Possible Hospital RAC Audits in 2014: Pow! Right in the Kisser!

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Muhammad Ali said, “Everybody has a plan until they get punched in the face.”

Whew…it’s a new year.  While I thoroughly enjoyed 2013, I am excited and hopeful for 2014.  Work is so busy that it seems like I’ve barely had time to breathe this January….that’s a good thing, right?  Hey, anyone see me on TV? :)  Check out WRAL.

Hospitals, on the other hand, may be anxious and doubtful about their 2014s.  Hospitals have good reason to wonder about the future.  Our NC General Assembly was fairly harsh on hospitals in the last session, passing numerous session laws that directly or indirectly negatively affect hospitals.

But to be fair, the 2013 NC General Assembly didn’t ONLY affect hospitals…see Stephen Kobert’s report on North Carolina legislature.  Kobert’s graphic simulation is hilarious!

Senate Bill 4 entitled “No NC Exchange/No Medicaid Expansion,” was one of the first bills out of the gate.  While I am not necessary an advocate for expanding Medicaid (see my blog “Medicaid Expansion: Bad for the Poor“), I understand that Medicaid expansion would greatly benefit the hospitals, as well as Medicaid recipients. 

Here is an interesting scenario:

Bradford Regional Medical Center and Olean General Hospital sit only 20 miles apart on opposite sides of the Pennsylvania/New York border. (See “Hospitals Facing Big Divide In Pro- and Anti- ACA States” by Beth Kutscher).  New York expanded Medicaid and Pennsylvania did not.  New York also opted to set up its own health exchange, which is working.  Pennsylvania is floundering with healthcare.gov.  Olean projects billions in lost revenue due to non-Medicaid expansion.  I bet Olean wishes it could move the border of New York!  Or its hospital!

House Bill 998 capped the sales tax refund that non-profit organizations, which was largely aimed at non-profit hospitals. 

House Bill 834 and Senate Bill 473 require certain hospitals and health care facilities to publicize the costs many health care procedures.  So when you need a CAT scan, you can see what UNC’s costs are for a CAT scan versus WakeMed’s and make an individual choice as to which hospital to present yourself.  Sounds like a fair and reasonable request, but imagine the administrative cost for the hospitals to abide by the requirements.

Furthermore, the budget reduced hospital outpatient payments from 80% to 70% of costs. The budget further instituted a 3% Medicaid reimbursement “withhold” that the states calls a “shared savings plan.” The budget changed the hospital provider assessment state retention formula.  Now the state can collect 25.9% of total assessment, instead of the cap of $43 million.

Not just the NC General Assembly affects hospitals.  On the federal level, the Center for Medicare and Medicaid Services CMS) also took a stab.  A new CMS rule converts the current Medicare 5-level, intensity-based payment system for clinic visits to one, single outpatient visit code.  Prior to this change, a hospital could be reimbursed for a Medicare patient visit anywhere from $56.77 for a level 1 new patient to $175.79 for a level 5 new patient.  Now all Medicare clinic visits are reimbursed at $88.31.  You can see that some hospitals would not like this change.

But, as Ali said, “Everyone has a plan until they get punched in the nose.”

The possible punch to NC Hospitals?

Medicaid RAC audits…

For two years, we have been required to sign up Medicaid recovery audit contractors (RACs).  But we have been slow.  HMS, the RAC with contracts in 28 states, including North Carolina says that it has been slow getting started with Medicaid RACs because the state-by-state data have been scant and the procedural hurdles were difficult.  But, according to “Report on Medicare Compliance,” Medicaid RAC audits will be in full swing for hospitals this year.

According to the same article, in North Carolina, two targets are tonsillectomies/adenoidectomies and ambulance services.  Also, at issue in NC, are the DRGs and the medical necessity of inpatient admissions vs. outpatient services.  While RACs are only to audit going back 3 years, the RACs can get permission to go back 5 years.

Medicaid RACs collect contingency fees anywhere between 9.5% to 12.5%, so they have the incentive to find problems. 

HMS boasts that in two mid-Atlantic states, the Medicaid RAC recovered over $12.5 million through credit balance audits of inpatient facilities.

Pow!! Right in the kisser!