Articles Posted in Recovery Audit Contractors (RACs)

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The Centers for Medicare and Medicaid Services (CMS) published a proposed rule on November 5 regarding RAC activities for Medicaid programs.  Section 6411 of the Patient Protection and Affordable Care Act (PPACA) requires states to contract with one or more Medicaid RACs by December 31, 2010.  By that date, states are also required to submit to CMS a State Plan Amendment (SPA) which documents the initiation of the Medicaid RAC program.  The proposed rule stated April 1, 2011 as a goal for Medicaid RAC implementation.

The proposed rule addresses four main points including contingency fees, reporting, appeals and coordination of audit efforts.  Comments are requested on the current methodologies for determining the maximum contingency fees allowed under the Medicaid RAC program.  According to the proposed rule, no state will pay a contingency fee higher than the maximum allowed under the Medicare RAC program, unless it provides ample justification for an exception based on the existing state law.  States must also provide incentives for the identification of underpayments to the Medicaid payments.

In addition, under the proposed rule states will report to the federal government only the net amount of collected overpayments after contingency fees that were paid to the contractor have been subtracted from the total.  Each state will be required to refund the federal share of the net overpayment amount to the federal government.  States will also have to issue reports describing the effectiveness of their Medicaid RAC programs.

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The RACs for Regions A, B and C recently added new approved issues for review.  The RAC for Region A, DCS Healthcare, added two issues, DRG validation claims and outpatient claims, to its list for providers in Region A states.  CGI, the RAC for Region B, added two new issues for professional services claims and the RAC for Region C, Connolly Healthcare, added a new issue for outpatient hospital claims and physician (carrier) claims.

For more information on Recovery Audit Contractors, or for assistance with a Medicare audit, please contact a Wachler & Associates attorney at 248-544-0888. 

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On October 4, 2010 the Centers for Medicare and Medicaid Services (CMS) published a letter that was sent to state Medicaid directors as part of a series of letters that will provide guidance for the implementation of provisions of the Patient Protection and Affordable Care Act (PPACA), including the expansion of the Recovery Audit Contractor (RAC) program to Medicaid.  States are required to contract with Medicaid RACs consistent with state law and the RACs will be paid through contingency fees.  States will submit a State Plan Amendment (SPA) to CMS through which the State will either attest that it will establish a Medicaid RAC program by December 31, 2010 or indicate that it is seeking an exemption from the requirements.  CMS will permit states to maintain flexibility in the design of the state’s Medicaid RAC program and the number of entities the state will enter into contracts with, so long as the states act within the parameters of the statutory requirements. 

States that seeks to request variances or exceptions from the Medicaid RAC program must submit to CMS a written request from the state’s Medicaid Director to the CMS/Medicaid Integrity Group.  CMS has expressed that it will grant complete Medicaid RAC program exceptions rarely and only under the most compelling of circumstances.

Another important component of the Medicaid RAC program is the contingency fee payment to the contractors.  PPACA requires that Medicaid RACs be paid only from amounts “recovered” on a contingent basis for collecting overpayments and in amounts specified by the State for identifying underpayments.  Although CMS will not dictate the contingency fee rates, the maximum rate will be established.  CMS will publish a notice in the Federal Register, no later than December 31, 2010, to announce the highest Medicare RAC contingency fee rate and this rate will apply to Medicaid RAC contracts with a performance period beginning on or after July 1, 2014.  The contingency fee rates should be reasonable and take into account several factors, including: the level of the effort performed by the RAC, the size of the state’s Medicaid population, the nature of the state’s Medicaid health care delivery system and the number of Medicaid RACs engaged.  The fees paid to Medicaid RACs must include amounts associated with (1) identifying and recovering overpayments and (2) identifying underpayments.  States must maintain an accounting of amounts recovered and paid, and ensure that the total Medicaid RAC fees paid are not more than the total amount of overpayments collected.

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In September the American Hospital Association (AHA) released its RACTrac for the second quarter of 2010.  RACTrac is a nationwide survey conducted by the AHA which documents the ongoing Recovery Audit Contractor (RAC) activity.  The purpose of the survey is to fill the void of information provided by the Centers for Medicare & Medicaid Services (CMS) on the RAC program’s impact on hospitals. 

RACTrac reported that 1,389 hospitals participated in the survey from all of the RAC regions.  During the first quarter of 2010, more than two thirds of these hospitals experienced RAC activity.  The survey results indicated that the RACs primarily engaged in complex reviews.  For instance, during the first quarter of 2010, 88 percent (over $15.5 million) of the reported RAC activity by hospitals participating in the survey was involved in complex reviews, while 20 percent was involved in automated reviews.  Complex reviews require human review of the medical records and a determination of whether or not an improper payment was made.  If an improper payment is identified, the hospital will receive a letter stating that the associated claim has been “denied.”  Automated reviews, however, involve a claim determination without human review of the medical records.  Instead, the RACs utilize software to detect certain types of errors.  The RAC will send a demand letter to the hospital, providing notice that an overpayment has been detected. 
Participating hospitals also reported appealing 16 percent of the RAC denials available for appeal.  Of the claims that had completed the appeals process at the time of the survey, 13 percent were overturned in favor of the provider.  However, 1,571 of the claims are still in the appeals process and the overturned rate may increase once the appeals process is complete. 
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On September 10, 2010, CMS released draft form CMS-10343, which will be used by state Medicaid plans to show that they have contracted with a RAC auditor.  The forms are used in connection with preparation for Medicaid RAC expansion and include criteria related to payments to the Medicaid RAC and the appeal of Medicaid RAC denials.  Under the Social Security Act section 1902(a)(42)(B)(i), States are required to have an operational program and contract with a Medicaid RAC by December 31, 2010.  Pursuant to CMS’s Supporting Statement, States will be able to tailor the Medicaid RAC’s activities to the uniqueness of the Medicaid program in their state, as well as identify and proposetargeted areas for improper payments.

