Recovery audit contractors seek to recover funds from Medicare fraud

Key Points

Called bounty hunters by some, recovery audit contractors, or RACs, are four companies, each representing a U.S. region. RACs are combing all types of healthcare practices, looking for improperly documented services; services that do not meet medical necessity guidelines; incorrectly coded and billed services; and overpaid services, according to Inga C. Ellzey, M.P.A., R.H.I.A., C.D.C., president and chief executive officer of Inga Ellzey Practice Group, Casselberry, Fla.

RACs are independent, for-profit companies, according to Ms. Ellzey, which essentially get paid when they recover money.

While Ms. Ellzey agrees with the concept of auditing for fraud and abuse, she says that RACs are not trained to audit individual specialties, heightening the need for dermatologists to become their own advocates.

"There is no specialization with these RAC auditors. I am a very competent auditor. I have been in dermatology for 30 years. I have a bachelor's and master's degree in medical record administration. So, when I read a medical records chart from a dermatology practice, I know what I am looking for," Ms. Ellzey says. "The problem is that if you put me right now into auditing orthopedic charts, I could probably do more harm than good, because I do not know anything about orthopedic surgery."

A call for vigilance

In the meantime, dermatology practices should prepare for possible RAC audits by being more vigilant than ever about their charts.

"They are going to have to try to show that not only are they supporting the services that they are billing, but also that the services are medically necessary," Ms. Ellzey says.

Medical necessity

Proving medical necessity is trickier than many doctors know. For example, a dermatologist might bill for wart removal, documenting the number and locations of the warts.

"But for warts, Medicare says that unless they are on a child, or on the penis, the anus or the vulva, you need to show (the government) why (it) should pay for a wart removal," she says.

Another example: While actinic keratosis is a covered diagnosis, which does not require that the dermatologist describe it, benign lesions are a bit more complicated.

"Every benign mole is not going to be covered by insurance. So, you have to show medical necessity by saying it is bleeding, enlarging, (signaling) cancer ... and that has to be documented," Ms. Ellzey says.

Know what to expect

RACs flag certain practices, according to Ms. Ellzey, by using software to identify payment errors, patient complaints and other processes. RACs can request medical records from as far back as three years, according to Ms. Ellzey.

Dermatologists should know, she adds, that in legitimate circumstances, dermatologists would not pay an auditor until the company has performed a full investigation. Beware, she says, of scammers that might ask for money upfront.

There are important steps to follow, and dermatologists can learn more about those on RAC Web sites. If the dermatologist, for example, is not aware of his or her rights during the "discussion period," the dermatologist forfeits those rights after a period of time.

"My recommendation is that there should be a person in your office who is responsible ... for anything that comes in the form of an audit request," Ms. Ellzey says.

The initial letter, called the demand letter, should go to that person, who would make sure to accommodate the RAC's requests in a timely manner. Staying on top of the audit and using the discussion period to address a simple mistake or explain an incorrect accusation by the RAC can avoid situations that spiral out of control.

"The average dermatologist may have to pay back a couple thousand dollars at the most, and the people that you will hear the horror stories about - those that are going to have to pay hundreds of thousands of dollars - those are the people that should be caught anyway," Ms. Ellzey says.