Home Health & Hospice

Know How a Math Concept Can Extend RAC Damage

Homecare Insider, December 14, 2009

The Recovery Audit Contractors (RAC) have started their work with hospitals and outpatient providers.  In 2010, homecare providers are on their list.  
There are many reasons for homecare agencies to be concerned about the RACs.  One big reason deals with mathematics, not Medicare coverage.  A RAC can extrapolate the error rate.  Extrapolation applies statistical sampling methodology to extend the application of a finding—in this case, a denial rate—to an unknown situation by assuming that existing trends will continue or similar methods will be applicable.  In other words, if a homecare provider did not comply with some specific coverage criteria in the sample reviewed by the RAC, it probably didn’t comply across the board.  Example:  The agency incurred a 20 percent denial rate of the sample review for skilled nursing observation and assessment.  The RAC used extrapolation to apply the penalty to all applicable claims.

A RAC can apply extrapolation in cases where there was evidence of a sustained or a high level of payment error or when documented educational intervention by the intermediary or the Medicare Administrative Contractor failed to correct the payment error.  This can result in huge cost savings for the Centers for Medicare and Medicaid Services (CMS), but it can be particularly problematic for agencies hit with medical necessity denials, in which each patient is part of a unique situation.

It will be important for an agency to review the specifics of every RAC denial.  If not valid, the agency should appeal the determination.  Every overturned denial reduces the percentage that will be applied to the universe of claims.  If extrapolation leads to a huge dollar penalty, experts recommend that an agency seek professional counsel.  The agency’s best defense against extrapolation is to show that the sample was flawed, most likely because of human error.  Added note:  If an agency prevails at any step in the appeals process, the RAC must return the contingency fee it received for identifying the overpayment in the first place.

Beacon Health’s seminar, “Mastering Medicare in 2010,” will address RACs and OASIS-C in the PPS.  Learn more about dates and locations at — http://www.beaconhealth.org/medicare2010.html.