"RACs Are On Their Way"

10/08/2008

Get Ready—The Medicare Recovery Audit Contractors (RACs) are on Their Way and Will Be Working Closely with Fraud Investigators and the Department of Justice

CMS began rolling out the Medicare Recovery Audit Contractor (RAC) Demonstration Project on a permanent, nationwide basis on October 1, 2008. CMS is contracting with four RACs that will be paid on a contingency basis—paid solely on the amount of overpayments recovered from providers. In contrast with the current, small-scale and sporadic overpayment recovery efforts of Medicare claims processors, RACs’ sole duty is to perform sophisticated and targeted statistical analyses of claims data to identify high-dollar, overpayment recovery opportunities for the Medicare Trust Fund. Below are a few facts from the CMS RAC demonstration project report, which should alert health care providers about the importance and impact of the coming overpayment recovery efforts:

Aggressive Complex Reviews. 33% of all medical record requests by a RAC for a complex review resulted in an overpayment determination.

Inpatient Hospital Providers Hit the Hardest. 85% of RAC overpayment recoveries were collected from inpatient hospital providers, totaling $828 million in overpayment recoveries.

RAC Coordination with Claims Processors. In addition to overpayment recoveries, the RACs worked closely with Medicare claims processing contractors to prevent overpayments by denying $1.8 billion in claims prior to payment.

RACs Will Feed Information to Fraud Investigators. In the permanent RAC program, RACs will work cooperatively with fraud investigators and the DOJ by promptly communicating the results of RAC overpayment investigations and pre-payment denials for subsequent fraud investigations.

The Cost-Benefit Analysis of Appealing. According to the CMS report, the appeal rate and appeal success rate do not take into account those providers who decided that the cost of an appeal outweighed the short-term monetary benefits of winning an appeal. However, RAC coordination with fraud investigators and the DOJ may change the cost-benefit analysis for appealing when providers consider the long-term costs of a fraud investigation sparked by the initial RAC overpayment determination.

The permanent RAC program was scheduled to roll out on a national basis to the first group of states on October 1, 2008 (including Florida and Colorado), the second group of states on March 1, 2009 (including Texas and California), and the final group on August 1, 2009 (including Louisiana and New Jersey).

If you would like more information or assistance in preparing for or responding to RAC medical record or overpayment requests, please contact one of the Haynes and Boone Health Care Practice Group attorneys.

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