As CMS begins to move towards expansion of the RACs to Medicaid, providers should start preparing for audits of their Medicaid claims.

For more information on RACs or if you need assistance defending a Medicaid audit, please visit www.racattorneys.com– or contract a Wachler & Associates attorney at 248-544-0888.

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The RACs for Region D and Region C added medical necessity reviews to their lists of approved RAC audit issues.  HealthDataInsights (HDI), the RAC for Region D, added ten medical necessity reviews to its list of approved issues, while Connolly Healthcare (Connolly), the RAC for Region C, posted 18 medical necessity reviews involving 29 MS-DRGs.  The approvals of medical necessity reviews in RAC Regions D and C follow closely behind 18 medical necessity reviews recently approved by CGI, the RAC for Region B.  It is important to note that the “new” issues were included in sections already listed on HDI’s approved audit issues lists for review of DRG validations, whereas Connolly listed the medical necessity reviews as separate “new” approved issues.

For more information on RACs or if you need assistance defending a Medicare audit, please visit www.racattorneys.com or contact a Wachler & Associates attorney at 248-544-0888.

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The American Hospital Association (AHA) reported on August 10 that the Centers for Medicare and Medicaid Services (CMS) have approved “medical necessity review” audits for the Recovery Audit Contractor (RAC) program.  According to the AHA, the approved audits include 18 types of inpatient hospital claims and one type of durable medical equipment claim.  Although the report did not include the specific new audit issues, providers should expect to see these issues posted on RAC websites and may begin receiving additional documentation requests (ADRs) within the next two weeks. 

For more information on recovery audit contractors, please visit www.racattorneys.com or contact a Wachler & Associates attorney at 248-544-0888.  
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On July 28 the U.S. District Court of the Southern District of California granted the Department of Health and Human Services’ (HHS) motion for summary judgment in the case, Palomar Medical Center v. Sebelius.  The case, filed on May 26, 2010, challenged a magistrate judge’s recommendation that HHS is correct in its position that a decision to reopen a Medicare audit claim is not subject to appeal, regardless of whether “good cause” was given for the audit.

Palomar Medical Center originally alleged that the Centers for Medicare and Medicaid Services (CMS) unlawfully reopened a claim without showing “good case” for the reopening as required by Medicare regulations.  In addition, Palomar argued that CMS was incorrect in its position, that Administrative Law Judges (ALJs) may not review whether Medicare contractors, such as recovery audit contractors (RACs), have followed federal regulations when reopening claims.

This case has important consequences for Medicare providers because there appears to be no recourse when a Medicare contractor does not abide by CMS’ reopening rules.

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The Office of Inspector General of the U.S. Department of Health and Human Services (OIG) released a report of its review of inpatient rehabilitation facilities’ transmission of patient assessment instruments for 2006 and 2007. Inpatient rehabilitation facilities (IRFs) are required to submit patient assessment instruments for each stay to the Centers for Medicare and Medicaid Services (CMS) National Assessment Collection Database. In 2001, CMS released guidance that required the assessments to be submitted by the 17th calendar day from the date of the beneficiary’s discharge. If the submission date is 10 calendar days late, the payment rate for the applicable case mix group should be reduced by 25 percent.

In its report released in June, the OIG reviewed calendar years 2006 and 2007 to determine if Medicare contractors were reducing case mix patient claims by 25 percent as required by the 2001 CMS rule. The CMS audit evaluated 10,338 claims, totaling $166 million in claims, for which the patient assessment instrument was submitted after 27-day deadline. Out of the over 10,000 claims, the study focused on 192 claims. The OIG report showed that in 113 of the 192 cases, the IRFs did not receive reduced payments despite the transmission of the patient assessment data past the 27-day deadline. CMS estimated that these payment errors totaled approximately $20.2 million overpayments to IRFs in 2006 and 2007.

The OIG determined that the overpayments were the result of inadequate internal controls at IRFs to ensure that the transmission date reported on the claim matched the actual date the IRF transmitted the instrument to the database. In addition, the OIG found that Medicare did not have “prepayment controls” to compare the actual dates of the patient assessment data submission with the date on the claim submitted to the fiscal intermediary.

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Three Recovery Audit Contractors (RACs) posted new issues.

  • The RAC for Region A, DCS Healthcare, posted 23 new approved issues. One new issue applies to DME supplier claims and applies to providers in all Region A states.
  • Connolly Healthcare, the RAC for Region C, posted 3 new issues for non-medical necessity DRG validation reviews. These issues apply to providers in: AL, AK, CO, FL, GA, LA, MS, NM, NC, OK, PR, SC, TN, TX, VI, VA and WV.
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