Medicare Recovery Audit Contractor (RAC) Update – Winter 2009

January 9, 2009

This listserve is a continuation of a series of listserves updating our clients on developments surrounding the Centers for Medicare and Medicaid Services (CMS) claims and activity Recovery Audit Contractors (RACs). Future updates will be provided on this listserve as they become available. For a more comprehensive discussion of RACs, please see the white paper Medicare Recovery Audit Contractors (RACs): What Providers Need to Know and How to Prepare.

CMS Updated Evaluation of RAC Demonstration Program Reveals Percentage of Appeals in Provider’s Favor 3% Higher than Previously Reported

CMS recently released an update to its July 2008 report titled “Evaluation of the 3-Year Demonstration.” The January 2009 update and July 2008 original reports are available on the CMS website. The update includes RAC determination appeals statistics through August 31, 2008. The more recent appeals statistics reveal that 22.5% of RAC determinations were appealed and that of those appeals, 34.0% were successful, resulting in an overall 7.6% of RAC determinations being overturned on appeal in the provider’s favor. These figures represent an increase from the figures included in the July 2008 report, which indicated that 14.0% of RAC determinations were appealed, with a success rate of 33.3%, resulting in an overall 4.6% of RAC determinations being overturned on appeal in the provider’s favor.

The reason behind the change in appeals figures is that at the time the July 2008 report was completed, many appeals of RAC determinations remained outstanding. CMS anticipates that additional updates to appeals figures will be required as first-level appeals of RAC determinations under the 3-Year Demonstration were filed through July 1, 2008, and a portion of these appeals remain outstanding.

While the percentage increase in RAC determinations being overturned on appeal is modest (3.0%), this does provide some more encouraging data for providers as they consider the prospect of appeals of RAC determinations.

Summary of Appeals Process for RAC Determinations

The process for appeals of RAC determinations is largely the same as the standard CMS appeals process for Medicare Administrative Contractor (MAC) identified claims. One significant exception, however, is that all first-level inpatient appeals are handled through the MAC rather than the Quality Improvement Organization.

Providers are to submit RAC determination appeal requests to the MAC. Upon receiving an appeal, the MAC requests medical records from the RAC through the RAC database within seven calendar days of determining that a valid appeal has been made. The RAC then must forward or make available the medical records to the MAC within seven calendar days of notification through the RAC database. Appeals are tracked in the RAC database throughout the appeal process so that the RAC can determine when recoupment proceedings must be stopped. The RAC database includes status updates for every level of appeal, which must be updated by the MAC within seven calendar days of any change in status. Where an appeal decision is favorable to the provider, CMS is required to pay interest to the provider, as determined by CMS’ interpretation of the appeal regulations.

If you have any questions regarding RACs, or RAC determination appeals, please contact the author or another member of the McGuireWoods Health Care industry group.