Health Law Scan

Legal Insights and Perspectives for the Healthcare Industry

In CMS’s continuing effort to take “a strategic approach to protecting taxpayer dollars and reducing regulation to put patients over paperwork,” Administrator Seema Verma recently highlighted changes to the Recovery Audit Program that are intended to make the program more provider friendly. Recovery Audit Contractors (RACs) review payments made to healthcare providers under Medicare Fee-for-Service plans. RACs have been controversial among providers due to concerns about their accuracy. In addition, although they are charged with identifying both overpayments and underpayments, unlike UPICs and MACs, RACs receive a percentage of the overpayments they recover, which historically has caused some disgruntled providers to characterize RACs as “bounty hunters” that are less concerned with program integrity than with their own bottom lines. Administrator Verma acknowledges that CMS has received many complaints in the past from providers that have found the audits to be time consuming and expensive.

Administrator Verma’s post highlights improvements to the Recovery Audit Program that should improve RAC accuracy and benefit providers. CMS will be providing better oversight of RACs in several ways, including by requiring RACs to have a 95% accuracy score. RACs also will be required to maintain an overturn-on-appeal rate of less than 10%. If a RAC fails to achieve either metric, the CMS will progressively reduce the number of claims the RAC can review. Providers can appeal RAC determinations first to qualified independent contractors, then administrative law judges, then the Medicare Appeals Council, and finally to US district court. Significantly, RACs no longer will receive a contingency fee until after the second level of appeal is exhausted. Previously, RACs were paid immediately upon denial and recoupment of a claim.

RACs historically could select at their sole discretion the types of claims they would audit, which supported the view among the provider community that RACs operated as bounty hunters. Now, a RAC must audit proportionately to the types of claims a provider submits. This prevents RACs from targeting only high-dollar claims from providers that bill various types of claims at a variety of rates. CMS also is focusing RAC audits on providers that already have high claim denial rates rather than treating all providers the same, which it asserts will lower the administrative burden on providers with low denial rates. And providers now are allowed more time to submit additional documentation during a 30-day “discussion period” before being required to repay claims. CMS notes that this “means that providers do not have to choose between initiating a discussion and filing an appeal,” and it also expects that this will reduce the volume of appeals.

Although CMS claims that its revisions to the Recovery Audit Program have decreased the number of RAC-reviewed claim determinations that are appealed and “reduced RAC-related provider burden to an all-time low,” even providers with low denial rates still may face RAC audits and time-consuming and costly appeals. Nevertheless, providers should be encouraged that CMS is responding to provider concerns and modifying the RAC audit and appeals process to better protect providers that are billing accurately, thereby “allowing providers to focus on their primary mission of improving patients’ health,” and not on “paperwork compliance.”