The Centers for Medicare & Medicaid Services’ (CMS) recent recovery audit contractor (RAC) demonstration report tallies the dollars recouped under the program and details significant improvements the agency plans for the permanent RAC program.
The AHA said the report indicates that CMS is responding to hospitals’concerns, but the association will continue to press for more improvements.
According to the July 11 report, 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, 85% were collected from inpatient hospital providers, 6% from inpatient rehabilitation facilities and 4% from outpatient hospital providers. After expenses, appeals and underpayments repaid to providers, the program returned $693.6 million to the Medicare Trust Fund; however, CMS notes that this amount is subject to change depending on the outcome of pending appeals.
The three-year demonstration began in 2005 in California, Florida and New York and expanded to Massachusetts and South Carolina before ending in March. Congress in 2006 made the program permanent and required CMS to have RACs operating in all 50 states by 2010.
The long-awaited report evaluates the demonstration program and outlines improvements CMS plans to make when it begins rolling out RAC later this year. “We appreciate that CMS has listened to hospitals’ concerns and made some important changes,” said Don May, the AHA’s vice president for policy. The AHA and the state hospital associations involved in the RAC demonstration worked closely with CMS to identify problems and push for improvements.
Those improvements include barring RACs from auditing claims paid prior to Oct. 1, 2007, which “sets a prospective date moving forward,” said May. CMS also set a maximum look-back period of three years and limited the number of medical records a RAC can request during a defined period. Also, RACs will not receive a contingency fee for denials that are overturned on appeal.
CMS plans to publicly release the contingency fee rates paid to RACs and will require them to have a physician medical director and use certified coders. Upon request, RAC medical directors must be available to discuss denials with providers, and the clinical credentials of RAC auditors will be available upon request.
CMS also addressed concerns with medical necessity reviews. For the permanent program, RACs will only be able to focus on coding errors at first – or “black and white issues,” as May put it. He said it was unclear how long medical necessity reviews would be excluded from RAC audits. RACs will need to seek CMS’ approval before pursuing new overpayment issues.
The AHA will continue to press for more changes before CMS takes the program nationwide. One change will be holding RACs to the same standards as other Medicare contractors. “That means they should only be able to review claims within the first 12 months after they’re paid, unless they can find good cause for looking at older claims,” May said.
The AHA is seeking more education about the RAC program for providers. “If we are to realize the larger goal of error-free claims, we need CMS to take the information they’ve learned from the RAC program and develop new education materials and make system changes,” May said.
“One thing we learned was that the paper-based process used by the RACs to correspond and share claim information with hospitals was inefficient and cased considerable burden,” he said. “We urge CMS to establish a centralized electronic tracking mechanism for hospitals to track denials, medical record requests and the status of appeals.”
The same day that CMS released its report, House Energy and Commerce Committee Chairman John Dingell, D-MI, and Ways and Means Committee Chairman Charles Rangel, D-NY, called on the Government Accountability Office (GAO) to study the RAC program. “Given the substantial challenges that arose during the pilot program, and notwithstanding the significant changes to the program going forward, we believe it is important that the RAC experience be reviewed,” they said in a letter to the GAO.
Earlier this month, 32 South Carolina hospitals and hospital systems filed a lawsuit against CMS, claiming the agency illegally recouped about $30 million in alleged Medicare overpayments during the RAC demonstration. The suit claims that the 2003 Medicare Modernization Act prevents the agency from recouping alleged overpayments prior to “reconsideration,” the second level of appeal available to providers in the case of an alleged overpayment.
South Carolina Hospital Association President and CEO Thornton Kirby said, “Our hospitals are not afraid of being audited – that’s not the issue here. But CMS needs to play by the rules that Congress set up and the RACs need to audit using the right standards.”
As it pushes for more administrative changes, the AHA also supports the “Medicare Recovery Audit Contractor Program Moratorium Act,” H.R. 4105, introduced by Reps. Lois Capps, D-CA, and Devin Nunes, R-CA. The bill would place a one-year moratorium on the RAC program to address problems that have been cited with the audits.
For more information on RACs and a link to CMS’ report, go to www.aha.org and click on “Recovery Audit Contractor (RAC) Program” under “Highlights.”
