RAC Recoveries Increase, as Problems Persist

October 12, 2018 3:09 pm

The rate at which RAC decisions for Medicare Part A hospital claims were overturned reached 38 percent in 2016, an increase from 22 percent in 2015.

Oct. 12—An update of Medicare’s overpayments recoupment program isn’t giving providers much hope for change in a system they say unfairly takes and holds their money for long periods, if not for good.

The Centers for Medicare & Medicaid Services’ (CMS’s) Medicare Fee-for-Service Recovery Audit Program uses recovery audit contractors (RACs) to identify and correct overpayments made on claims for healthcare services provided to beneficiaries.

According to a CMS report prepared for Congress last month, RACs recovered about $474 million in improper payments in 2016, up from about $441 million the year prior. The program returned $214 million to Medicare Trust Funds, a 50 percent increase from the amount logged in 2015, according to the report.

A RAC can review provider and hospital claims long after they are submitted to the Medicare program. If they take back Medicare payments, the provider has an opportunity to appeal the decision. But that takes time–years, typically. Providers aren’t paid costs associated with responding to initial auditor questions, and those successful in challenging their decision don’t get interest on the money inappropriately kept.

About 63 percent of the overpayments collected in 2016 were for inpatient hospital claims.

Provider Instruction

The report doesn’t offer much guidance for providers, advocates said.

“It’s pretty much a worthless report,” said Ronald Hirsch, vice president for regulations and education at R1 Physician Advisory Services. “Everything that CMS talks about in regard to the RACs is really in vague generalities. They don’t go into the depth that hospitals would be able to use it to take action to make sure that they’re being sure that they’re being compliant.”

For example, Hirsch said, the report indicates that the receipt of an appeal and the reversal of a RAC decision doesn’t necessarily mean the RAC was wrong in its determination regarding the claim as billed, as providers might furnish new or revised pertinent information later that would have impacted its initial decision.

“It’s just weird that they go out of the way to try to protect the RACs,” Hirsch said. “The goal is to continue to show how much money they’re collecting in overpayments and that the RAC program should be continued on despite all of the negative publicity.”

The report does acknowledge a coverage change it made in response to provider concerns, stripping RACs of the ability to review inpatient status claims, said Mark Polston, a partner at King & Spalding, who represents hospitals responding to audits from RACs and other claims administration contractors. He said they were often inaccurately determining admission eligibility.

About 63 percent of the overpayments collected in 2016 were for inpatient hospital claims, and the overturn rate for Medicare Part A hospital claims was 38 percent, an increase from 22 percent in 2015.

“The RACs were simply getting it wrong,” Polston said. “So CMS removed from their purview the decision of the appropriateness of admitting a patient versus providing outpatient services at the hospital.”

That’s now handled by quality improvement organizations or QIOs.

Providers like that, Polston said.

“People generally were very happy with the way in which QIOs work with them. There’s really appropriate education going on. Clinical experts and providers are sitting down, going through entire medical records with physician experts at the QIOs. They’re reaching consensus on these cases. And you are seeing, as a result, a lot fewer appeals of the patient status claims in current time.”  Polston said. “That’s great. That’s the way it should work.”

Other contractors that collect overpayments do so in a program that targets the problem and educates providers on how to properly bill. Many of the issues that arise in “targeted probe and educate” reviews are vetted in small probed samples and by contractors that give providers the chance to correct their processes. If a provider fails to shape up, then they are referred to RACs, which then review the entire set of claims.

The problem, Polston said, “remains a lack of agreement in advance between the providers and CMS auditors or direct contractors over exactly what guidelines are being imposed to determine whether or not this is an appropriate or accurate payment.”

“We’re always one or two issues away from something drastic happening again,” Polston said. “They’ve still not dealt with the underlying problem, which is to train the RACs and providers to all be on the same page in terms of what the standards are for appropriate payment and coverage.”

Still though, there is concern that RACs will find other ways to make up the money lost from no longer making inpatient status decisions. In that earlier role, they received a percentage of any amount recovered.

“The RACs sort of feasted on these claims for several years. That was taken from them. But they’re rational financial actors. So they’re going to go for some other area of vulnerability that has similar potential upside in terms of financial consequences,” Polston said.

Future Directions

Such claims might include the diagnosis and coding of severe malnutrition for inpatients–on the rise due to guidelines recently adopted by physicians and clinicians practicing in nutrition, he said.

“We’re starting to see a lot of audits from CMS in the contractors who are saying those are inappropriate diagnosis in severe malnutrition,” Polston said, noting that when such a diagnosis is made, the patient is categorized into a much higher payment rate for an inpatient case.

“Then you have another high-dollar inpatient case that the RACs could argue were potentially over-coded or incorrectly coded and they would get to keep the difference between that and what they consider to be the appropriately coded case,” Polston said.

Hirsch does recommend that providers check the lists of approved RAC billing issues posted by CMS.

Such information “every hospital should be monitoring on a regular basis to see what the new issues are and then take a look internally to see what their processes are in place to ensure that they’re following the regulations,” Hirsch said.

It’s important, he said, as more hospitals acquire physician practices, which all too often learn billing from physicians who have no training in compliance.

“We know that before too long some RAC is going to be approved to start auditing short inpatient admissions, so remaining vigilant about making sure you get the patient status correct is still important,” Hirsch said.

Polston said providers at odds with administrative contractors always should take their cases to CMS. Most, he said, fall under the jurisdiction of the Center for Program Integrity.

“I think CMS, at some level, wants to hear this dialogue; not only that contractors got it wrong, but they want to hear about other parts of the program that they can have sort of process changes to lower provider burden,” Polston said. “Find a contact within the agency and avail yourself of the opportunity to raise these issues. Be prepared to provide them with examples and be prepared to explain what the issues are and how you can help them change the process so that it’s better for providers.”

Cheryl V. Jackson is a freelance writer in Chicago. Follow her on Twitter at @cherylvjackson.


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