The Medicaid Modernization and Improvement Act  mandated a pilot project to utilize Recovery Audit Contractors (RAC’s) in an effort to provide additional oversight for acute rehabilitation programs. The project was implemented in New York, Florida and California utilizing independent contractors appointed by the Fiscal Intermediaries. As of July 2007, it has been implemented in South Carolina, Arizona and Massachusetts. The Tax Relief Act of 2005 requires implementation in all states no later than 2010, but many FI’s are moving to implement in 2008.

Currently RAC’s are only being used to evaluate acute rehabilitation programs; however, the goal is to utilize their services for all inpatient services – including behavioral health and skilled nursing units within the next few years.

The main objective of the RAC providers is to retrospectively deny records if medical necessity is not documented/evident. For each denial, the RAC is paid 25% of the recovered monies. Additionally, there are not currently any published guidelines; however, some Intermediaries utilize Local Coverage Determinations (LCD’s) when applicable.

There are many risks to the hospitals/programs, including, but not limited to:

  • Denials are immediately retro-active to the Hospitals and must be reimbursed to Medicare/CMS immediately
  • Hospitals have a 7 step process available to appeal denials; however, this is approximately an 18 month process and very costly to the Hospital in legal fees
  • Programs with orthopedic utilization are especially at risk – even though some orthopedic patients do qualify under the CMS 13 Categories
  • Some hospitals are experiencing as much as an 80% denial rate – this can devastate a Program or Hospital’s reimbursement position

Signet Health Corporation is working to assist hospitals with evaluating their programs prior to a RAC Audit. Our team has over 124 years of acute rehabilitation experience and we have developed a detailed consulting approach to review, identify, and correct problems in an effort to assist your program’s services and financial stability.