Recovery Audit Contractors ("RAC") is a new program being instituted nationwide by the Centers for Medicare & Medicaid Services ("CMS") to detect and correct past improper payments (over- or under-payments) made on claims of health care services provided to Medicare beneficiaries, and to prevent future improper payments. 

 

RAC was tested through a 3-year demonstration period carried out by CMS in four states, which ended on March 27, 2008. From March 2005 to March 2008, CMS estimated the demonstration RACs collected $980 million in overpayments. The demonstration program established that most of these improper payments occur when payments are made for services not medically necessary or incorrectly coded, or when providers fail to submit sufficient documentation to support a claim.

 

The RAC Program is set to become permanent and expand to all 50 states by no later than January 1, 2010. There will be four permanent RACs, each responsible for approximately ¼ of the country. Mississippi is to be located in Region C, and will begin RAC audits in August 2009 or later. The RAC for Region C will be Connolly Consulting Associates, Inc. RAC contractors will be paid a contingency fee derived from the improper payments they collect from Providers, so there is strong incentive for the RACs to actually find error.

Any physician, health care provider or supplier which bills the Medicare fee-for-service program is subject to RAC review, including 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. If you are one (or more) of these types of providers, you need to start preparing for RAC now.

RACs review claims of a Provider on a post-payment basis. There are two types of review: automated and complex. The automated reviews generally allow for a decision to be made without the RAC requesting medical records. RACs may use automated review where there is certainty that the claim contains an overpayment. With complex reviews, typically the RAC will first contact the Provider with notice of a possible overpayment and a medical records request.

The RAC will then review the medical records provided and make a decision about a suspected improper payment.

 

Providers may, and should, start preparing for RAC now in a number of ways. Steps which you can take now to get out in front of the RAC include: forming compliance committees and/or interdisciplinary teams to identify potential overpayments and develop a corrective action plan to reduce the risk of future overpayments; review (and correct if need be) all medical records dating back to October 1, 2007 to ensure they contain appropriate documentation; conduct internal assessments to ensure submitted claims meet all Medicare coverage and payment rules; educate employees on the audit process, and educate physicians on the provider's admission process and documentation requirements; and identify and engage independent counsel to provide assistance throughout the process and to assist in filing any appeals.

 

Providers have several options when faced with a RAC audit and subsequent demand letter. First, comply with the audit request. Be organized and document your response. If an overpayment is identified and a demand letter issued, you may of course pay the demand. CMS allows payment by check, recoupment from future payments, or you may request an extended repayment plan. A second option is the open discussion period. Here, the Provider may call the RAC and speak person-to-person with the medical director/etc. to discuss why the RAC audit is wrong and provide the RAC any documentation to support that contention. Thirdly, you may appeal the decision. CMS published figures for appeal outcomes in the target states during the 3-year demonstration period; as of March 27, 2008, only 14 percent (73,266 of 525,133) of all RAC reviews had been appealed, but approximately a third of those (24,376 of 73,266) were decided in the Provider's favor. Be aware that there are multiple levels of appeal, each with different deadlines, minimum amount in controversy thresholds, and reviewing entities. You must make sure that all appeals are filed timely so as to preserve your rights and properly stop recoupment. Be sure you have independent counsel to provide assistance and guidance throughout this process and to assist in filing any appeals.