CMS Initiates Changes to Recovery Audit Program as New Contracts Are Rolled Out

The revised Recovery Audit Program Improvement Document released on December 30, 2014, aims to address stakeholder concerns by reducing the administrative burden on providers, enhancing CMS’s oversight and increasing program transparency.

At the end of 2014, the U.S. Centers for Medicare and Medicaid Services (CMS) announced a variety of changes affecting Recovery Audit Contractors (RACs) and the audits of Medicare participating providers and suppliers. These changes could affect provider experience with and response to RAC audits in 2015.

Recovery Audit Program Overview

Under the Recovery Audit Program, contractors audit Medicare claims submitted by hospitals, physicians and other health care providers. This program is one of many run by CMS to assess and achieve payment accuracy. RACs are paid a commission on each claim they deny. In fiscal year 2013, RACs identified $3.75 billion in improper payments. This included $3.65 billion in overpayments collected and $102.4 million repaid in underpayments to providers and suppliers (view the full report here).

In late February 2014, CMS suspended RACs from making document requests of providers to allow CMS time to finish work associated with the current RAC contracts and to provide sufficient time for RACs to resolve any outstanding claim reviews. At the time CMS announced this suspension of activities, it also announced that it was working to make improvements to the program and released a Recovery Audit Program Improvement Document.

On December 30, 2014, CMS released a new version of the Improvement Document, detailing a series of program improvements and revisions. CMS believes these revisions, developed in response to stakeholder feedback, will reduce the administrative burden on providers, enhance CMS’s oversight and increase program transparency.

Highlights from the Recovery Audit Program Improvement Document

The following are among the more noteworthy changes in the document:

• Look-back periods have been reduced from three years to six months from the date of service. In cases where the hospital submits the claim within three months of the date of service, it will be allowed to rebill denied Part A claims under Part B up to one year after the date of service.
• RACs have a limit on the number of document requests they can make to a provider. These limits vary based on provider type and practice setting. To address concerns about providers unfamiliar with the Recovery Audit Program becoming overwhelmed by document requests, CMS is now instructing RACs to let these providers transition into the program by not requesting the maximum number of documents immediately, but by reaching document limits through incremental requests.
• The time RACs have to complete complex reviews is reduced from 60 days to 30.
• To address concerns regarding accuracy of automated reviews, RACs will be required to maintain an accuracy rate of 95 percent. Failure to maintain this rate will result in a progressive reduction in document limits for RACs.
• In response to concerns that RACs focus too much of their efforts on inpatient claims, CMS will require RACs to broaden their review to topics that include all claims/provider types. This could potentially increase the risk of a RAC audit for other provider types, such as skilled nursing facilities, long-term care facilities or physicians.

CMS’s efforts to address provider concerns and improve the RAC program should be welcomed by all stakeholders, but expectations should be moderated. It is important to note that while some of the changes are very specific, such as a reduction in look-back time from three years to six months, many are more general in nature. Since RACs are paid on a contingency fee, there may be financial incentives for them to focus on certain providers, and CMS could be limited in how much change it can effect.

Visit the CMS website to keep up with these and other changes to the Medicare RAC program.