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While it is difficult to pinpoint the exact areas that Recovery Audit Contractors ("RACs") will look to recover improper payments, it is worthwhile to review the current CMS Approved Audit Issues and use them as guidance for internal reviews and self-auditing.

Diversified Collection Services, covering Region A (including New York and New Jersey), lists:

• Pharmacy Supply and Dispensing Fees
• Wheelchair Bundling
• Urological Bundling

as the CMS Approved Audit Issues for Region A, and providers billing the codes that accompany these audit issues between October 1, 2007 - present may undergo an automated review (where no medical record is involved in the review) for overpayments.

The CMS Approved Audit Issues for the other three regions are as follows:

Although the audit issues vary among each region, the overall focus of CMS is important to study because it explains the manner of billing that providers must avoid.  Where, in the past, billing errors may have gone unnoticed, the advent of RACs will force providers to diligently research and review their billing and coding prior to submission for payment.    

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After reading a recent article posted by Angela Boynton, a frequent and informative writer with the American Academy of Professional Coders, titled "The Cost of ICD-10 Implementation," I am left wondering who will, realistically, finance the cost of conversion to ICD-10.  In the article, Angela cites a study conducted by the The Medical Group Management Association which predicts astronomical ICD-10 implementations costs.  The study found that, on average, it would cost :

• $84,000.00 for the average small physician practice to upgrade to ICD-10;
• $3,000,000.00 for large practice implementation;
• $500,000.00 - $14,000,000.00 for health plans, depending on size.

While the article does not go into details regarding the scope and time frame for the projected costs (i.e. Are these "lifetime" costs or one-time conversion costs?  Do these costs include new equipment, software, technical support, training and so forth?), it is clear that the health care industry will be addressing more than the burden associated with training and education.

However, I am not sure that these figures are accurate, nor that they will be paid by the health care providers.  For instance, if a small physician practice is currently leasing billing software, or working with a medical billing company, wouldn't these service providers absorb most of the conversion costs?  

My assumption is that current ICD-9 billing and coding software can easily be converted to, or updated for, ICD-10 functionality and compatibility.  And even if my "easily converted" assumption is wrong, isn't it in the service providers' best interest to keep the costs to the end users - like small physician practices - as low as possible so that they can retain  their client base?

As for those practices that use in-house billing and coding software that they own, it is probably best to hold off and buy a comprehensive software that incorporates ICD-10 billing and coding, and a certified electronic health records system ("EHR").  Most practices will be expending money for the EHR software no matter what happens with ICD-10, so waiting for one unified system will likely be the most cost effective approach.  The problem for these practices is that they will be pressed to purchase the EHR software much sooner than ICD-10 will be in use.

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In an effort to identify improper Medicare payments and fight fraud, waste and abuse in the Medicare program,  The Centers for Medicare & Medicaid Services ("CMS") awarded contracts to four permanent Recovery Audit Contractors ("RAC's").  The national RAC program is the outgrowth of a successful demonstration program that used RAC's to identify Medicare overpayments and underpayments to health care providers and suppliers in California , Florida , New York , Massachusetts , South Carolina and Arizona . The demonstration resulted in over $900 million in overpayments being returned to the Medicare Trust Fund between 2005 and 2008, and nearly $38 million in underpayments returned to health care providers. 

• Overpayments can occur when health care providers submit claims that do not meet            Medicare’s coding or medical necessity policies.
• Underpayments can occur when health care providers submit claims for a simple procedure but the medical record reveals that a more complicated procedure was actually performed.

Health care providers that will be reviewed for overpayments and underpayments include: hospitals, physician practices, nursing homes, home health agencies, durable medical equipment suppliers, and any other provider or supplier that bills Medicare Parts A and B.

On October 6, 2008, CMS announced the names of the new national RACs. The new RACs are:

• Diversified Collection Services, in Region A, initially working in Maine, New Hampshire, Vermont,  Massachusetts, Rhode Island and New York. 
• CGI Technologies and Solutions, in Region B, initially working in Michigan, Indiana and Minnesota.
• Connolly Consulting Associates, in Region C, initially working in South Carolina, Florida, Colorado and New Mexico.
• HealthDataInsights, in Region D, initially working in Montana, Wyoming, North Dakota, South Dakota, Utah and Arizona.

Additional states will be added to each RAC region in 2009.

The RACs will be paid on a contingency fee basis on both the overpayments and underpayments they find. Contingency Fees are as follows:

• Region A - 12.45%
• Region B - 12.50%
• Region C -   9.00%
• Region D -   9.49%

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