If each one of us thinks about it for just a moment, we can probably think of a product, service or perhaps a person who doesn’t match up to their perceived value.

Since it’s Christmas time, I think back to the sales pitches of my childhood. Seemingly every December in the 1970’s brought forward an onslaught of commercials for Ronco products. From the Pocket Fisherman to Mr. Dentist (“Buy a separate Mr. Dentist for your DOG!”), each one of these ridiculous, fell-off-the-back-of-a-truck curios sold for $9.98, then usually worked once and broke. 

As a sports fan, I can think of countless examples of players who have signed long-term contracts for obscene amounts of money who didn’t come close to their value. The Washington Redskins discovered this belatedly with Albert Haynesworth two days ago. My fellow hockey fan friends know that I can sum up underachievement based on contract terms in two words: Alexei Yashin (I realize that the NHL ranks roughly 6th among sports in the United States, so I invite you to look it up).

On the subject of RACs, this topic comes up when I again review the results of the RAC Demonstration Project. When we look at the successful appeal rate of 64.4%, most people in health care see a great chance for victory for the provider community simply by drowning the RACs in appeals, and I can’t say that I disagree with that assessment.

I, however, remembering the abject lesson of the Veg-O-Matic, have internalized the idea that the demonstrated usefulness of a product or service and its actual value exist on different planets. At a bare minimum, RAC determinations were incorrect 8.4% of the time based on the percentage of RAC results reviewed. I suspect that based on the high percentage of Part B claims reviewed in the demonstration project, coupled with well-documented abysmal response rates from physicians to requests for documentation, the RAC error rate is much higher.

In baseball, it’s acceptable to be good with a bat 30% of the time, and when it is less than that, who other than the owners of the 30 teams and degenerate gamblers have a financial stake in a better outcome? The RACs are independent contractors, but at the very root of their payment structure for uncovering incorrect payments by the Medicare program is a tax payer. We invest in the Recovery Audit Contractor program with the promise that what they uncover strengthens the Medicare program financially. Yet their is an outstanding question that hangs over the heads of the RACs like a sword, and that is a question of competence.

One of the more frustrating aspects of a country that currently carries a 17% true unemployment rate is the knowledge that there are gifted, productive people who for a variety of reasons are viewing working life from the sidelines. We are handed conflicting rationales for this phenomenon on a daily basis from our leaders and the national media, none of which directly address the abandonment of the fundamental belief in shared experience and sacrifice being a cornerstone of building a strong society.

However, it takes a special blend of arrogance and blatant exploitation to ask a country’s people to fund incompetence. If our order in the fast food drive-thru line is screwed up, we’re getting what we pay for. When an independent contractor of the federal government produces shoddy work product, it affects all of us in a fashion much more profound than a few hours of bad digestion.

It is hoped that future reports of results of the RAC program reveal better results than their poor showing out of starting gate. Given my direct experience with the law of diminishing returns, I suggest we not hold our collective breaths.

I can’t say that I have the widest and most diverse skill set as a human being, but one thing at which I consider myself somewhat accomplished is pattern recognition. Considering the downward spiral currently being experienced on so many levels in this country, one pattern that has emerged more than any other is the continuing absence of any sense of urgency.

With 17% true unemployment, a banking system that for all intents and purposes has collapsed, two ongoing wars and crumbling infrastructures for transportation and energy delivery, no one is standing up anywhere and saying “Fix it now!”. In fact, the solution of the incoming Congress for all of these ills can be summed up by the phrase “shut down the government”.

Erasing a deadline for self-satisfaction is not what I would call a useful policy. If one unilaterally decides not to comply with a deadline, there are consequences to that, a short list of which would include a newspaper with blank pages, a penalty for not making a payment on your credit card by the due date or (as many people have found out over the last four years) a foreclosure notice.

There is nothing in the world that brings forth success better than a healthy respect of the clock. Failure to accomplish a time-sensitive task is supposed to have consequences.  When a time frame is codified into law, one would expect that an entity that operates outside the mandated parameters would face consequences.

As a shining example of this rule crumbling before our eyes, I’d like to introduce you to the complex review process of the Recovery Audit Contractor program.

The RAC Statement of Work states that when a provider submits medical records to the RAC for complex review, the contractor has up to 60 days to review the records, then subsequently make a claim determination and issue a review results letter.

