CMS' Medicare Recovery Audit Contractor Program: 8 Things to Know

The Senate Special Committee on Aging is taking on the issue of Medicare audits in a hearing today. CMS' recovery audit contractor program — which started in 2009 and involves independent contractors — aims to ensure all Medicare and Medicaid payments are proper. Here are eight things to know about the Medicare RAC program.

1. Medicare RACs have performed a vast majority of the audits in the first four-plus years, recouping almost $2.25 billion in Medicare funds from hospitals and other providers from July through December 2013.  In fiscal year 2012, Medicare RACs identified $2.4 billion in improper payments, according to CMS. Of that total, $2.3 billion were overpayments.

2. According to CMS, ensuring accuracy, efficiency and effectiveness are key to RAC success. Maximizing transparency, minimizing provider burden and developing provider education are areas of focus as well, according to the agency.

3. RACs are paid with contingency fees. In FY 2012, Medicare RACs earned up to 12.5 percent of their recovery total, except for claim types that involved durable medical equipment. In 2012, Medicare RACs received $142.3 million overall in contingency fees, while returning $1.9 billion to the Medicare trust fund (after accounting for costs and appeal reversals).

4. The American Hospital Association tracks RAC activity through its quarterly RACTrac survey. The survey measures Medicare recovery auditor, or RAC, activity. AHA created the web-based survey because of the lack of data from CMS concerning the impact RACs have on providers, according to the RACTrac website. The most recent survey information for the first quarter of this year showed 48 percent of 1,165 hospitals surveyed reported spending more than $25,000 managing the RAC process.

5. The American Hospital Association has urged CMS to improve the RAC program by adopting the reforms included in the Medicare Audit Improvement Act of 2013, under which Medicare RACs would be limited to a hard cap of additional medical record requests. The bill would also impose financial penalties on RACs for auditing errors, improve RAC transparency and allow denied inpatient claims to be billed as outpatient claims when appropriate. Rep. Jim McDermott (D-Wash.), a ranking member of the House Ways and Means Health Subcommittee, has also called on CMS to reform the RAC program to enhance auditor accountability and performance.

6. Additionally, the AHA has expressed concern about a temporary suspension in administrative law judge hearings concerning payment denials from RACs. In December, OMHA announced a temporary suspension of most new requests for administrative law judge hearings concerning payment denials from RACs due to a backlog in appealed claims. Most new hearing requests will be delayed by at least two years. The AHA has urged CMS to work with OMHA to address the suspension to mitigate detrimental effects for hospitals. Additionally, earlier this year, 111 House members sent a letter to HHS Secretary Kathleen Sebelius asking her to take immediate action to reform the RAC program. The temporary suspension of administrative law judge hearing requests illustrates a need for change, the lawmakers wrote.

7. In February, CMS announced it would "pause" additional documentation requests from Medicare RACs as the agency procures the next round of RAC contracts. June 1 was the last day RACs could send improper payment files to Medicare administrative contractors for adjustment. In response to industry feedback, CMS also announced it would make adjustments to the RAC program, such as making RACs wait 30 days to allow for discussion before sending claims to MACs for discussion, meaning that providers will no longer have to choose between initiating a discussion and an appeal.

8. However, it's unclear at this point when CMS will award new Medicare RAC contracts. The agency has agreed to postpone awarding the new contracts because of a lawsuit filed by CGI, a current RAC. CGI has claimed the payment terms proposed by CMS in the new contracts will create "an intolerable revenue flow model," according to a RAC Monitor report. Currently, RACs can receive their contingency fees following the exhaustion of the first level of appeal of a claim determination. Under the new contracts, RACs can't receive that payment until the second level of appeal is exhausted.

More Articles on Medicare RACs:
Rep. Jim McDermott Advocates for More RAC Accountability
CMS Announces 5 Changes to RAC Program, Halts Documentation Requests  
OMHA Holds Forum on RAC Audit Appeals Backlog 


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