RAC Audits of Physicians and Hospitals to Continue

auditLast December, CMS announced an extension of their RAC (Recovery Audit Contractors) contracts with the same four companies that have managed the program the last few years. Earlier in the year, CMS had suspended the RACs from making document requests of providers to allow CMS time to finish work associated with the current RAC contracts and to provide sufficient time for RACs to resolve any outstanding claim reviews.

Auditors are assigned regions of the country and conduct audits on providers in response to whistle-blower tips and complaints and as a result of irregularities and red-lag markers in billing and coding practices by “…providers that have a high propensity for error based on the Comprehensive Error Rate Testing (CERT) program and other CMS analysis,” according to information available at CMS’ website.

The auditors themselves work on a contingency fee basis and the firms contracted by the government are paid up to 12.5% of all claims they successfully identify as invalid and which they collect. The burden this places on healthcare providers from both a resource, financial liability and record-keeping standpoint is significant, they can go back as far a three years and the maximum number of requests per 45 days is 400. The maximum request amount is per campus. RACs identified $3.65 B in overpayments collected and $102.4 M in underpayments to providers and suppliers.

CCI Federal, HealthDateInsights, Connolly and Performant Recovery will be able to once again actively audit hospitals, doctors and other providers for improper payments through December 31, 2015 and will be allowed to perform administrative and transitional activities through April 30, 2017 to address late claims and manage the appeals process. However, the RACs will still not be allowed to audit inpatient hospital stay claims until March 31, 2015, a measure Congress put in place when patching the physician payment formula. CMS states in their contract award notice that the contract extensions will enable it to fulfill its congressional mandate to correct improper payments in efforts to "protect the Medicare Trust Funds" while the contract procurement process is delayed due to CGI’s suit in Federal court. (This past year, CGI, unhappy with the  with new RAC contract terms, filed suit in Federal court. A ruling is not expected until this summer at the earliest.)

Even with the contract renewals, it is still not clear what types of reviews and  procedures will be audited. CMS has stated that most will be automated reviews with some complex reviews.

CMS also awarded a new RAC contract to Connolly LLC to identify improper Medicare payments nationwide made to suppliers of durable medical equipment, prosthetics and orthotics (DMEPOS) and to home health and hospice (HH/H) providers. This is the first of the new contracts that will come under the new Recovery Audit Improvement program, designed to  enhanced oversight, reduced provider burden, and provide more program transparency.

The RAC program came under fire from a host of providers, medical organizations, the OIG (Office of Inspector General) and Congress last year for its over-denial of correct claims and huge back-logs in addressing provider appeals, among other issues. The RAC Improvement Program will establish Additional Documentation Requests (ADR)  limits based on a provider’s compliance with Medicare rules across different claim types as well as other limitations. Here are some of the more noteworthy changes to the program:

  • The time RACs have to complete complex reviews is reduced from 60 to 30 days.
  • Look-back periods have been reduced from 3 years to 6 months from the date of service.
  • In response to concerns that RACs focus too much of their efforts on inpatient claims, CMS will require RACs to broaden their review to topics that includes all claims/provider types. This could potentially increase the risk of a RAC audit for other provider types, such as skilled nursing facilities, long-term care facilities or physicians.
  • To address concerns and criticism regarding accuracy of automated reviews, RACs will be required to maintain an accuracy rate of 95%. Failure to maintain this rate will result in a progressive reduction of document limits for RACs.

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