U.S. Medicare's Recovery Audit Contractors

Claims Denials, Appeals, Records Requests Give Hospitals Problems

Aug 10, 2009 Aurae Beidler

Hospitals brace themselves for more financial troubles as Medicare's Recovery Audit Contractors (RACs) begin nationwide claims audits in fall 2009 and calendar year 2010.

The United States Medicare program was established in 1965, by the Social Security Act, to provide health care coverage to people age 65 and older, and the disabled. Today, it covers various other groups including those citizen with End Stage Renal Disease (ESRD). Medicare costs and beneficiaries have grown drastically since 1965, reaching 43 million beneficiaries in 2006, according to the Centers for Medicare and Medicaid Services (CMS). Due to its size, representing 15% of the total U.S. federal budget, the Medicare Trust Fund is at high priority for fraud protection.

Medicare Improper Payment

CMS and the Office of Inspector General (OIG) have made aggressive efforts to reduce health care fraud and payments errors. Improper payments from Medicare, consist of any claim paid by Medicare to providers, such as hospitals, that did not qualify for payment, including fraudulent claims. Using a program called CERT, or Comprehensive Error Rate Testing, the Medicare Fee-for-Service (traditional Medicare) error rate has dropped from 14 percent in 1996 to 3.6 percent in 2008.

Beginning of Recovery Audit Contractors

However, the U.S. government has gone to even greater lengths to recover overpayments. Under the Medicare Prescription Drug Improvement and Modernization Act of 2003, or MMA, a demonstration project using recovery audit contractors (RAC) to identify Medicare overpayments was signed into law.

This demonstration was operated from March 2005 through March 2008. During the three-year RAC demonstration, more than $1.03 billion of Medicare improper payments were identified and subject to provider repayment, as stated by CMS (CMS, 2009). Due to its success, the RAC program became permanent, as passed into law by the Tax Relief and Health Care Act of 2006 (TRHCA). The permanent, nationwide RAC program will be rolled out by January 1, 2010. There are four separate RACs for the permanent program.

Permanent RAC Program is Coming

The RACs use the same Medicare policies as other government contractors to review claims on a post-payment basis. The limit for “look back” is three years. The maximum look back date is October 1, 2007. Claims will go through two types of review:

• automated review, easily reviewed without the need of medical records
• complex review, requiring medical records

Providers must comply with the requests from the RACs and provide medical records to the RACs within the set deadlines. Providers will have a period of discussion within which they are able to send in the required records and clear up any issues. After this discussion period, providers are not allowed to send in additional documents. Providers have the ability to appeal any RAC decision, within a series of five levels of appeals.

Claims can be denied for reasons such a lack of medical necessity, wrong coding, duplicate payment or other reasons the RAC finds for overpayment.

References: Centers for Medicare and Medicaid Services

The copyright of the article U.S. Medicare's Recovery Audit Contractors in Insurance is owned by Aurae Beidler. Permission to republish U.S. Medicare's Recovery Audit Contractors in print or online must be granted by the author in writing.

RACs Hit the Heart of Healthcare

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