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Red Flags For Getting a RAC Audit Notice for Private Practices

December 24, 2012

RAC RedflagsMedical practices are continuously under the radar from health insurance agencies. This is due to the high rise of misappropriated funds within the health insurance industry. Whether funds are allocated as a result of medical insurance fraud, an unintentional miscalculation or a coding error, private practices undergo medical insurance audits. These audits are conducted by Recovery Audit Contractors commonly abbreviated as RAC.

 These auditors are hired by medical insurance agencies on a fee-for-service basis. The hiring agencies and the audit contractors have an independent relationship. These contractors are only hired for the purpose of conducting an official inspection concerning the financial accounts of private practices and similar medical organizations. Auditors can retain 9% to 12.5 % of what they recover, are now expanded to Medicare Part C, Medicare Advantage Plans, and Part D, prescription drug coverage.

In regard to private practices, an audit may be routine in nature. However, health insurance companies may target such practices due to one or more red flags. As red flags are indicative of a financial concern, it will certainly warrant an official investigation from an RAC.

Red Flag Signs that Warrant a RAC Notice

Red flags in the healthcare insurance industry are warning signs that alert officials of misrepresentation within the system. As such, an official audit will be conducted. As misrepresentations can come in many forms, there are some signs that physicians should be aware of.

One red flag includes prescriptions written for durable medical equipment. Such equipment includes items that can be used in a patient’s home. The intended use of the equipment should help improve the quality of life for such patients. Examples of durable medical equipment include oxygen tents, wheelchairs and hospital beds. Prescriptions for such items should only be written if they are medically necessary. Recovery Auditor Contractors may consider the prescription and payment for such items to be fraudulent if a private physician requests payment for many of these items or a patient never receives the specified item. Fraudulent activity may also be suspected if there is any indication that such equipment is not medically necessary.

If there are questions surrounding a physician’s practice, this may also warrant an investigation. This is especially true if such questions concern billing and reimbursement. Questions can easily arise from an employee, competitor or a patient.

Another red flag includes an increase in pay for services rendered. An increase in pay will cause an alarm concerning fraudulent medical billing when other physicians in the community charge less for the same services rendered.

As physicians of private practices may have one or two employees handle their coding and billing procedures, physicians should always be advised to hire an independent financial auditor. This also holds true for those physicians who require their employees to seek continuing education courses regarding such procedures. Although such employees may be abreast with the laws concerning CMS and the Health Insurance Portability and Accountability Act (HIPAA), errors are still possible.

By hiring professional auditors in this field, periodic reviews can be made to ensure the accuracy of all financial records. Present medical coding and billing specialists should not be given the task to review their own work. Independent auditors should be hired as they can quickly identify errors in financial records. Errors can easily be overlooked by employees who are in charge of completing such records as part of their daily routine. At times, it is best to have a fresh pair of eyes that see things differently. By hiring these professionals, all errors detected should be corrected immediately. Swift action will benefit a physician as it should keep his or her private practice free from red flags and RAC notices.

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