When a Midwestern provider recently asked the Division of RAC Operations at CMS what penalty is imposed upon a contractor for not complying with the deadline, the answer was rather revealing. In his response, the project officer stated the following (key passage italicized for effect):

“The 60 day time frame for a RAC to respond to medical records sent by a provider is a contractual requirement for the RAC National Program, therefore, it is possible that non-compliance by the RAC may result in assessment of a lower score in their annual performance appraisal.  The cumulative results of this appraisal impacts CMS’s determination of whether to extend the incumbent RAC’s contract for an additional year.  I recommend you contact the RAC directly and inquire about follow up with the remaining records”.

I would make a wager that if I polled providers who have had money recouped due to a RAC audit, they could come up with a substantially stronger penalty for non-compliance by a RAC than “I’m putting a demerit in your file, young man”. The problem is that the Statement of Work for the RACs didn’t specify any penalty for behavior in opposition to established standards. In response, CMS came up with a penalty that doesn’t even rise to the level of going to bed without dessert. Note that the response stated that the assessment of a low score in the performance appraisal is possible, not probable.

With this type of lack of accountability as a backdrop, the solution to this falls upon the provider community. Careful tracking of time frames when a complex review is undertaken by a RAC is the key to protecting yourself under the established guidelines. Be certain to contact the RAC after records have been forwarded to determine the date of receipt. If more than 60 days elapses between that date and the date indicated on the review results letter, mark the claim for appeal if there is a determination for overpayment. With no established penalties for not following the guidelines, an actual penalty with teeth may fall to the higher reaches of the RAC discussion period process. While not guaranteed, it is certain to get the RAC’s attention if a large number of cases are appealed for this reason.

Additionally, there is no harm in following the above suggestion of CMS and reporting the RAC’s non-compliance with the time frame. In the absence of actual consequences, nothing stops any provider adversely affected by a RAC audit from doing the right thing and creating them from scratch themselves. In a world without clocks, every moment takes on importance.

I read a news story yesterday that, as a fan of music, immediately filled me with a sense of loss.

A warehouse in San Carlos, California owned by Neil Young caught fire early Tuesday morning, causing $1 million in damage and the loss of roughly 30% of his personal collection of memorabilia from his nearly 50-year career in music. 

I thought for a moment about the enormous scope of Neil’s career when I heard this news, starting as a musician in Ontario, playing with a band called the Mynah Birds in Buffalo with a young Rick James (!) as the lead singer, moving on to groundbreaking work with Buffalo Springfield, his stints with Crosby, Stills & Nash, appearances at Woodstock and Live Aid, “Heart of Gold”, his concerts for the Bridge School in San Francisco and on and on. Neil’s memorabilia collection spans a time in music that is forever gone, never to return, never to be repeated. Once a special moment has come and gone, it either exists in memory or in history, if anyone was lucky enough to be there to photograph it, commit it to tape or write about it. As a 19-year-old kid who was in the sun-baked crowd at Live Aid in Philadelphia in 1985, watching Neil Young play “Only Love Can Break Your Heart” with Crosby, Stills and Nash by his side, I felt Neil’s loss yesterday emotionally, if not financially.

In a roundabout way, Neil Young’s warehouse catching fire becomes a great teaching moment for medical providers about RAC audits, and about carrier recoups in general. When a provider receives a letter in the mail demanding money back for past medical services due to audit, it is not as if those dollars are sitting in a desk drawer, a safe deposit box or the safety of the physician’s wallet. The money is gone! The expense of being a medical provider requires that dollars collected for past procedures be reinvested across many things, from utilities to employee salaries, from medical supplies to new diagnostic equipment.

The threat posed to any medical provider’s bottom line from retrospective audit cannot possibly be overemphasized. Any money recouped as part of this process is taking a piece not of the past, but the present. It makes the idea of preemptive self-defense that much more important.

Based on the results of RAC audits up to this point, the very clear takeaway is the importance of documentation to medical reimbursement, from the very first patient encounter to the last. As the RACs have expanded into complex reviews for medical necessity, hospitals are learning too late that the hospitalist program they currently have in place is convenient in the short term, but not so much in the long term. RACs are starting inpatient reviews of certain DRG’s at the very beginning of the process, that being the plan of care as documented by the admitting physician. If the care provided does not match the admitting plan, the stay is being invalidated, which affects not only the hospital’s reimbursement for care already provided, but every individual Part B provider involved on the same case.

As a physician, you went through a decade of challenges and training that instilled confidence in the treatment you provide. I now offer you a new challenge, which is to approach the documentation of the services you provide not with a sense of dread of paperwork, but with a swagger and arrogance about its contents. Document in the patient’s medical record with the knowledge that no other person in this patient’s life is capable of putting together a plan of care for the person’s health but you. Be defensive, be arrogant, be verbose and be confident. Seize the opportunity to put your years of training in a narrative format. It’s not only your privilege, but as it turns out, your best defense from an unseen entity attempting to make financial decisions on your practice’s behalf.

