Medicare Recovery Audit Contractor (RAC) Update – Summer 2009

June 11, 2009

This news item is a continuation of a series 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 list as they become available.

Calm Before the Storm – RAC Activity Expected to Spike in Late June

Temporarily hampered by a bid protest on contract awards, the RAC program is once again under way. CMS now expects that providers included in the first phase of the national rollout of the permanent RAC program will begin to receive letters for automated reviews by late June or July. A representative of HealthDataInsights, the RAC for Region D, which includes states in the first phase, has confirmed CMS’ expectations, stating that it may begin to issue letters for automated reviews in June.

RACs for the states involved in the first phase of expansion for the permanent program (Arizona, Colorado, Florida, Indiana, Maine, Massachusetts, Michigan, Minnesota, Montana, New Hampshire, New York, New Mexico, North Dakota, Rhode Island, South Carolina, South Dakota, Utah, Vermont, and Wyoming) continue to conduct provider outreach sessions. RACs are not permitted to issue medical record requests or demand letters until after the requisite RAC provider outreach sessions have been completed. The RAC Expansion Schedule that identifies the phases for expansion and the Provider Outreach Schedule are available on the CMS website.

Softening the Blow – Initial Reviews Limited to “Black and White” Issues

There is some “good” news for providers with respect to the national rollout. CMS has stated that it does not expect RACs to begin conducting complex reviews until 2010 or later, which means that initial reviews by RACs will be limited to automated reviews. Consistent with this guidance, a representative of HealthDataInsights has stated that initial reviews would likely only involve “black and white” issues such as duplicate billings.

The delay in implementing complex reviews is favorable for providers in the sense that automated reviews are less cumbersome and do not involve the need to comply with a medical records request. This is significant because complying with medical record requests proved to be one of the greatest burdens for providers in the RAC Demonstration Project.

Automated reviews involve RAC analysis of claims for simple objective determinations, such as improper payment for non-covered services or coding errors. No medical record requests are required. Any automated review must have a clear policy, such as a statute, regulation, or National Coverage Determination that serves as a basis for the overpayment. The only exception is where the RAC identifies a “clinically unbelievable” issue (i.e., there is certainty that the service is not covered, but no clear policy exists). CMS must approve any clinically unbelievable issue in advance.

Unlike automated reviews, complex reviews do require a review of medical records by the RAC. For complex reviews, the RAC analyzes claims data to perform targeted reviews intended to identify those claims most likely to contain overpayments. Where overpayments are suspected, the RAC sends to the provider a request for medical records. The provider has forty-five days to respond to this request by submitting copies of the medical records to the RAC.

RACs Touting Rebuttal Period as an Alternative to Appeal

Recent comments by a representative of the Region D RAC, HealthDataInsights, suggest that the rebuttal or “discussion” period available under Medicare regulations may serve as a valuable tool for providers in working with RACs to identify possible RAC errors in overpayment determinations. Under Medicare regulations, the provider has fifteen days from the date of notice of the overpayment to submit a statement as to why a recoupment of funds to offset overpayments should not be put into effect. An example would be a situation where the RAC simply applies the wrong payment rule for making a determination. Filing of a rebuttal that is accepted by the RAC is a one-time opportunity to reverse the initial determination of overpayment in the provider’s favor, without the time and expense involved in an appeal.

The rebuttal or “discussion” period is particularly attractive to RACs who appear to be concerned that some of their overpayments will be overturned on appeal. The opportunity to clarify matters on rebuttal would eliminate this uncertainty. It is also attractive to providers as a means of preventing an inappropriate recoupment of funds from Medicare receivables and avoiding the unnecessary time and expense of the Medicare appeals process. It is important to note, however, that filing of a rebuttal does not toll the 120-day timeframe for filing a redetermination request – the first level of appeal. If appeals are not timely appealed, the provider’s rights are waived.

If you have any questions regarding RACs, or RAC determination appeals, please contact the authors, members of our RAC Response Team.