will need to do the same thing for Medicaid patients as well," she says.

The Medicaid RAC program has made it absolutely necessary for hospitals to have a front-end gatekeeper to make sure that patients who are admitted really need to come into the hospital, adds Joanna Malcolm, RN, CCM, BSN, consulting manager, clinical advisory services for Pershing, Yoakley & Associates in Atlanta.

"Hospitals need to have a strong case manager in the emergency department to make sure that all patients meet admissions criteria," she says.

In addition, hospitals must have a robust process for second-level review of patient status, Gilbert adds.

"A lot of Medicaid patients are frail older patients who don't qualify for Medicare. They may not meet admissions criteria, but they are likely to need intense observation and evaluation," she says.

Since the Medicaid population typically has a lot of psychosocial issues that may make it difficult to discharge them to home safely, it's a good idea to have a social worker in the emergency department to handle transfers to other levels of care, she adds.

Case managers should be diligent in making sure the patient status is correct for Medicaid beneficiaries and that patients meet the screening criteria chosen by their facility.

Some state Medicaid agencies use InterQual criteria, others use Milliman, and some have their own criteria, Malcolm points out.

"I believe that hospital case management departments need to pick one criteria set to focus on and know it inside and out in order to keep denials at bay. They need to stay on top of all the updates and be comfortable with applying the criteria. It's better to be proficient in one criteria set than to be partially competent in several," she says.

The Medicaid RACs will be a challenge for case managers who now will have to stay on top of all the changes in state regulations.

"Case managers are working so hard and so fast and usually have such a high case load that they haven't had the luxury of being familiar with all the nuances of state regulation. The Medicaid RACs will put a big strain on case managers, the case management director, or whoever is in charge of staying on top of the regulations, which changes frequently," Malcolm says.

In addition, hospitals should expect to be under the same type of scrutiny from commercial payers in the future, Gilbert says.

She recently worked with one hospital that came under an intense review by an outside auditor hired by a commercial insurer.

The Medicaid RAC initiative is part of the Affordable Care Act's strategy to crack down on waste, fraud, and abuse in the health care system.

"Reducing improper payments is a key goal of the administration, and the tools provided by the Affordable Care Act will help us achieve that goal. We are using many of the lessons learned from the Medicare RAC program in the development and implementation of the Medicaid RACs, including a far-reaching education effort for health care providers and state managers," said Donald Berwick, MD, CMS administrator in a statement.

In the notice of proposed rule-making, issued Nov. 10, CMS required state Medicaid programs to submit plans for implementing the Medicaid RACs by Dec. 31 and to be fully operational by April 1. A CMS spokeswoman told Hospital Case Management the agency expects publication of the final rule by March 1.

The Medicaid RAC process differs from the Medicare RACs in a number of ways.

While CMS divided the country into four regions for the Medicare RAC program, the states are allowed to contract with one or more RACs to identify overpayments and underpayments.

There is one cohesive process for appeals for the Medicare RAC program that is consistent throughout the country.

CMS is allowing the state Medicaid programs to use their current administrative appeals process if they desire or to modify the process for Medicaid RAC-related appeals, making it likely that there will be 50 distinct appeals processes.

Like the Medicare RACs, the Medicaid RACs will be paid based on the inaccuracies they identify.

States will be able to decide whether to pay the Medicaid RACs on a contingency basis or to use some other fee structure agreed upon by the parties for underpayment. RACs will be paid on a contingency basis for identifying overpayments. All fees to the Medicaid RACs must come from amounts recovered after all appeals have been exhausted.

The RAC audits will be separate from the Medicaid Integrity Program audits that are already under way in some areas.

The Medicaid Integrity Contractors are part of the MIP and do not receive financial incentives to uncover improper payments.

(For more information, contact: Joanna Malcolm, RN, CCM, BSN senior consultant for Pershing, Yoakley & Associates, e-mail: