February 2015 Monthly RAC Report

February 16, 2015

Every year the Centers for Medicare and Medicaid Services (“CMS”) evaluates concerns raised by providers about the Recovery Audit Program (“Program”) and issues numerous changes to the Program. On December 31, 2014, CMS issued its Recovery Audit Program Improvements for 2015, which took effect beginning with each new contract awarded to Recovery Audit Contactors (“RACs”) on December 30, 2014. The improvements for 2015 apply to RACs involved with the recoupment of Medicare payments from providers across all facility types, including hospitals.

Providers should expect several beneficial changes to the Program once the RACs obtain their contracts and begin their audits. These improvements are categorized into three initiatives: (1) reducing provider burden; (2) enhancing CMS oversight; and (3) increasing Program transparency. Each of these initiatives addresses some but not all of providers’ concerns over the recent years. So what can providers expect?

Some of the improvements are discussed in more detail below, most notably being the reduction in the period in which the RACs can reach back and deny claims based on patient status. Previously the RACs could deny claims going back three years from the date of service, but now CMS will limit the RACs to a six-month look-back period for claims filed by the hospital within three months of the date of service. One important thing to remember, however, is that these “improvements” are changes to the RACs’ contracts with CMS and will not necessarily become regulations or law. In other words, providers must rely on CMS to enforce its contracts. Here are the most notable changes.

Reducing Provider Burden

  • Additional Document Request (“ADR”) limits: CMS will establish ADR limits based on a provider’s compliance with Medicare rules. Providers with low denial rates will have lower ADR limits; providers with high denial rates will have higher ADR limits. CMS will diversify these ADR limits across claim types—examples include inpatient versus outpatient claims, and inpatient rehabilitation stays. For new providers, which in the past immediately began to receive ADR requests for the maximum number allowed, CMS will instruct the RACs to incrementally apply the ADR limits to ensure that new providers are able to respond timely and coordinate staff accordingly. For physicians, CMS will maintain and not increase the current ADR limits.
  • Three-year look-back period: Hospitals have long suffered from the extensive look-back period enjoyed by the RACs. Hospitals are required to submit their claims for payment within one year of the date of service, while the RACs could deny claims with dates of service extending back three years, causing hospitals in some instances to miss their opportunity to rebill denied Part A inpatient stays under Part B. To remedy this, CMS will limit the look-back period for RACs to six months from the date of service for patient status reviews, but only in cases where the hospital submits its claim within three months of the date of service.
  • Complex reviews: Previously, providers were required to wait 60 days before being notified of the outcome of their complex reviews. Now the RACs must complete their complex reviews and notify providers of their findings within 30 days.
  • Contingency fees and expertise of reviewers: Most providers have been concerned with the contingency-fee arrangement between CMS and the RACs. RACs were previously paid their contingency fee once they recouped improper payments, even if appealed, and even at the first level of appeal if the provider did not postpone recoupment. Additionally, CMS placed few requirements on the RACs regarding expertise of the persons reviewing a claim for payment. The good news for providers is that now the RACs must wait to be paid their contingency fee until after a denial at the second level of appeal. This, among other reasons, was the basis for the lawsuit filed by one RAC, CGI Federal, Inc., against CMS and the Department of Health and Human Services. The bad news for providers, however, is that CMS offered no changes to the requirements regarding the expertise of the RACs’ reviewers. Instead, providers were reminded that the RACs are required to have a Contractor Medical Director on staff, who must be a physician, but who will not necessarily be the person overseeing the actual review of the medical record.

Enhancing CMS Oversight

  • Public information: Generally, providers receive much of their data on the Program from organizations like the American Hospital Association, which releases a quarterly RACTrac Report that outlines surveys conducted by the AHA regarding the Program. In response to providers’ concerns about public disclosure of information on the Program, CMS plans to publicly report additional data about the Program for providers—particularly regarding appeals, quality assurance activities, and timeliness standards.
  • Overemphasis on inpatient hospital claims: CMS notes that it will require the RACs to broaden their review topics and to review “certain topics based on referral, such as an OIG Report.” CMS did not elaborate on which topics will be included in the referral categories.
  • Penalties for high overturn rates: Previously, CMS did not penalize the RACs for high appeal overturn rates. Now, each RAC must maintain an overturn rate of less than 10% at the first level of appeal, excluding claims denied due to no or insufficient documentation or claims corrected during the appeal process. If the RAC’s overturn rate exceeds 10%, CMS will place the RAC on a corrective action plan that could include (i) decreasing the RAC’s ADR limits, or (ii) ceasing certain review types until the problem is corrected.
  • Accuracy of automated reviews: The RACs will be required to maintain an accuracy rate of at least 95% on all automated reviews. Failure to do so will result in a progressive reduction in ADR limits.


Increasing Program Transparency

  • Contact information: In response to providers’ concerns regarding the RACs’ inability to resolve issues raised by the Provider during the review process, CMS has established a Provider Relations Coordinator who is tasked with more efficiently resolving issues raised by providers regarding the Program. The Provider Relations Coordinator is Latesha Walker, who may be contacted at RAC@cms.hhs.gov (for Recovery Auditor review process concerns and suggestions) or MedicareMedicalReview@cms.hhs.gov (for MAC review process concerns and suggestions).
  • New issue postings: CMS will require the RACs to post new issues to their websites more consistently and in more detail.

If you have any questions regarding this Monthly RAC Report, please contact Larry McCarty (larry.mccarty@phelps.com) or Jeff Moore (jeff.moore@phelps.com).