CMS releases RAC report

The Centers for Medicare & Medicaid Services (CMS) on July 11 released a new report on the Medicare Recovery Audit Contractor (RAC) demonstration program in a limited number of states. RACs are tasked with identifying inaccurate Medicare payments - both overpayments and underpayments - and are paid on a contingency fee basis, receiving a percentage of the inaccurate payments they identify and recoup.

The three-year demonstration program, authorized by Congress in 2003, was conducted in California, Florida, New York, Massachusetts and South Carolina. In 2006, Congress authorized the national expansion of the RAC program by January 2010. CMS is planning to begin rollout of the national RAC program later this summer.

Today's report provides the most complete overview to date of the demonstration program and improvements CMS has planned for the permanent program scheduled to rollout this summer. Highlights include:

• RACs collected $1.03 billion in improper payments during the three-year demonstration program; $992.7 million in overpayments and $37.8 million in underpayments. After expenses, appeals and underpayments repaid to providers, the program returned $693.6 million to the Medicare Trust Fund.
• Hospitals accounted for 95 percent of overpayments collected by RACs, with 85 percent from inpatient services, 4 percent from outpatient services and 6 percent from inpatient rehabilitation facilities.
• Of the overpayments collected, nearly 40 percent were based on a RAC determination that care provided was not medically necessary or provided in the correct setting, while 35 percent were denied for incorrect coding and 8 percent for no/insufficient documentation.
• CMS reports that 4.6 percent of all RAC denials were overturned through the appeals process. Of the 14 percent of RAC denials appealed so far, approximately one-third were overturned in favor of the provider. However, many denials are still in the appeals process, and final figures will not be available for some time. CMS will issue report updates through summer 2008 on appeals that are still in process.

Changes to the Permanent RAC Program

The American Hospital Association and other state hospital groups involved in the RAC demonstration worked hard to identify problems in the demonstration and pushed for changes to make the program better. In response, CMS details in the report significant improvements to the permanent RAC program. While further changes are still necessary, the changes below represent important steps in the right direction.

• The RAC look-back period was reduced from four to three years; and no audits may be conducted on claims paid prior to October 1, 2007.
• CMS will publicly release the contingency fee rates paid to RACs; and no contingency fee will be paid to RACs for denials that are overturned on appeal.
• RACs must have a physician medical director and use certified coders. Upon request, RAC medical directors will be available to discuss denials with providers. The clinical credentials of RAC auditors also will be available upon request.
• New areas targeted by RACs will be approved by CMS in advance and will be announced on RAC Web sites prior to widespread review.
• RACs will be limited in the number of medical records they can request per a defined period and are required to accept electronically scanned records.
• RACs will be required to document their "good cause" for looking at claims that are more than one year old. In addition, the reason for a claim denial will be provided by RACs.
• RAC denials will be independently audited for accuracy.

Additional Changes Necessary

While CMS has made significant improvements to the permanent RAC program, the following additional refinements are essential before the program expands nationwide. The AHA will continue to advocate for these essential changes.

• CMS should invest in education to help hospitals understand its complex rules and guidelines so claims are paid correctly the first time. CMS can also proactively minimize errors by making Medicare systems corrections.
• RACs should be required to expand the role for physicians, especially with regard to medical necessity reviews.
• CMS should establish a reliable process for re-billing claims denied by a RAC. This requires waiving timely filing limits and establishing a process for re-billing ancillary costs and procedures at a different level.
• While the shortened three-year look-back is helpful, a 12-month look-back is more appropriate to focus providers and RACs on the most recent claims and minimize complexities associated with reopening old claims.
• CMS is requiring each of the four RACs to develop its own Web-based tracking system. Instead, we urge CMS to develop a centralized system that will provide the status of RAC audits and appeals.
• CMS must require RACs to implement a more balanced approach on overpayments and underpayments, rather than the demonstration program's 96 percent focus on overpayments. In addition, more dispersed audits across provider types would be appropriate.
• RACs should be required to reimburse all providers for copying and shipping medical records. While inpatient and long-term care hospitals are reimbursed, other hospitals and outpatient services are not.

Looking Ahead

Hospitals strive for payment accuracy and are committed to continuing to work with CMS to ensure hospital payments are accurate and mistakes in the system are fixed. However, many concerns with the RAC program remain, and we will continue to urge CMS to make key changes before rolling out a permanent RAC program to all 50 states. The AHA-backed Medicare Recovery Audit Contractor Program Moratorium Act (H.R. 4105), introduced by Reps. Lois Capps (D-CA) and Devin Nunes (R-CA), would place a one-year moratorium on the RAC program.

Further documents are attatched below:

RAC Program Evaluation: Download rac_program_evaluation_june_2008_070908_final508compliant_2.pdf

CMS' Press Release on Program Evaluation: Download rac_evaluation_final_release_2.pdf

Comments

[Michael Apolskis]

The Centers for Medicare & Medicaid Services recently released an update document to the report evaluating the 3-year Medicare recovery audit contractor demonstration project. For more information, visit: http://medicareupdate.typepad.com/medicare_update/2008/09/the-cms-recentl.html

[Michael Apolskis]

On January 5, 2009, the Centers for Medicare & Medicaid Services released a January 2009 update document to the report evaluating the 3-year Medicare recovery audit contractor demonstration project. See the Medicare Update weblog’s post at http://medicareupdate.typepad.com/medicare_update/2009/01/racdemoreportupdate.html