The RACs Are Coming to Ohio!

What are RACs?

The Centers for Medicare and Medicaid Services (CMS) has announced that Ohio will be subject to additional medical review analysis beginning August 1, 2009 as part of the Recovery Audit Contractor (RAC) program. The RACs are third-party contractors hired by CMS to review provider medical records in an attempt to detect and correct past improper payments (including both overpayments and underpayments). According to CMS, the goals of the program are to help providers avoid submitting claims that do not comply with Medicare rules, to help CMS lower its error rate, and to ensure that taxpayers and future Medicare beneficiaries are protected.

Five states (California, Florida, Massachusetts, New York, and South Carolina) participated in a demonstration project between 2005 and 2008. Over $900 million in overpayments and $38 million in underpayments were detected during the demonstration project. CMS reported that through January 2009, RACs have determined 525,133 claims resulted in overpayments, of which 118,051 have been appealed at some level. Of those that have been appealed, approximately 34%, were found to be in the provider’s favor. The CMS report broke down the overpayments detected during the demonstration project as follows:

Ohio has been assigned to Region B of the permanent RAC program. CMS has contracted with CGI Technologies and Solutions, Inc. of Fairfax, VA to perform the audits throughout Region B, which also includes Indiana, Michigan, Minnesota, Illinois, Kentucky and Wisconsin.  CGI can be contacted by calling 1-877-316-7222 or emailing racb@cgi.com. You can also visit their website at http://racb.cgi.com.

Why should you care?

The answer, unfortunately, is that based upon results to date, most providers will owe money back to CMS following a RAC audit. Any and all providers that submit claims to Medicare are subject to possible audit under the RAC program. The program will cover hospitals, skilled nursing facilities, physician practices, and suppliers that bill Medicare. According to CMS, each RAC will use its own proprietary software and systems, as well as its knowledge of Medicare rules and regulations, to determine what providers to audit and which claims to review. CMS will not have a role in choosing what providers are reviewed.

When a provider is chosen by the RAC to be reviewed, the provider will have 45 calendar days to respond to the RAC’s request for medical records. An extension of the time may be available, but must be requested from the RAC and not from CMS. If the RAC determines that overpayment has occurred, it will issue a demand letter to the provider to repay Medicare within 30 days. If the amounts are not appealed or repaid within 40 days, CMS will withhold the funds from future remittance advices until the overpayment is satisfied.

The RACs are limited to a rolling three-year look back period from the date of the claim’s payment. Initially, the RACs will not be permitted to review claims paid prior to October 1, 2007. For each individual National Provider Identification (NPI) number, the RACs will be able to review up to 200 medical records every 45 days. However, they will be further limited to 10% of the average monthly Part A claims/payments and 1% of the average monthly Part B claims/payments every 45 days.

By far the most controversial aspect of the RAC program is the method by which the RACs will be paid by CMS. The RACs will be paid on a commission basis and will be paid a percentage (12.5% for Region B) of the overpayments that they discover in their reviews. As a result of being paid on a commission basis, the RACs will likely aggressively look for overpayments and will likely not be as focused on underpayments, generally resulting in providers owing money back to CMS. Furthermore, if the RAC discovers a notable trend during its review, they will be permitted to extrapolate their findings across all Medicare claims.

What can you do to prepare for RACs?

In real estate, the saying goes “location, location, location.” In RAC audits, the saying goes “documentation, documentation, documentation.” From the RAC’s perspective, if a service wasn’t documented, it wasn’t performed and an overpayment has occurred. Below are a few examples of what you should do in order to prepare for a RAC audit:

• Review hospital discharge information
• Review the level of care determination
• Ensure that the physician certification agrees with the 3-day qualifying hospital stay
• Compare the diagnosis from Section I of the MDS to the bill and to therapy, if applicable
• Review physician orders to support care plans, nurse notes, progress notes, restorative plans, etc.
• Ensure cut letters were issued
• Ensure no-pay/benefit exhaust bills were submitted 

Keep in mind that the above list contains only a few suggestions and is not intended to be comprehensive. CMS has stated that providers are permitted to perform a self-audit of their claims to determine if any overpayments occurred. If the provider determines that overpayments have occurred, the payments are made back to CMS and those claims are excluded from the RAC review process. In addition to potentially excluding some claims from the RAC process, performing a self-audit may also assist you in improving your processes and documentation procedures to ensure that future Medicare claims/payments are sufficiently documented and will not result in overpayment.

REMEMBER:
If you receive a medical records request from a RAC, you should coordinate a team to review the request and ensure that the request is properly followed and submitted. The request should be sent via a certified delivery service that offers tracking.  Be sure to maintain a copy of all information submitted with the request.

What other information is available?

CMS has established a website with information regarding the RAC program. It can be found at http://www.cms.hhs.gov/RAC/.  The website offers an overview of the RAC program, as well as a list of frequently asked questions. Additional contact information for all RAC contractors is available on the site. 

Need help?

Please contact our HW Healthcare Advisors to discuss any questions or clarifications on the RACs program, or to schedule a "Preliminary RAC Audit Review". Our team is available to assist you in conducting your own self-audit.