How do you want to feel on the way home? Do you want to feel fear or confidence about your chosen course in life? Make your practice a testament to your path and legacy, and not something you look back upon as a constant act of firefighting against payers that chipped away at what you wanted to build. Build your defenses with walls of impenetrable documentation, which constructs a story not only of dedication to medical regimen, but of financial well-being.

A tried and true tradition of the Executive branch of the U. S. government is the “Friday News Dump”. With the idea that it becomes too late for national news outlets to update their lead stories, Cabinet departments save the news with potentially the biggest impact until late on a Friday afternoon, hoping that the late discovery of the same buys time for a response from the releasing agency.

An issued statement this past Friday afternoon from CMS was no exception to this rule. In a last-minute news dump, CMS unceremoniously released the proposed rule regarding Recovery Audit Contractors for Medicaid programs across the country. Much of the information in the proposed rule mirrors what was learned with the release of the first preliminary guidance letter from CMS to State Medicaid Directors on October 1, 2010, but landed with a thud all the same.

Section 6411 of the Patient Protection and Affordable Care Act (PPACA) requires states to contract with 1 or more Medicaid RACs by December 31, 2010. States are mandated to submit a State Plan Amendment (SPA) by this date indicating the establishment of the Medicaid RAC program, along with the contingency fees to be paid to the selected RAC(s) for the state. The goal of the proposed rule is a Medicaid RAC implementation date of April 1, 2011, with CMS seeking comment on this date.

States can request an exception from any part of the Medicaid RAC program, but the proposed rule reiterated that CMS foresees granting exceptions “rarely, and only under the most compelling of circumstances”.

It’s worth noting that the official release date of this proposed rule to the Federal Register is listed as November 10th. Based on the 60-day comment period for all proposed rules, the comment period ends 9 days after the states must either have a contract in place with a Medicaid RAC or have a request for exception from the program on file with CMS. I translate this to mean that commenting on the Medicaid RAC contract is taken off the table, but the implementation date of April 1st will most likely lead to a large quantity of comments during the period.  

The proposed rule goes into great detail about the contingency fees to be paid under the Medicaid RAC program. Unless a state provides ample justification for an exception based on existing state law, no state will be able to pay a contingency fee that is higher than the maximum allowed under the Medicare RAC program, which is currently 12.5% for a five-year period ending July 1, 2014. If state law mandates a higher contingency fee for similar services, a federal match will not be paid to the state plan on any amount above the Medicare RAC fee maximum.

As with the Medicare RAC program, states must amend their plans to provide incentives for the identification of underpayments to Medicaid providers. The total contingency fee paid to the Medicaid RAC for both underpayments and overpayments cannot equal more that the total amount of overpayments collected by the contractor. This is not to say that the current incentives for the identification of underpayments are working on the Medicare side of the RAC program. The current ratio of identified overpayments to underpayments stands at 9:1.

In reporting the amount of overpayment dollars collected, states would report only the net amount after payment to the contractor of contingency fees for both overpayments and underpayments is taken off the top from all dollars collected. After this amount is determined, the State is required to refund the Federal share of the net overpayment amount to the Federal government. The proposed rule would also require that states issue a report describing the effectiveness of their Medicaid RAC program.

The proposed rule wishes to give states options on setting up appeals processes for providers. Rather than one standardized Medicaid RAC appeals approach, CMS is requesting comment on giving states the option of either utilizing an existing process for provider appeals of RAC determinations or creating a new one specifically for the state’s RAC program. These particular passages in the proposed rule have the potential of creating over 50 unique appeals processes, one for each state and territory covered by the Medicaid program. It doesn’t take long to realize the potential administrative nightmare that is created when a standard format for Medicaid RAC appeals does not exist.  

The proposed rule once again makes clear that the establishment of a Medicaid RAC does not replace existing audit efforts by the state plans. Going further, the states are expected to mandate coordination efforts between the Medicaid RAC and other audit entities to minimize the risk of overlapping audits of the same issue by multiple audit entities. CMS also wishes not to jeopardize the outcome of ongoing fraud investigations via duplication of audit. It amazes me that states will be mandated to share information on ongoing audits with the RACs, yet the RACs, being for-profit entities, will more than likely not return this favor. CMS is finding that the Medicare RACs, due to the financial incentives for identifying overpayments, are generally not referring suspected cases of fraud to CMS for further investigation. I look forward to CMS strengthening their language with the RACs regarding referrals to CMS and the OIG for further investigation of suspect providers in the realm of fraud.

It promises to be a spirited comments period as we head into the holiday season.