RACs gear up for nationwide expansion
AHA isn't satisfied with proposed changes
The final report on the three-year recovery audit contractor (RAC) demonstration project for hospitals shows that the Centers for Medicare & Medicaid Services (CMS) has made "a lot of important changes," says Don May, vice president of policy for the American Hospital Association (AHA). "There are still changes that we'll continue to push for, that need to be made when the project is rolled out permanently," he says.
The Medicare Prescription Drug, Improvement, and Modernization Act of 2003 required a demonstration program using RACs to detect and correct improper payments in the Medicare fee-for-service (FFS) program. The demonstration program operated in New York, Massachusetts, Florida, South Carolina, and California, and it ended on March 27, 2008.
At press time, CMS said it planned to begin implementing the RAC permanent program this summer for hospitals in a few states. [A map with the expansion schedule for the permanent RAC project is available.] CMS is required to have the nationwide program implemented by Jan. 10, 2010. In the meantime, the 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. This bill has been referred to committee. Several congressmen have asked for a report from the General Accounting Office (GAO) once the program is rolled out nationally.
According to CMS' final report on the demonstration program, RACs recouped $992.7 million in overpayments to providers, while $37.8 million in underpayments were repaid to providers as of March 27. Of the overpayments, 4% were from outpatient hospital providers. The report detailed changes that will be made to the permanent program.
In South Carolina, 32 hospitals and health systems have sued the Department of Health and Human Services and CMS for what they claim is illegal recouping of $30 million in Medicare payments in the RAC project.1 The lawsuit says the Medicare Modernization Act precludes agencies from recouping what they allege is overpayments prior to the second level of appeal. The suit seeks payback of recouped payments with interest until the second stage of appeals is complete.
Here are the additional changes the AHA would like to see in the final RAC program:
- Reduce the look-back period for medical records. May would like to see this period reduced to 12 months. "That's the standards that other contractors are held to," he says. Older claims should be reviewed only if there is "good cause," May says, "but we want to make sure they indeed have good cause to open an older claim."
- Create a contingency-free form of payment. In the demonstration project, the RACs are paid a contingency fee by CMS. "We don't think it's the best way to do it in terms of the program integrity in the Medicare project," May says. "It led to aggressive behavior by the RACs." Instead, they should be paid a contract fee, he says.
- Add protections for RAC review of medical necessity. There is a lot of subjectivity when looking at the medical necessity of care, May says. "The contingency fee here will lead them almost always to deny anything in a gray zone," he says. Typically, the denials are for "big-dollar items," May says.
At a minimum, the medical necessity review needs to be delayed, he says. "There are thousands of appeals in the queue right now," he says. Many are for medically necessity review, May says. "Until they work through the process, and it's a 12-24 month process, there needs to be a delay in looking at medical necessity," he says.
- A centralized tracking platform needs to be created. A centralized electronic tracking platform can help hospitals, as well as CMS and all contractors, track denials and appeals, May says. While CMS officials have told RACs that they need to develop a web-based tool to track medical record requests and denials by 2010, organizations need to be able to track appeals, he says. "It doesn't end when the denial happens."
In the meantime, what should hospitals do to prepare for the national rollout? "You need to form a team, with billing, medical records, coding, physicians, and nursing, to be able to tackle this issue," May says.
Also, consider conducting some self-audits, May advises. "Look at some of those areas identified as problem areas in the RAC report," he says. Determine if you have any vulnerability in those areas, May suggests. If so, self-disclose this information to the fiscal intermediaries and pay the money back, he says. "It's much better to see that than for the RAC find it and get 20%-25% of that." (Editor's note: For a copy of the final CMS report, go to www.cms.hhs.gov. For more information on the RAC program, go to www.aha.org/aha/issues/RAC/index.html. To obtain a list of audit tools, click on RACTrac and then scroll down to RAC Audit Tool Vendors.)
Reference
- Hospitals sue HHS over RAC demonstration process. AHA News Now; July 11, 2008.
CMS makes changes to permanent program
Several changes were made to improve the recovery audit contractor (RAC) permanent program for hospitals, including:
- All new issues a RAC wants to pursue for overpayments must be validated by the Centers for Medicare & Medicaid Services (CMS) or an independent RAC validation contractor, and upcoming issues must be shared with providers.
- A web page will allow providers to look up the status of medical record reviews.
- A RAC cannot perform any automated or complex reviews in excess of 10 medical records without CMS approval.
- CMS has changed the look-back period from four years to only three years and established a maximum look-back date of Oct. 1, 2007.
- CMS will establish a uniform "sliding-scale" limit for medical record requests across all RACs. Thus, the limit will be higher for large facilities and lower for small providers.
- CMS has required each RAC to hire a physician medical director to oversee the medical record review process.
- By 2010, CMS will require the new, permanent RACs to maintain a web page to display the status of all medical record requests.
- CMS has issued instructions to the RACs requiring that they consistently document their "good cause" for reviewing a claim.
- CMS will not contract with separate Medicare secondary payer RACs.
How do RACS identify that payments are wrong?
The two primary ways through which recovery audit contractors (RACs) identify overpayments and underpayments are automated review and complex review.
Automated review occurs when an RAC makes a claim determination without a human review of the medical record. RACs use proprietary software that is designed to detect certain types of errors. To make a coverage or coding denial using automated review, there must be certainty that the service is not covered or is incorrectly coded. Second, there must be a written Medicare policy, Medicare article, or Medicare-sanctioned coding guideline supporting the decision. For example, an automated review could identify when a provider is billing for more units than allowed on one day for a service such as colonoscopy. The RAC may use automated review when making other types of determinations (for example, duplicate claims and pricing mistakes) when there is certainty that an underpayment or overpayment exists, even if written policies don't exist.
Complex review occurs when an RAC makes a claim determination using human review of the medical record. Complex review is used when there is a high probability that a service is not covered or where no Medicare policy, Medicare article, or Medicare-sanctioned coding guideline exists. The RAC will need copies of medical records to provide support for its decisions. Most of the focus of complex reviews has been medical necessity determinations.
Complex reviews for which no written Medicare policy/articles/coding guidelines exist are referred to as "individual claims determinations." The RAC must use appropriate medical literature and apply appropriate clinical judgment. The RAC's contractor medical director (CMD) must be involved in actively examining the evidence used in making individual claims decisions.
The final report on the three-year recovery audit contractor (RAC) demonstration project for hospitals shows that the Centers for Medicare & Medicaid Services (CMS) has made "a lot of important changes," says Don May, vice president of policy for the American Hospital Association (AHA).You have reached your article limit for the month. Subscribe now to access this article plus other member-only content.
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