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Health Care, particularly hospitals are gearing up for Medicare’s Recovery Audit Contractor (RAC) program. We have been warned for over two years by Medicare newsletters and seminars, publications and even newspapers, exploding with stories of the findings and the Medicare dollars recovered.

Third party insurers are jumping on the bandwagon and requesting records, performing audits and hiring contractors or collection agencies asking for refunds from physician practices. Who is asking for the information? What are they requesting? How do they go about demanding the refunds? How can we be prepared for these challenges which are certain to drain resources of the practice?

WHO? An audit can be requested by Medicare, Medicaid, insurance companies and any third party payer. The RACs represent Medicare and are paid a percentage of what they collect; therefore, they are very motivated to “find” money for Medicare. For now, RACs are focusing on hospitals, assuming, where the larger claims/dollars are recoverable.

WHAT? The request may come in the form of a collection letter from an agency, a letter from Medicare or a payer directly. The letterhead may not have the insurance company listed and the staff may not realize who is actually going to review the medical records. This can be deceiving and/or confusing to an inexperienced staff person.

HOW? Although more commonly requested in writing, an agency representative may just show up at the office. For instance, the FBI may appear at the front desk and ask to see the physician. Insurance companies are hiring former “police officers” for enforcement and demanding repayments with very little warning or documentation.

An audit request may also come from a Medicare HMO because they have a relationship with Medicare and must meet certain criteria in coding and documentation. The HMO may request hundreds of medical records. This is a daunting process for the practice and should be well thought out and a process be discussed in advance.

When the request is received, it should never be processed without supervision. A medical records clerk is rarely in a position to make these decisions that will affect the revenue and liability of the practice.
If overpayments are demanded, a professional outside of the practice, should be consulted. Do not just “write a check”. There is always an appeal process which should be evaluated. The RACs are in a position to extrapolate claims data and request thousands of dollars from a practice. It is often in the best interest of the practice to hire an auditor, file an appeal and reduce or eliminate the overpayment issue.
If a government or insurance representative appears at the office, the front desk should be instructed on action to be taken in a calm manner. For instance, identification should be requested if not presented. Should the physician meet with the representative? Should the practice attorney be contacted? These are all questions that legal counsel and/or the malpractice carrier risk managers will be able to assist in suggesting.

Most importantly, just like regular disaster drills, this discussion needs to take place with the staff often enough so everyone is aware of the process and knows their individual responsibility. Very often, innocently, a file clerk or receptionist reacts quickly by complying with a request unaware of the ramifications to the practice. Inform the staff how important each persons’ role is in preparing for and responding to an audit.

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