CMS Expands the Recovery Audit Contractor (RAC) Program: How This Will Impact EP
- Mon, 11/24/08 - 12:45pm
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In the coming months, you will be hearing more about The Centers for Medicare and Medicaid Services (CMS) using Recovery Audit Contractors (RACs)1 for recovering “inappropriate payments” for Medicare services. CMS is expanding the use of RACs from a limited demonstration program in a few selected states to a national rollout that will be completed by 2010. This article is intended to provide you with some background as to what RACs are, what they are intended to do, and what actions you should consider to prepare for their upcoming national rollout.
Background
Although CMS has reported a declining error rate in paid claims over the past five years due to significant compliance efforts, a January 2008 report by the Office of Management and Budget (OMB) indicated that Medicare is still among the top three Federal programs with improper payments, totaling an estimated $10.8 billion in 2007.
The Medicare fee-for-service (FFS) paid claims error rate was estimated to be 10.1% in FY 2004 but had declined to 4.4% in FY 2006.3
As a result, The Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA) directed CMS to create a three-year RAC demonstration program to detect and correct improper payments in the Medicare FFS programs. The demonstration project ran from March 2005 to March 2008, and was initially limited to the three states with the highest per-capita Medicare population: California, New York, and Florida. Three additional states were subsequently added in 2007: Massachusetts, South Carolina, and Arizona.4
Program Methodology
RACs identify potential cases for review through proprietary analysis of the Medicare claims file.2 Identification of potentially inappropriate payments results in an automated review and data collection process. Cases involving a likely error result in a request for the medical record and a complex review that may be performed by non-physician personnel.
Overall, claims may be denied due to improper coding, inaccurate assignment of medical necessity, insufficient documentation, duplication of charges, or billing for services already included in other payments. During the demonstration, the types of hospital services most likely to be identified for overpayment included wound debridement, surgical procedures in the wrong setting, respiratory system diagnosis with ventilator support, extensive OR procedures unrelated to the principal diagnosis, inpatient rehabilitation services following an orthopedic procedure, and heart failure admissions.
Congress directed CMS to utilize commercial contractors to administer the RAC program. As per the MMA, RACs are paid on a contingency fee basis. Medicare believes this compensation arrangement appropriately aligns incentives for the RACs, as they are also required to return any funds overturned on appeal. However, this payment methodology has been criticized as potentially creating an incentive to focus their reviews on high dollar value claims, particularly in the inpatient hospital setting,5 as well as overpayments rather than underpayments.6
Financial Impact of the Demonstration Project
1. The Centers for Medicare & Medicaid Services (CMS) RAC Permanent Program. http://www.cms.hhs.gov/rac/
2. The Medicare Recovery Audit Contractor (RAC) Program: An Evaluation of the 3-Year Demonstration. June 2008, CMS. http://www.cms.hhs.gov/RAC/Downloads/RAC%20Evaluation%20Report.pdf
3. Timothy B. Hill, CFO of CMS; March 29, 2007 testimony before the US Senate regarding initiatives to reduce improper payments in Medicare, Medicaid, and SCHIP.
4. CMS RAC Status Document, FY 2007. Status Report on the Use of Recovery Audit Contractors (RACs) In the Medicare Program, February 2008. http://www.cms.hhs.gov/RAC/Downloads/2007%20RAC%20Status%20Document%20vs...
5. National Healthcare Compliance Audioconference: Medicare RAC Audit Update. Don May, American Hospital Association, May 13, 2008.
6. Recovery Audit Contractor (RAC) Program — Heart Rhythm Society Member Advisory. http://www.hrsonline.org/Policy/CodingReimbursement/resources/rac_member.... cfm
7. CMS Office of Public Affairs (February 25, 2008). “CMS Program Identifies $371.5 Million in Improper Medicare Payments in Three States.” Press release. http://www.cms.hhs.gov/apps/media/press/release.asp?Counter=2943&intNumPerPage=10&checkDate=&checkKey=&srchType=1&numDays=3500&srchOpt=0&srchData=&srchOpt=0&srchData=&keywordType=All&chkNewsType=1%2C+2%2C+3%2C+4%2C+5&intPage=&showAll=&pYear=&year=&desc=&cboOrder=date
8. Freking K, Associated Press (March 1, 2008). “Audits sting hospitals, physicians.” Press release. http://abcnews.go.com/Politics/wireStory?id=4369079 (Retrieved Nov. 11, 2008).
9. “RAC Permanent Program.” CMS. http://www.cms.hhs.gov/RAC/10_ExpansionStrategy.asp#TopOfPage
10. “RAC Attack” web conference. Day Egusquiza, AR Systems, Inc., September 30, 2008.
11. 2006 MedPAR data.
12. NCD for Implantable Automatic Defibrillators (20.4). January 27, 2005. http://www.cms.hhs. gov/mcd/viewncd.asp?ncd_id=20.4&ncd_version=3&basket=ncd%3A20%2E4%3A3%3AImplantable+Automatic+Defibrillators
13. InterQual. http://www.McKesson.com
14. Milliman Care Guidelines. http://www.careguidelines.com
15. MCAP Clinical Review Criteria. http://www.oakgroup.com
16. “The In’s and Out’s of Cardiac Devices: Getting Patient Status Right.” Joseph Zebrowitz, MD, Executive Health Resources, web conference, December 12, 2007.
17. McKesson; 2006 InterQual Level of Care – Acute Adult Criteria. http://www.mckesson.com
18. “Hospitalization Criteria for Pacemaker and ICD Placement and EP/Ablations,” Heart Rhythm Society, 2008. http://www.hrsonline.org/Policy/CodingReimbursement/resources/upload/RAC-GUidelines-stationary.pdf
19. Recovery Audit Contractors. “Lessons learned to help your hospital prepare now”, Audio conference, March 11, 2008, HCPro, Inc.
20. “The Recovery Audit Contractor Initiative: Background and Recommendations for Administrative Preparation for Hospitals in Maine”, Laurence Vernaglia, Foley & Lardner, LP, presentation to the Maine Hospital Association, February 28, 2008.
21. “The Recovery Audit Contractor (RAC) Initiative: What you need to know and what you can do to prepare for RAC in Massachusetts” PricewaterhouseCoopers LLP and Foley & Lardner LLP presentation to the Massachusetts Hospital Association, May 3, 2007.
22. “RACs and Take-Backs: Strategies for dealing with Recovery Audit Contractors and Medicare’s Payment Error Program”, Healthcare Financial Management Association, 2008.
23. Cohen, Camille; “Getting Ready for RACs”, ADVANCE for Health Information Professionals, June 2, 2008, pgs. 20-22.
24. The Centers for Case Management. Levels of Care for Cardiac Device Implants: A Case Management Perspective. http://www.medtronic.com/crdmreimbursement
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