Medicare Recovery Audit Contractors

1
Medicare Recovery Audit Contractors

• Kathy Reep
• Florida Hospital Association
• TELNET 2381 March 18, 2008 1-2 pm EDT

2
Legislative Authority

• Section 306 Medicare Modernization Act
• Requires Secretary of Health and Human Services
  to test the use of Recovery Audit Contractors
  (RAC) for identifying Medicare Part A and B
  underpayments and overpayments, and recovering
  the latter
• At least two states with high Medicare
  utilization
• May not use existing contractor
• May compensate based on percent of recovery
• Previously prohibited for Medicare
• No more than three years
• Report to Congress
• Six months after completion
• Recommendations for extending/expanding project

3
Reasons for RAC Demonstration

• Medicare medical review and payment error rates
• Claimed effectiveness of RACs proprietary
  software
• Experience of states and other federal agencies
• Collection without additional cost

4
RAC Mission

• The RAC programs mission is to reduce Medicare
  improper payments through the efficient detection
  and collection of overpayments, the
  identification of underpayments and the
  implementation of actions that will prevent
  future improper payments

5
Demonstration States

• CMS selected the three states with the highest
  per capita Medicare utilization
• Florida
• California
• New York

6
Demonstration

• November 2004 CMS issues two separate
  Statements of Work
• Medicare secondary payer (MSP)
• Non-MSP
• March 28, 2005 CMS awards RAC contracts
• Contracts expire March 27, 2008

7
Non-MSP RAC Demonstration

• Included overpayments and underpayments
• Incorrect payment amounts
• Non-covered services
• Incorrectly coded services
• Duplicate services

8
Non-MSP RAC Demonstration

• Excluded overpayments and underpayments
• Services other than Medicare fee-for-service
• Cost report settlement process
• Incorrectly coded E M services
• Claims under one year or over four years old
• No random claims selection
• No prepayment review

9
Types of RAC Review

• Automated review
• Only where there is certainty that service is not
  covered, incorrectly coded, a duplicate payment
  or other claims related overpayment
• Complex medical review
• Must be used if there is probability, but not
  certainty, of overpayment, and medical records
  are needed to make that determination

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Medical Record Requests

• The RAC will send a medical record request letter
  to the provider containing the clinical rationale
  for each request
• Provider has 45 days to respond
• No response will lead to an administrative denial
• RACs have worked with providers who cannot meet
  the 45-day deadline
• RAC has 60 days to make determinations after
  receiving the records
• Extensions granted by CMS
• Provider has 15 days from date of demand letter
  before recoupment process begins

11
FY 2006 Improper Payments(MSP and Claim RACs)
Status Document For FY 2006 on
www.cms.hhs.gov/RAC
collected dollars in the bank (cases lost on
appeal have been backed out contingency fees
have NOT been backed out) in the queue
dollars determined by the RAC to be overpayments
but still in the collection process at the RAC or
carrier/DMERC/DME MAC/FI overpayment demand
letter has been sent to the provider in about
half the cases identified dollars collected
dollars in the queue costs RAC contingency
fees (12M) carrier/DMERC/DME MAC/FI costs
(1M) RAC Evaluation/Database (1.5M)
12
FY 2006 Improper Payments by Type of Improper
Payment (Claim RACs Only)
RACs found 10.4M in underpayments from Jul 05
Aug 06
13
FY 2006 Improper Paymentsby Provider Type (Claim
RACs Only)
14
FY2007 Findings

• Overpayments Collects 357.2 m
• Less Underpayments Repaid (14.3 m)
• Less Overturned on Appeal (17.8
  m)
• Less Costs to Run Demo (77.7 m)
• BACK TO TRUST FUND ? 247.4 m

15
FY2007 Findings Overpayments Collected by
Provider Type
SOURCE RAC Data Warehouse
16
FY2007 Overpayments Collected by Error Type (Net
of Appeals)
SOURCE Self-reported by RACs
17
Issues Identified

• Procedure code on claim did not match procedure
  described in medical record
• Debridement
• Respiratory failure
• Discharge status/transfers claim indicates
  discharge to home or other facility but medical
  record indicates beneficiary was discharged to
  another hospital or home with home care
• Claims with single secondary diagnosis designated
  as a complication or comorbidity
• DRG payment window

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Issues Identified (continued)

• Wrong number of units billed
• Neulasta
• Speech therapy initial evaluation
• Transfusions
• Medical necessity
• Inpatient rehab
• Short stay admissions, including chest pain, back
  pain, congestive heart failure, and
  gastroenteritis
• Admission for scheduled elective procedures

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RAC Expansion

• Tax Relief Act of 2006, section 302 makes RAC
  program permanent and nationwide by no later than
  2010

20
RAC Expansion Schedules
21
Demonstration vs. Permanent RACs
22
Demonstration vs. Permanent RACs
23
The Issues that Continue

• Contingency fee-based payments
• Medical necessity determinations
• Look back period
• Ability to rebill denied claims
• Move to electronic communications
• Increased transparency need for report card
• Provider education

24
Avoid Interference with MAC Transition

• RAC black out period will allow new MACs to focus
  on claims processing activities
• Blackout period three months before MAC cutover
  date and three months after cutover date for a
  given state

25
In Conclusion

• Need for data collection tool
• RAC committee
• Single point of contact
• Know the rules
• On you
• On the RAC
• Review records before sending to RAC
• Support your claim
• Look at potential areas of risk

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• Questions?
• kathyr_at_fha.org