Comparative Analytics: The Only Answer to Stay Ahead of RAC and Other Audits

By Michael L. Sanderson

The government's continued implementation of health care reform has resulted in a nationwide crackdown on Medicare fraud, making it a key priority for auditors to analyze comparative billing data to spot physician outliers among their peer groups.

In a September 24 letter to the CEOs of the nation's top hospital associations, academic health centers, and medical colleges, the Secretary of Health & Human Services and the U.S. Attorney General made it known that the Centers for Medicare and Medicaid Services (CMS) is specifically reviewing comparative billing data through audits to identify and prevent fraud and abuse.  CMS is also initiating more extensive medical necessity reviews to ensure that providers are coding evaluation and management (E&M) services accurately, making inaccurate E&M coding another red flag.

Since 2011, more than $200 million in overpayments were recovered by (RAC) auditors, whose primary task is to identify improper payments made on Medicare claims. The Recovery Audit Contractor program, a component of the Tax Relief and Healthcare Act that was signed into law in 2006, identifies improper Medicare payments, including overpayments and underpayments. As a result of this program, there has been a marked increase in the number of audits being conducted among Medicare services providers such as hospitals, medical equipment companies, and physician practices. 

These audits can wreak havoc for healthcare services providers and practitioners, most of whom don't even realize that they are labeled "outliers" (businesses targeted for audits).  The cost of being targeted as an outlier can mean considerable loss of time, money, and resource productivity in preparing for a RAC audit.

While most providers targeted for RAC audits operate within the law, not understanding the red flags and necessary processes and procedures can result in the loss of millions of dollars in denied Medicare payments-a terrifying thought for practitioners and businesses who primarily serve Medicare patients. The worst-case scenario is that businesses and practices are forced to close their doors permanently.

Comparative Analytics to the Rescue
With the extraordinary challenges brought about by healthcare reform, healthcare services providers must look beyond analyzing proprietary data in order to meet government mandates, minimize the risk of denials, and avoid penalties.

Peer-to-Peer Comparative Analytics provides the only clarity, transparency, and focus into claims data that until recently has only been the purview of government agencies and RAC auditors. More and more, medical billing companies and physician practices are turning to Comparative Analytics to help prepare for government audits and provide real-time transparency into claims and billing processes, and help providers benchmark their performance against their peers across the country.

Specifically, Comparative Analytics can help providers understand:
- How payers are treating their business relative to their state or national peers
- How their denial rates compare to others in the industry, locale and specialty specific
- If they are being flagged as an outlier on key audit triggers
- The speed of cash flow compared to others in the industry
- The reasons and frequency of claims denials

Preparing for Government Audits Starts with Comparing the Right Data
Comparative Analytics can also provide assistance in preparing for RAC audits by ensuring a provider has the necessary clinical notes and information. And, businesses that don't have access to this critical comparative business intelligence can be at a serious disadvantage.

For example, the U.S. Attorney's Office recently settled a suit with a cancer specialist located in the southern U.S. for more than $4 million, claiming that this provider violated the False Claims Act by billing Medicare for E&M services that went against Medicare rules.

Generally, providers are not permitted to bill both E&M services and a related procedure on the same day under Medicare program regulations. In specific circumstances, providers can avoid this issue by submitting claims marked with modifier-25, which instructs Medicare to pay both the procedure and the E&M service. Unfortunately, there has been widespread abuse of modifier-25, so the U.S. Department of Health & Human Services, Office of Inspector General is now targeting those who overuse modifier-25 as outliers that are subject to RAC audits.

Assessing Comparative Analytics Vendors
A true Comparative Analytics vendor can provide both billing companies and practices with the tools, resources and knowledge they need to compile the clinical data that will be requested during a RAC audit.

Not all Comparative Analytics vendors are alike, however. The key differences include their ability to analyze and compare large sets of structured data and their ability to present that information in a meaningful format that is easy to consume and act on.

Some critical criteria to look for include:

- Experience  -- ideally, a vendor should have extensive experience in collecting, analyzing, and comparing electronic remittance data and other structured healthcare data sets

- Database size - a vendor must have data on a large number of providers within the U.S. - preferably 20 to 40 percent.

- Technology - a vendor needs the capacity to rapidly apply intelligence and perform comparisons in real-time. Providers can no longer afford to wait for a report to post on the Web or conduct a data pull at the end of each month or quarter. Medical billing companies and providers must have comparative reimbursement and utilization data in real-time in order to set proactive alerts and take the necessary corrective action.

The best way to avoid having a RAC audit conducted is to analyze, evaluate, and synthesize E&M data using the same microscope of an auditor, and to become familiar with your data before it becomes known to them. Comparative Analytics is the only answer for healthcare providers and billing companies to overcome the difficulties of increasing government regulations and scrutiny. The old saying is true: "You can't manage what you can't measure." 

Michael Sanderson is president of RemitDATA Inc.