Coding & Reimbursement

Medicare's New Auditing Program

By Suzanne L. Corcoran, COE

The Medicare program uses a variety of methods and contractors to ensure it is not over-paying for services. The Recovery Audit Contractor (RAC) program is the most recent. Here is what you need to know.

Q. What is the Recovery Audit Contractor program?

A. The Centers for Medicare and Medicaid Services (CMS) awarded contracts to four independent agencies, known as RACs, to execute a program identifying improper payments, waste, fraud and abuse within the Medicare and Medicaid programs.

States are divided into four regions. The jurisdiction map can be found at http://www.cms.hhs.gov/RAC/Downloads/Four%20 RAC%20Jurisdictions.pdf.

The four contractors are:

► Region A: Diversified Collec tion Services, Inc.

► Region B: CGI Technologies and Solutions, Inc.

► Region C: Connolly Consulting Associates, Inc.

► Region D: HealthDataInsights, Inc.

The 2003 Medicare Modernization Act (MMA) §306 required a three-year demonstration project to determine potential efficacy. The Tax Relief and Healthcare Act (TRHCA) of 2006, §302, mandated a permanent nationwide program by 2010. The MMA and TRHCA allow CMS to pay the RACs on a contingency fee basis. The contingency fee must be returned if the RAC loses at any level of appeal.

The demonstration program was very successful by Medicare's standards. As of March 27, 2008, RACs identified $992.7 million in overpayments collected from providers, and $37.8 million in underpayments made to providers. The demonstration project returned $693.6 million to the Medicare Trust Funds.

Q. What kind of review will RACs perform?

A. RACs will perform postpayment reviews. There are two types, "automated" and "complex." An automated review does not require review of the records to determine that an overpayment has occurred. This relies on a certainty that an overpayment occurred (e.g., a national coverage decision or statute that always indicates non-coverage, or your failure to respond to a RAC record request in a timely fashion).

In a complex review, medical records must be sent. This is required when there is a high probability, but not a certainty, that an overpayment exists. Although details are not yet available, CMS has said RACs will accept CD/DVD images of records. A detailed report of the findings follows all complex reviews.

Q. What limits are placed on these reviews?

A. The look-back period will be three years from the claim payment date, but there is a limit: no claims paid prior to Oct. 1, 2007 are eligible for review. The RACs are required to employ medical professionals, including nurses, therapists, certified coders and a physician contractor medical director (CMD) in performing these audits.

There are also limits on the number of claims the RACs may request, based on the size of the physician practice. In a 45-day period, no more than:

► 10 records for a solo practitioner

► 20 records for a partnership of two to five providers

► 30 records for a group of six to 15 providers

► 50 records for a large group (16 or more)

You have 45 calendar days to respond to a records request, plus 10 business days for mail delivery. The RAC has 60 days to review and respond with their findings.

Q. What are my options once I receive the RAC's findings?

A. Unlike the traditional appeals process, there will first be a discussion period offering an opportunity to discuss the findings with the RAC. After the discussion period, the traditional appeals process begins.

Q. What are the targets for RAC reviews?

A. At present, the Statement of Work for the RACs cites the following:

Identification of Medicare Improper Payments:

► Incorrect payment amounts

► Non-covered services (including services that are not reasonable and necessary under §1862(a)(1)(A) of the Social Security Act)

► Incorrectly coded services

► Duplicate services

New issues and areas of concern will be posted on CMS' Web site as they are identified. The RAC web site is http://www.cms.hhs.gov/RAC. OM

Suzanne L. Corcoran is vice president of Corcoran Consulting Group. She can be reached at (800) 399-6565 or www.corcoranccg.com.