We have previously written about the Medicare Recovery Audit (RAC) program. In previous years, they reviewed million of claims and identified improper payments totaling nearly $1.3 billion. The mission of the Recovery Audit Program is to identify and correct Medicare and Medicaid improper payments through the efficient detection and collection of overpayments made on claims for health care services provided to Medicare and Medicaid beneficiaries, to identify underpayments to providers, and to provide information that allows the Centers for Medicare & Medicaid Services (CMS) to implement actions that will prevent future improper payments. CMS oversees several different Recovery Audit Programs, such as those for fee-for-service (FFS) Medicare and Parts C and D. States oversee their own Medicaid Recovery Audit Programs in accordance with federal guidelines set by CMS.
Annual report to Congress
CMS released its annual recovery auditing report to Congress. In fiscal year 2014, for example, the RAC program returned $1.6 billion to CMS for improper payments, after subtracting administrative costs and underpayments. This is largely because CMS banned its contractors from reviewing inpatient hospital patient statuses in connection with the Two Midnight Rule implementation and Probe & Educate program.
The two-midnight rule, which was created in 2013, calls for Medicare’s payment and audit contractors to assume a hospital admission was legitimate if it spans two midnights. Shorter stays are assumed to be more appropriately billed as outpatient observation care. The CMS stood by it two-midnight policy in the 2016 hospital outpatient prospective payment system and ambulatory surgical center payment system payment rule released earlier this fall. However, in 2013, CMS modified how Medicare contractors review inpatient hospital and critical access hospital admissions for payment purposes and prohibited its RACs from conducting inpatient status reviews for claims with dates of admission after October 1, 2013. That moratorium was recently extended through December 31, 2015.
CMS’s “Inpatient Probe and Educate” program allowed providers to work with CMS and Medicare Administrative Contractors to settle claims related to the Two-Midnight Rule. As of June 11, 2015, the Probe and Educate process had resulted in settlements with more than 1,900 hospitals, involving approximately 300,000 claims and provider payments of approximately $1.3 billion.
According to the report, CMS says it uses the results of audits performed by RACs to “identify program vulnerabilities and take appropriate corrective actions to prevent future improper payments. CMS hosts regular meetings with the Recovery Auditors, MACs, and CMS staff to discuss best practices, particular vulnerabilities, and future corrective actions, including CMS educational articles, local and national system edits, and additional review by other entities.”
The agency faces criticism for the program, which CMS seemed to acknowledge by noting it wishes to make improvements that “help alleviate provider burden, verify the accuracy of Recovery Auditor determinations, and promote transparency within the program.” CMS said it is working to increase collaboration between RACS and the Medicare Administrative Contractors (MACs) to share data and reporting, policy and coverage interpretation, appeals, and general operational issues and improvements. CMS claims the Recovery Auditor Data Warehouse, the clearinghouse for all RAC review activity, has been successful in preventing duplicate reviews of the same claim among all review contractors. CMS requires Recovery Auditors and other review contractors to use the Data Warehouse to prevent another review entity from selecting a previously reviewed claim.
CMS reducing number of claims RACs may audit for healthcare providers other than physicians and suppliers
In addition to its report to Congress, CMS also announced that it has reduced the maximum percentage of records that providers must submit to RACs through the payment auditing process. Beginning January 1, 2016, the annual limit for additional document requests (“ADR”) will be 0.5 percent of a provider’s total paid Medicare claims from the last year which is a reduction from the current level of 2 percent of a provider’s total paid claims. This update does not apply to physicians or suppliers. The update is also limited to the RAC program, and does not include Zone Program Integrity Contractors (ZPIC) or other audit contractors.
Providers will receive ADR letters from Medicare on a 45-day cycle. For each 45-day cycle, the total number of claims under the ADR limit will be divided by eight. This is the cycle limit, or the maximum number of claims that can be included in a single 45-day period. Auditors may not make requests more frequently than every 45 days. ADR limits will be mixed between all claim types in a facility, based on the types of bill the provider was paid for in a previous year. CMS also advised that lower denial rates and compliance with Medicare rules will allow providers to submit fewer records to Medicare to support claims being audited, while providers with higher denial rates will be required to submit more records.