RECOVERY AUDIT CONTRACTORS and MEDICARE AUDITS
RECOVERY AUDIT CONTRACTORS AND MEDICARE AUDITS
I. INTRODUCTION
Attention radiology providers and suppliers: Get ready for increased Medicare auditing activity. The Centers for Medicare and Medicaid Services (CMS) Recovery Audit Contractor (RAC) program has been made permanent and is expanding nationwide, beginning this year. Claim denials and overpayment determinations made by RACs are subject to the Medicare appeals process. Radiology providers and suppliers are well advised to understand the Medicare appeals process and should recognize that there are many effective strategies that can be successfully employed in the appeals process to defend Medicare audits.
II. RECOVERY AUDIT CONTRACTORS
Section 306 of the Medicare Prescription Drug, Improvement and Modernization Act of 2003 (MMA), directed the Department of Health and Human Services (HHS) to conduct a three-year demonstration program using RACs. The demonstration began in 2005 in the three states with the highest Medicare expenditures: California, Florida and New York. The purpose of the demonstration program was to determine whether the use of RACs would be a cost-effective way to identify and correct improper payments in the Medicare FFS program. The RAC demonstration program proved highly financially successful from the point of view of the CMS. In fact, in fiscal year (FY) 2007 alone, the RACs identified and collected 7.2 million in overpayments, and repaid just .3 million in identified underpayments to Medicare providers and suppliers. Based upon information compiled by CMS, the RAC demonstration program cost only 22 cents for each dollar returned to the Medicare Trust Funds.
Section 302 of the Tax Relief and Health Care Act of 2006 makes the RAC program permanent, and requires the expansion of the RAC program nationwide by no later than 2010. CMS is aggressively moving forward with this expansion. During the final months of the demonstration program, RACs expanded into South Carolina and Massachusetts. According to the “RAC Expansion Schedule” published on the CMS website, CMS planned to expand to 19 states by March 2008, 5 more states by October 2008, and the remaining states by January 2009 or later. Although CMS has not yet expanded to 19 states as planned, radiology providers and suppliers in these states can expect the commencement of RAC auditing activity at any time.
Although RACs are responsible for correcting underpayments as well as overpayments, it is the process of recouping alleged overpayments that is of particular significance to Medicare providers and suppliers. RACs may make determinations regarding coverage, coding and other technical issues (e.g. duplicate claims). The RACs are permitted to attempt to identify improper payments resulting from any of the following:
Incorrect payments; Non-covered services (including services that are not reasonable and necessary); Incorrectly coded services (including DRG miscoding); and Duplicate services.
When performing coverage or coding reviews of medical records requested from a Medicare provider or supplier, nurses (RNs) or therapists are required to make determinations regarding medical necessity and certified coders are required to make coding determinations. The RACs are not required to involve physicians in the medical record review process. However, the RACs are required to employ a minimum of one FTE contractor medical director (CMD), who is a doctor of medicine or doctor of osteopathy, and arrange for an alternate CMD in the event that the CMD is unavailable for an extended period. The CMD will provide services such as providing guidance to RAC staff regarding interpretation of Medicare policy.
Although the RACs have fairly broad discretion in determining which claims to review for the purposes of identifying payment errors, CMS has prohibited the RACs from looking at certain categories of claims. For example:
The permanent RAC program will begin with a review of claims paid on or after October 1, 2007. This first permissible date for claims review is the same for the RAC reviews in all states, regardless of the actual start date for a RAC in a particular state. However, as time passes, the RACs will be prohibited from reviewing claims more than three years past the date of initial determination (defined as the initial claim paid date).
RACs are not permitted to review claims at random. However, RACs are authorized to use “data analysis techniques” to identify claims likely to be overpayments, a process called “targeted review.” The permanent RACs, like those in the demonstration program, will likely consider their “data analysis techniques” to be proprietary, and thus will not tell