RACs Become a Reality

March 23, 2009

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What is RAC?

In order to determine whether the use of Recovery Audit Contractors (RACs) was a cost-effective means of ensuring that correct payments were being made to providers and suppliers in the Medicare Fee-For-Service Program, the Centers for Medicare & Medicaid Services (CMS) developed the (RAC) demonstration program, which lasted from March 2005 to March 2008. The RAC program not only provides CMS a new tool for identifying past improper payments, but also will be used to prevent future overpayments. To ensure accuracy, RACs are required to use nurses, therapists, certified coders, and physician Carrier Medical Directors (CMD).

The RAC Demonstration evolved from an initial study conducted by CMS involving the Comprehensive Error Rate Testing (CERT) program and the Hospital Payment Monitoring Program (HPMP). The success of both the RAC Demonstration and the CERT study allowed for the legislation of Section 302 of the Tax Relief and Health Care Act of 2006 to make the RAC Program permanent. Knowing that the estimated amount Medicare overpaid in 2007 was 10.8 billion dollars, it was in CMS' best interest to further pursue these financial discrepancies due to both an increasing beneficiary population and skyrocketing health care costs. Preliminary results of the demonstration projects in California, Florida, and New York indicate that the use of recovery auditors is a viable and useful tool for ensuring accurate payments. According to the Office of Management and Budget, Improving the Accuracy and Integrity of Federal Payments (January 31, 2008), Medicare is one of the top three federal programs with the highest amount of improper payments, along with Medicaid and Earned Income Tax Credit.

CMS found that the demonstration was a successful tool in returning money ($693.6 million) to the Medicare Trust Funds and that most of the overpayments (85 percent) were from inpatient hospital providers. Some of the common payment errors CMS found were:

  • Payments do not meet Medicare's medical necessity criteria
  • Payments are incorrectly coded
  • Providers fail to submit documentation when requested, or fail to submit enough documentation to support the claim
  • Claim payments are based on outdated fee schedules
  • Provider is paid twice because duplicate claims were submitted

What is the Academy Doing about RACs?

The AAN Professional Association has been advocating for fair and reasonable treatment between RACs and physicians as the program expands nationwide. The Academy promotes educating physicians about the complexities of evaluation and management (E/M) coding before making the RAC audits a permanent fixture. In a comment letter to CMS about this issue, the Academy stressed the inconsistent determinations of proper E/M coding by RACs, and that initial findings of "errors" in E/M coding should be educational rather than punitive.

The Academy also advocates for better systems for obtaining hospital notes and informing physicians that RAC requests must be answered before penalization begins. The Academy believes that RACs should be required to go to the hospitals directly for hospital notes since it is often difficult for physician offices to obtain them.

Finally, the Academy comments urged CMS to establish a neutral arbiter of disagreements for the RAC program. Inherent in the way the RAC process is set up, each RAC has a financial conflict of interest because it serves as the investigator, judge, and collector. An outside entity, without any conflict of interest, should decide any disputed matter when there is disagreement between the RAC and the physician.

In addition, the Academy will continue to collect member comments and concerns regarding the RAC program, and will passing them along to the American Medical Association (AMA). If you have any RAC concerns, please email Katie Kuechenmeister at kkuechenmeister@aan.com.

What Can I Do to Prepare?

Medicare providers in the first round of the permanent program will begin receiving correspondence from their assigned RAC in August 2009. CMS Provider Outreach Programs, including educational meetings and town hall gatherings, will begin in July 2009. The Academy recommends the following steps to assist you in preparing for a possible audit:

  • Learn your RAC's name and have staff watching for their letter.
  • Tell your RAC the precise address and contact person to whom they should send Medical Record Request Letters.
  • Attend RAC outreach sessions in your area.
  • Make sure your medical records are complete and that billings are in compliance with Medicare rules.
  • Learn the RAC response times and act right away: failure to respond in a timely manner to record requests will result in automatic denial.
  • Mark the RAC appeal deadlines on your calendar: the RAC deadlines are very strict and failure to file timely appeals will prevent an appeal of an improper denial.
  • Don't be afraid to appeal an audit, because during the demonstration project, a high percentage of appeals overturned the original determination.
  • Look at previous audits and RAC findings for common themes.
  • Review the Office of Inspector General (OIG) and Comprehensive Error Rate Testing (CERT) reports detailing where improper payments have been found.
  • Learn from your mistakes; keep track of your RAC audits found in your claims and pay special attention the same type in the future.

Read the CMS fact sheet, "Appealing a Medicare Recovery Audit Contractor (RAC) Overpayment: Understanding The Appeals Process."

What RAC Region Do I Belong To?

The permanent RAC Program is required by Section 302 of the Tax Relief and Health Care Act of 2006 to expand to all 50 states by no later than 2010. Providers will not begin receiving correspondence from a RAC until the RAC and CMS have completed the provider outreach.

Find your state's proposed RAC Region below:

Region A

Diversified Collection Services (DCS) (1-866-201-0580)
RAC Medical Director Contact: Richard Pozen, MD
CMS Contact Person: Ebony Brandon (410-786-1585)
Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, New Jersey, New York, Pennsylvania, Rhode Island and Vermont

Region B

CGI Technologies and Solutions, Inc. (CGI) (1-877-316-7222)
Email: racb@cgi.com
RAC Medical Director: Percival Seaward, MD
CMS Contact Person: Scott Wakefield (410-786-4301)
Illinois, Indiana, Kentucky, Michigan, Minnesota, Ohio, and Wisconsin

Region C

Connolly Consulting Associates, Inc (1-866-360-2507)
RAC Medical Director: Ellen Evans, MD
CMS Contact Person: Amy Reese (410-786-8627)
Alabama, Arkansas, Colorado, Florida, Georgia, Louisiana, Mississippi, New Mexico, North Carolina, Oklahoma, South Carolina, Tennessee, Texas, Virginia, and West Virginia

Region D

HealthDataInsights, Inc. (HDI)
Part A: 1-866-590-5598
Part B: 866-376-2319
Email: racinfo@emailhdi.com
CMS Contact Person: Kathleen Wallace (410-786-1534)
Alaska, Arizona, California, Hawaii, Idaho, Iowa, Kansas, Missouri, Montana, Nebraska, Nevada, North Dakota, Oregon, South Dakota, Utah, Washington, and Wyoming

Did You Know?

  • Medicare receives over 1.2 billion claims per year! That's 4.5 million claims per work day, 574,000 claims per hour and 9,579 claims per minute.
  • The Claim RACs identified and corrected improper payments on only 0.3 percent ($1.03 billion) of the claims received.
  • The RAC demonstration cost only 20 cents for each dollar collected.