Don’t think the Recovery Auditors will disappear

Despite scrutiny, audit program is going strong

Hospitals may eventually receive some relief from the burdens of the Centers for Medicare & Medicaid Services (CMS) Recovery Auditor (RA) program (previously called the Recovery Audit Contractor [RAC]) program — but don’t think the RAs are going away.

“Hospitals can’t ignore the issues at their facilities just because problems with the Recovery Auditor program are being investigated. Problems with compliance need to be addressed. Hopefully, the situation won’t be so onerous for hospitals in the future, but they need to have a system in place to deal with it,” says Amanda W. Berglund, MBA, MS, partner in Pace Healthcare Consulting, LLC with headquarters in Hilton Head, SC.

In the final months of 2012, the American Hospital Association and four hospital systems filed suit against the U.S. Department of Health and Human Services for allegedly refusing to meets its financial obligations for hospital services provided to some Medicare patients. The Medicare Audit Improvement Act (HR 6575), intended to improve the audit process and improve transparency and accuracy in the RA program and other Medicare integrity audits, was introduced in Congress, and the HHS Office of Inspector General included a review of Medicare contractors in its Work Plan for 2012.

Since 2009, the RA program has collected more than $3 billion in overpayments according to CMS’s end-of-year report.1 “Despite all the scrutiny the audit process is receiving, the figures justify continuing the program,” Berglund adds.

If your hospital has a successful program for facilitating appropriate inpatient admissions, improving documentation and handling records requests and denials, keep doing what you’re doing, suggests Deborah Hale, CCS, CCDS, president and chief executive officer of Administrative Consultant Service, a healthcare consulting firm based in Shawnee, OK.

Hospitals need to be diligent about preparing for the audits and responding to them to ensure that they don’t lose money they’re entitled to, Hale says. The recovery auditors are looking at medical necessity, particularly for short stays, and whether there was a physician’s order to admit that is dated, timed and legibly signed, Hale says.

That means that case managers must make sure that documentation in the medical record shows that the services provided are medically necessary and reflects the severity of illness and intensity of service as well as why the patient was admitted in inpatient status, adds Brian Pisarsky, RN, MHA, ACM, director in Huron Healthcare’s Clinical Operations Solutions, with headquarters in Chicago.

“The number of medical record requests keeps going up, which leads to increased denials, and the RAs are adding new issues,” he adds.

Some facilities are becoming overwhelmed because the RAs are issuing the maximum number of requests for medical records allowed every 45 days, Berglund says. “The recovery auditors determine what issues are problems for individual facilities and keep going after those cases,” she says.

According to the American Hospital Association, hospitals that participate in the organization’s RACTrac Web-based survey reported in the second quarter of 2012, that medical record requests were up 22% compared to the previous quarter, that the number of denials increased by 24%, and the dollar value was up 21% during the same period of time.

From the time the RAs began reviewing records in 2009 through 2011, Winthrop University Hospital in Mineola, NY, received 2,500 requests for records. In the first quarter of 2012 alone, the hospital received more than 1,000 requests for records. “They ramped it up dramatically,” says Maureen Gaffney, RPOAC, RN, senior vice president patient care services for the Long Island hospital.

One of the biggest problems hospitals face with the RAs is that the auditors can go back three years instead of looking at what hospitals are doing concurrently, points out Pat Wilson, RN, BSN, MBA, case management director, Medical City Dallas Hospital.

“We have made tremendous improvements in the past three years, but when it comes to the RAC audits, we’re only as good as what we knew we should be doing three years ago,” Wilson says.

That’s why case management should be working to address the problem areas where hospitals are receiving denials and work on improving compliance now to prevent denials in the future, Berglund says. “Every day there is an unaddressed error means a day in the future when the hospital will be at risk for denials,” she adds.

Hospitals should have a process in place to identify and deal with areas of risk, Berglund says. “It’s hard when hospitals are dealing with 600 requests for records every 45 days. It’s vital for case management to work with medical records and physicians to stop the bleed,” she says.

“There’s got to be a team effort around compliance. The right people need to get the information and act on it. This is an opportunity where medical records, finance, and case management can work together to stay on top of deadlines and target areas for improvement,” Berglund adds.

There is an increasing need for medical records to be complete when the claim is filed, Hale says. Recovery auditors and Medicare administrative contractors (MACs) both are performing pre-payment audits that require the medical record to be submitted shortly after discharge. An incomplete record can be detrimental to the hospital’s case for establishing medical necessity and DRG accuracy, she adds.

Hale cautions hospitals against improperly providing observation services to patients when they should be inpatient admissions. The Office of Inspector General’s work plan for 2013 includes evaluating the over-use of observation services and how it affects patients, Hale points out.

By overusing observation, hospitals are negatively impacting their bottom line and affecting the patient financially because observation services are covered under Medicare Part B, and unless patients have a Medicare supplement plan, they have substantial co-pays for outpatient services and are responsible for the payment of medications CMS considers to be “self-administered,” she adds.

When hospitals have limited resources, focusing on making sure everything is in order for conditions targeted for complex reviews will have the biggest dollar impact, Berglund says. According to the AHA, hospitals reported that 97% of all denied dollars were for complex denials, with the vast majority (84%) reporting that medical necessity was the top reason for complex denials.

Don’t ignore the automated review issues, Berglund advises. According to the AHA’s RACTrac, hospitals report that the top reasons for automated denials are outpatient billing error, inpatient coding error, duplicate payment, outpatient coding error and incorrect discharge status. “The denials following automated reviews represent fewer dollars than the denials from the complex reviews but they do add up, especially if extrapolation is used to apply denials across an entire collection of cases rather than individual cases. We recommend that our clients address both areas of risk,” she says.


  1. For more information on the Centers for Medicare and Medicaid Year-End report, see: