Medicare Audits Affecting Healthcare Ecosystem

Medicare is the most prominent health insurance program in the world; accounting for two percent of gross domestic production, seventeen percent of the U.S. health expenditures, and one-eighth of the government’s national budget. The major impact that this government payer program has in the healthcare ecosystem is the massive coverage it provides to the elderly and disabled. Costing about $260 billion annually, Medicare inaugurated the Recovery Audit Contractor (RAC) program to make claims more cost effective with the detection of over and under payments.

The recovery audit was first drafted through Section 306 of the Medicare Modernization Act (MMA) of 2003 which directed the Department of Health and Human Services (DHHS) to constitute a demonstration of the program. The required program began in 2005 and utilized RACs to isolate and correct inappropriate payments in the Medicare Fee-For-Service (FFS) program. According to the Centers for Medicare and Medicaid Services (CMS) (2014), the demonstration ended in 2008 resulting over $900 million in overpayments and nearly $38 million in underpayments. The success of the audit trial gave CMS a “valuable new tool for preventing future inappropriate payments” (American Health Information Management Association (AHIMA), 2009). This succession brought the recovery audit into legislation under Section 302 of the Tax Relief and Healthcare Act of 2006 which mandated a permanent nationwide audit program by 2010.

The RAC program was conducted in a lucrative manner to ensure that appropriate payments were made to suppliers and providers; thus, protecting the Medicare Trust Fund. Prior to recovery auditing, the billions and billions of dollars that Medicare spent every year to cover its enrollees were, in fact, part of overpayments in claims. RACs have a major role in reimbursement by simply assuring that proper payments are made without targeting gain or loss. According to AHIMA (2009), RACs are paid by contingency fee based on the amount of over and under payments they identify. But, if in any circumstance, the RAC loses an appeal; the contingency fee would have to be returned, proving that the intentions of RACs are unbiased. Whether reimbursement is in favor of the provider or the Medicare Trust Fund, it is nonetheless heavily impacted by RACs. After all, RACs are supposed to be for “recovering” anyhow.

According to AHIMA (2009), RACs are required to employ licensed clinical staff, certified coding staff, and a medical director in order to ensure accuracy. A key personnel apart of the recovery auditor staff is the contractor medical director (CMD) who must either be a doctor of medicine or a doctor of osteopathy with relevant work and education experience. A CMD must either be a doctor who is currently licensed or have experience practicing medicine as a board certified doctor of medicine. Recovery auditor coders are required to have earned their certification from an accredited association such as the American Health Information Management Association (AHIMA) or the American Association of Professional Coders (AAPC). And finally, RACs are required to employ registered nurses who currently hold their licenses in nursing in the United States.

When the audits are being compiled, not only do RACs report potential fraud cases to the Centers for Medicare and Medicaid Services (CMS), but they also note potential quality issues and forward it to quality improvement organizations (QIOs). In healthcare, quality is providing optimal care in the most effective manner and for the least cost - which is something every healthcare organization strives to do. In today's healthcare system, improving the quality of healthcare is a fundamental consideration, which explains why quality is a concern even in claims reviews. Because RACs are more concerned with improper payments, when they do come across quality issues in their reviews, they immediately report the potential issue to their respective CMS Contracting Officer Representative (COR). These audits influence clinical quality directly due to potential disputes in the clinical documentation of the medical chart.

In order to assure quality, the recovery auditor utilizes the "Data Warehouse" to check if another entity has already started a review on a claim before proceeding with their own review. CMS uses the Data Warehouse to store outstanding overpayment data, determination dates, principal amounts, the status of the overpayment and to prepare detailed reports from various data included in the Warehouse. Basically, the Dara Warehouse shows auditors what is and what isn't available to them for review in order to promote efficiency and effectiveness for quality improvement purposes. RACs also perform Quality Assurance (QA) reviews on a monthly basis as part of an Inter-Rater Reliability (IRR) in order to measure performance.

Another area of minimal influence brought upon by the recovery program is patient access. In order to avoid medical necessity denials, registrars in patient access have to confirm that the physician orders are accurate for the particular patient. Registrars would have to check the patient’s name, the date, the service ordered, and the diagnosis along with signs and symptoms for accuracy. Ensuring accuracy and transparency promotes clinical quality. Transparency is the degree to which patients included in secondary data sets are aware of their inclusion. CMS promotes transparency of RACs by posting improper payment corrections information, including over and under payments, on a quarterly basis on its website for patient access. CMS also posted recovery auditor statement of work and several education articles aimed at preventing future improper payments on its website.

Ensuring accuracy and promoting quality of audits require backing from informatics. Informatics is the process of data storage and retrieval. Health informatics professionals use their knowledge of healthcare, systems, databases, and IT security to collect, interpret, and manage the considerable quantities of data generated when care is provided to patients. In order to identify claims for review, RACs require the support of data mining techniques. Data mining is the analyzing of data from different perspectives and summing it into useful information. According to CMS (2013), there are three types of audit reviews; automated, semi-automated, and complex. Thanks to informatics, automated and semi-automated reviews are performed without the need of medical records to detect errors; it is “automated” which means that there is some type technology behind it to make it automatic. The health informatics workforce is impacted by RACs because the contractors employ their own custom-designed computer software that utilizes distinctively established criteria based on Medicare rules and regulations.

In conclusion, the ultimate goal of Medicare audits is to detect and correct past improper payments while implementing actions to prevent future improper payments.