RAC Audits – Big Brother is Watching You (and Our Hospital Partners too)

In November 2009, the National Medical Fee For Service Error Rate, was estimated by the US government to be $24,000,000,000 dollars. Yes, twenty four BILLION dollars. Well guess what, Uncle Sam wants this back.

On January 1, 2011, hospitals nationwide received audits from RAC auditors, or Recovery Audit Contractors. In essence, these are private contractors who go into hospital billing and medical records to look for what they term “inappropriate admissions.”

The admissions are ones deemed medically unnecessary or ones that could have been handled on an outpatient basis. These contractors get a percentage of collections, or rather what they collect from our hospital partners. If the RAC auditors find inappropriate admissions they require the hospital to retroactively repay all money received for that patient care. This is regardless of the fact that the patient DID receive care, medications, CT scans, stress test, labs……you get the point. They require refund of all these charges……so the hospital gets zero, zip, nada.

Sound fair? Any other industries operate this way? See any conflict of interest with the RAC auditor profiting by how much they generate? Well this is how it is, so get used to it. And do not be surprised if in the future they set their sights more on the medical providers and the test we order. Yes, that means you and your colleagues in the ED.

The RAC auditors have decided to target one-day admissions. They are retroactively denying payment and requiring refunds for many conditions that we admit to the hospital. Examples include chest pain, syncope, TIA, dehydration, chronic CHF exacerbations, COPD, allergic reactions, etc.

Does this mean we cannot care for these patients anymore? What should you do with your chest pain rule out in the ED or the asthmatic that is not well enough to be discharged, but also not hypoxic or intubated. Well the answer is simple… OBSERVATION medicine.

We can still care for these patients over an extended period of time. However, instead of admitting them, we place them in observation. They can still get their serial lab test, CT scans, medications and even have a specialist consultation; but observation is still considered an outpatient status rather than inpatient. Much like the outpatient status our ED patients have, just extended out over a longer time frame. Observation is optimally for a patient who needs continued care for less than 23 hours, but in some circumstances could extend out to 48 hours.

Observation medicine is cheaper for Medicare over a traditional admission, but still can be profitable for our hospital clients. Observation also guards against the RAC audits and the potential for a hospital to be forced to refund very large sums of money for care rendered.

We have operated and staffed observation units since 2008. This service line continues to grow as the healthcare dynamic changes. In July 2011, we will be expanding our observation unit at Western Maryland Regional Medical Center. This partnership with the hospital and administration will expand our current unit from 10 to 20 beds. It will entail a dedicated nursing and provider observation team.

Observation medicine will continue to grow in the future as cost containment efforts expand. We can continue to provide high quality care, but at a lower cost point for our patients and insurers. I urge all to become familiar with observation medicine and the RAC audits, as you will be hearing more about these efforts and others in the future.