CMS Announces Program Changes in RAC Oversight

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Karen Utterback By Karen Utterback 
Former Vice President, Product Marketing and Strategy, McKesson (Retired)
CMS Announces Program Changes in RAC Oversight

Home health and hospice executives struggling with high Medicare denial rates will be pleased with changes to the Recovery Audit Contractors (RAC) program CMS announced in late February.

Earlier in the month, a letter signed by 111 members of Congress was sent to Health and Human Services Secretary Kathleen Sebelius calling for increased oversight of Recovery Audit Contractors (RACs), which are financially incented to deny claims. They receive a 9% to 12.5% commission, depending on the claim amount.

The lawmakers noted that 72% of hospital Medicare Part A appeals that have reached the third level of the process are overturned in favor of the hospital, turning getting paid into a major burden for these organizations. They also pointed out that when an inpatient stay is inaccurately denied by a RAC, the beneficiary pays higher out-of-pocket expenses under Part B and are sometimes financially responsible for post-acute care services.

To rectify the situation, which includes 375,000 claims currently before HHS’s Office of Medicare Hearings and Appeals (OMHA), the lawmakers demanded an immediate reform of the RAC process. They called for RACs to receive a retainer rather than a commission and for a more transparent method for providers to be informed of errors so they can avoid them in the future.

Although CMS did not directly respond, it did announce some changes to the RAC program. To address auditors receiving their fee even if the provider appeals, CMS said starting with the next RAC contract awards, auditors will have to wait until the second level of appeal is exhausted before receiving their fee.

It also announced that auditors must:

  • Wait 30 days to allow for a discussion before sending the claim to the Medicare Administrative Contractor (so providers don’t have to choose between a discussion and an appeal)
  • Confirm receipt of a discussion request within three days
  • Limit additional document requests (ADRs) to categories such as inpatient or outpatient, rather than the entire facility
  • Adjust ADR limits in accordance with the providers denial rate (providers with high denial rates will have higher ADR limits)

Additionally, CMS announced that as of February 18, it was suspending the ability of RACs to request documents associated with claims reviews until it finished the procurement process for new RAC contracts. The pause is designed to allow current RACs to finish any outstanding claims reviews.

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