Three of the four Recovery Audit Contractors (RACs) have begun work on home health audits, HHL has learned.

Only one RAC has so far posted an approved home health audit issue, but two others are in preliminary stages of determining their own home health review topics, says Mary St. Pierre, VP for regulatory affairs with the National Association for Home Care and Hospice (NAHC).

Connolly, the contractor in region C, is actively conducting an automated review of home health claims which could result in good news for affected agencies: The review is designed to spot underpayments that resulted from incorrectly billed partial episode payment adjustments (PEPs), CMS has told NAHC.

However, DCS in region A and CGI in region B seem to be on the hunt for overpayments.

Both have requested records from agencies as part of an early test phase to validate several audit topics the RACs are interested in, St. Pierre says. If the RACs find issues with the records they’ve requested, it could lead CMS to grant approval to the RACs to conduct a review on those issues.

The tests are focused on classic home health audit topics such as high-therapy episodes, patients with a high number of subsequent episodes, and low-utilization payment adjustment (LUPA) episodes.

In addition, CGI has contacted at least one agency in Ohio to validate a review of unusually high rates of outlier episodes, St. Pierre says.

RAC to review unnecessary PEPs

For now, region C RAC Connolly is the only RAC actively conducting home health audits.

The issue chosen by Connolly is in line with the RACs’ traditional focus on reviews that require only an automated search of claims data, rather than documentation checks, says Robert Markette, an attorney with Benesch, Friedlander, Coplan & Aronoff in Indianapolis.

Connolly will analyze Medicare claims for scenarios where an agency billed with a discharge code that results in a PEP (discharge code 06), but there is no sign in the system that a PEP was justified.

PEPs happen in most cases where a patient is discharged before the end of the episode and then readmitted to another or the same agency within the original 60-day period from the start of care, according to the Medicare Claims Processing Manual.

PEPs can mean substantial financial losses for agencies. For example, a patient whose full episode payment would total $2,434 elects to transfer to another agency on day 13 of the episode. This would leave the agency with only $527, a near-$2,000 loss, says Thelma Bowen, CEO and owner of HealthCare Compliance Services in San Antonio (HHL 8/8/11).

Communicate with receiving agencies

CHRISTUS HomeCare in San Antonio is in Connolly’s jurisdiction, but expects little impact from the audit as PEPs are not a frequent occurrence for the agency, says Laura Montalvo, director of quality management. Still, unnecessary PEPs can sometimes happen despite an agency’s best efforts, she says.

Mistakes are possible, for example, when a patient dies before an expected transfer to another agency can be completed or when the receiving agency ends up not admitting the patient, Bowen says.

Issues with unnecessary PEPs can be avoided by following established transfer protocols every time a patient is transferred to another agency’s care, she advises. For example, ensure you communicate with someone at the receiving agency about the exact time and date for the planned transfer. Find a full transfer protocol here: http://tinyurl.com/7qubdy4.

How RAC audits work

RAC audits are very similar to those conducted by other CMS contractors, says Les Johnson, an attorney with Liles Parker in Baton Rouge, La.

In fact, they may have less of an impact on your cash flow than Zone Program Integrity Contractor (ZPIC) audits.

Like ZPICs, RACs can apply the error rates they find in a record sample to all claims billed by your agency. This technique, known as “extrapolation,” has often resulted in seven-figure overpayment demands following a comparatively small-scale review (HHL 2/6/12). However, the RACs so far have not made use of this technique, Johnson says.

One difference between RACs and other auditors: The RAC will grant you a “discussion period” during which you can attempt to justify any review findings, he says.

You can initiate the discussion period by contacting the RAC up to 40 days after you receive a demand letter, according to CMS guidance.

Steps to speed RAC audits

If you find yourself the target of a RAC review, take these steps to ensure a quick return to business as usual:

Begin your response to the RAC immediately to avoid having to scramble to compile a response right before your deadline runs out, Johnson recommends.

Analyze the RAC’s motives in asking for more information on a particular patient. If you think you know the RAC’s motivation, think about any factors that could, for example, justify your decision to recertify a patient, Johnson says. Then, include a short narrative outlining why it was appropriate to recertify the patient in your response to the RAC.

Stay organized to be prepared for a possible appeal, Johnson advises. Ensure you have a comprehensive file with all relevant documentation for the patient in case the RAC finds against you and you want to ask for a redetermination. – Tina Irgang (tirgang@decisionhealth.com)

Editor’s note: To see a list of the different RACs, their jurisdictions and contact information, go to www.cms.gov/Recovery-Audit-Program/Downloads/RACAbbr.pdf.