Assistance for General Businesses

Recovery Audit Contract (RAC) Program

Background of the RAC Program

The Centers for Medicare and Medicaid Services (CMS) under Section 306 of the Medicare Prescription Drug Improvement and Modernization Act of 2003 were directed to utilize Recovery Audit Contractors (RACs) to identify and recoup Medicare overpayments and underpayments. The Tax Relief and Health Care Act of 2006 made the program permanent with expansion to all 50 states by 2010. Recovery Audit Contractors were identified for various regions to open the review nationwide after initial demonstrations showed significant amounts of net overpayments between 1996 and 2002. Due to the scope of overpayments identified during the initial demonstration phase which involved California, Florida and New York the program is now to roll out to all 50 states.

Two points within the act under section 306 to be particularly aware of are;

306(e) which states that the recovery of an overpayment to a provider by an RAC does not necessarily prohibit the secretary or attorney general from investigating and prosecuting allegations of fraud or abuse arising from such overpayment
306(a)1 which states that RACs may be paid on a contingency basis.

It is important to understand that while the Recovery Audit Contractor is performing a service for CMS the contractor is operating under an arrangement in which they are compensated on a contingency basis for overpayments they uncover so they have a vested interest in finding what may be out there.

The RACs perform two types of audits, automatic reviews and complex medical reviews. The former is a computerized data mining analysis of claims and coding. The latter involves a study of medical records or related documentation which could result in a finding that a billed procedure was, in their opinion, unnecessary based on the documentation provided. The results do not rely on actual case situation and ultimate appropriateness of treatment but rather on the documentation. The jurisdiction includes claims that are one to three years old. The process involves the request of records, a review of those records followed by a determination and then a communication to the provider via letter. The findings are also communicated to the fiscal intermediary who adjusts future reimbursement to recoup the funds.

The scope of the audit will include:

Incorrect payment amounts
Claims for non-covered services
Incorrectly coded claims
Duplicate claims/services

While Pennsylvania is among the later states for RAC roll-out, the audits are coming and the time to prepare is now as all will be in place and ongoing by 2010.

What it means to Your Practice

First and foremost you need to be prepared well in advance of the actual RAC audit. Once the official audit is conducted the results will be documented and used as deemed appropriate including to recover previously reimbursed funds as well as to potentially assess interest or financial penalties. In addition to the financial risk and operational risk due to the need to respond with additional information or remediation plans and assemble possible appeals, this importantly carries potential reputational risk for you and your practice. There are various recommended preparatory steps outlined below but most importantly preparation and an established plan implemented well in advance are the keys to successful navigation through these yet unchartered waters.

How You Can Prepare

What You Should Consider to Prepare

It is important for you to gain a working knowledge of the process, possible impacts and expectations for your practice and for your office management staff to develop and implement a detailed plan of action soon in preparation. Steps recommended by CMS and those who have participated in earlier stages of the RAC program include the following:

Determine who will be your internal primary contact points for working with the Recovery Audit Contractor. Establish procedures to provide records within the required timeframe of 45 days from request.
Consider development of a compliance committee, depending upon practice size, to monitor compliance and to establish the preparation and implementation once the audit begins. Determine a compliance officer or ensure that the role is a formal, real component of one of your office staff or principals' job descriptions.
Establish a procedure to track and monitor requests from the RAC.
Gain an understanding of the rebuttal and appeals process prior to the audit. The response and submission time frames are fairly aggressive and are not flexible. The plan to submit rebuttals must be submitted within 15 days of the initial determination and first level appeals must be filed within 120 days from initial determination.
Perform your own audits of key documentation to determine areas of clear compliance as well as any areas of over or under billing or lack of documentation for medical necessity or other possible findings.
Be prepared if you need to appeal medical necessity denials because responding to these will require time of your clinical resources in addition to your billing and coding resources.

The Challenges

Proper preparation for an important audit like this brings with it various challenges not the least of which is simply finding the time to dedicate to it. The preparation absolutely must occur and your decision should not be whether to do so but simply how to effectively do so.

Review of the recommended preparation steps indicates they can be summarized into a couple distinct categories as far as your ability to implement; organization, training and awareness, review of sample cases and documentation. These tend to require two key resources, time and expertise. You have expertise through you or your staff but what you most likely do not have is the time to implement all of the above. You need assistance and one key area where outside assistance makes sense is in conducting a mock, or baseline audit since you most likely do not have the time and even if your staff can allocate time an independent review will carry with it a higher degree of comfort that the results will mirror what a targeted RAC audit might uncover.

Of course, despite in-house expertise you have the need to have the application of that expertise tested and confirmed. The most experienced staff were included in the population of entities assessed the significant "take-back" amounts from the initial RAC demonstration audit.