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Hospitals - Medicare RAC Program Improvements Delayed Until 2016


The CMS had planned to award new contracts to companies that act as Medicare's recovery audit contractors (now referred to as "recovery auditors" or RAs) for operation of the Medicare recovery audit program in the hospital sector by the end of 2014, which would have concluded the procurement process for new contracts that began in May 2013. However, in familiar fashion, CMS announced recently that due to continued delays in awarding the new contracts, the existing contracts for the four private companies that currently act as Medicare's RAs (namely, CGI Federal, Connolly, HealthDataInsights, and Performant Recovery) would be extended through calendar year 2015. Along with the delay of the new contract for DME and home health and hospice providers awarded December 30, 2014, to Connolly, a post-award protest of that contract caused CMS to modify the existing RA contracts to allow the Medicare RAs to resume certain reviews that had stopped in 2014 pursuant to the old contracts' terms. The existing work under the old contracts was extended with CMS through April 2017, to finalize all appeals and reconciliation.

Unfortunately, the contract extensions and modifications granted by CMS further delay CMS's efforts to usher in the next phase of the recovery audit program, and leave hospital providers waiting at least another year for long-promised and much-needed program improvements. Looking ahead to the next phase of the recovery audit program, we have highlighted some of the program changes in the table on page five, published by CMS after evaluation of the multitude of concerns raised about the existing program, which are aimed at reducing the administrative burdens associated with the program and increasing program oversight and transparency. The new requirements will be incorporated into all new RA contract awards, and will be effective for any RA activities performed under new contracts entered into on or after December 30, 2014.

Even after the new contracts incorporating these program improvements become effective and begin to have an impact, hospitals will continue to encounter the considerable administrative burdens and related challenges that result from the current environment of aggressive auditing activities by multiple government program contractors and other payors. Past practices, trends, and approved audit issues with the recovery audit program serve as a good indicator that certain providers and service areas will continue to receive special attention from the RAs. Hospitals should closely monitor sources which reveal those trends and should continue to focus on their facilities' practices which have previously been considered high-risk areas by the RAs. One of those sources is the Connelly Consulting, Inc., website. Connelly is the primary RA with jurisdiction over Region C, which includes North Carolina providers. The Connelly website provides a complete list of issues that CMS has approved for RA audit, which may be accessed at Another valuable source is the 2015 Work Plan published by the Office of Inspector General (OIG) for the United States Department of Health and Human Services, which may be accessed at

An analysis of past or current issues approved by CMS for RA review for North Carolina hospitals reveals that often North Carolina hospitals are included in the review of a specific billing issue because the state has the highest number of inpatient days of any of the states in Region C, its RA jurisdiction region. The RA then selects the initial claims for review based upon an analysis which identifies claims billed with the top Medicare Severity Diagnosis (MS-DRG) on the most recent Comprehensive Error Rate Testing (CERT) report. Examples of approved issues for RA review in North Carolina include minor surgery and other treatments billed as inpatient stays; esophagitis, gastroenteritis, and miscellaneous digestive disorders with or without major complications (MS-DRG-391 and 392); diabetes with or without major complications or comorbidities (MSDRG-637, 638, and 639); and other vascular procedures without multiple complications or comorbidities (MS-DRG-254).

Maintaining an awareness of current audit issues and giving special attention to potentially vulnerable practice areas should be viewed as essential to hospitals' provider action plans to avoid being targeted for audit and to ensure an effective response if they are audited. Whether your facilities are analyzing regulatory requirements and changes, reviewing compliance policies and procedures, formulating best practices, assessing any rights and duties, or preparing a response plan post-audit notice, involvement of experienced legal counsel can be an important resource to work with hospital staff prepared and trained to deal with the burdens of auditing activity.

Reducing Provider Burden
Provider Concern Benefit to Providers
Additional documentation request (ADR) limits are the same for all providers of similar size and are not adjusted based on a provider's compliance with Medicare rules. CMS will establish ADR limits based on a provider's compliance with Medicare rules. Providers with low denial rates will have lower ADR limits, while providers with high denial rates will have higher ADR limits. The ADR limits will be adjusted as a provider's denial rate decreases, ensuring the providers that comply with Medicare rules have less recovery audit (Audit) reviews.
ADR limits are based on an entire facility, without regard to the differences in departments within the facility. CMS-established ADR limits will be diversified across all claim types of a facility (e.g., inpatient, outpatient). This ensures that a provider with multiple claim types is not disproportionately impacted by Audit review in one claim type vs. another (e.g., all of a provider's inpatient rehabilitation claims reviewed or all inpatient).
Providers that are not familiar with the Recovery Audit Program (RAP) immediately receive requests for the maximum number of medical records allowed. CMS-established ADR limits will include instructions to incrementally apply the limits to new providers under review. This will ensure that a new provider is able to respond to the request in a timely manner considering staffing levels at the time.
Providers must wait 60 days before being notified of the outcome of their complex reviews. Recovery Auditors (RAs) will have 30 days to complete complex reviews and notify a provider of their findings. This provides more immediate feedback to the provider.
Upon notification of an appeal by a provider, the RA is required to stop the discussion period.
RAs will not receive a contingency fee until after the second level of appeal is exhausted. Previously, RAs were paid immediately upon denial and recoupment of the claim. This delay in payment helps assure providers that the decision made by the RA was correct. Note: If claims are overturned on appeal, providers are paid interest calculated from the date of recoupment.
Enhancing Program Oversight CMS?
Provider Concern Benefit to Providers
RAs focused much of their resources on inpatient hospital claims.
CMS will require the RAs to broaden their review topics to include all claim and provider types, and will
be required to review certain topics based on a referral, such as an OIG report.
RAs are not penalized for high appeal overturn rates. RAs will be required to maintain an overturn rate of less than 10% at the first level of appeal, excluding claims that were denied due to no or insufficient documentation and claims that were corrected during the appeal process. Failure to do so will result in CMS placing the RA on a corrective action plan, which could include decreasing the ADR limits or ceasing certain reviews until the problem is corrected.
Providers are concerned with the accuracy of RA automated reviews, and RAs are not penalized for low accuracy rates. RAs will be required to maintain an accuracy rate of at least 95%. Failure to maintain an accuracy rate of 95% will result in a progressive reduction in ADR limits. CMS will continue to use a validation contractor to assess RA identifications and will improve the new issue review process to help ensure the accuracy of RA automated reviews.
Increasing Program Transparency
Provider Concern Benefit to Providers
Providers are unsure of whom to contact when they have complaints/concerns about the RAP. CMS established a provider relations coordinator to offer more efficient resolutions to affected providers. This position gives providers a name and contact information when issues arise that cannot be solved by having discussions with the RA.
Providers need more information on how to prevent improper payments and bill correctly. CMS will continue to post compliance tips to the CMS website, to be used with education and MLN Matters articles, which give information to help providers proactively prevent payment and billing errors.
Providers are unclear about the information in the RA new issue website postings. CMS will require the RAs to provide consistent and more detailed review information concerning new issues on their websites.

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