Articles Tagged with “Recovery Audit Contractors”

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In August 2013, the U.S. Department of Health and Human Services (HHS) Office of Inspector General (OIG) issued a study addressing problems and vulnerabilities in Recovery Audit Contractor (RAC) activities, as well as their oversight by Centers for Medicare & Medicaid Services (CMS). RACs are tasked with identifying improper payments and are paid on a contingency fee basis according to their findings. RACs are also obligated to refer potential fraud to CMS.

The report addresses RACs’ efforts at identifying improper payments and potential fraud for the fiscal years (FYs) 2010-2011 and emphasizes the importance of effective CMS oversight over the RACs. The OIG set out to discover and report on four main objectives, including the extent to which:

1. RACs identified improper payments for services billed to the Medicare program;

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In 2005, the Centers for Medicare & Medicaid started the Medicare Recovery Audit Contractor (RAC) program in three pilot states, where the program recovered over $900 million dollars during the three-year pilot. Due to the success of the pilot program, CMS expanded the program to all states in 2010, and has since recovered over three billion dollars. The success of the Medicare RACs resulted in the expansion of the current RAC program to Medicaid and Medicare Parts C and D through Section 6411 of the Affordable Care Act (ACA).

The ACA requires states to:

  • Contract with a RAC to ensure that overpayments and underpayments by the state Medicaid agency are identified, and that overpayments are recouped;
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Last Friday, the vice president of legal affairs for the American Health Care Association (AHCA), Dianna De La Mare, reported that CMS will be combining the integrity responsibilities of the Zone Program Integrity Contractors (ZPICs) and the Medicare Administrative Contractors (MACs) into one integrity contractor. These newly designated integrity contractors, the Unified Program Integrity Contractors (UPIC), will focus on both Medicare and Medicaid integrity issues. Dianna De La Mar also reported that the new UPICs will encompass the MAC integrity responsibilities and will retire the Medicaid Integrity Contractors (MICs).

Follow the Wachler & Associates Health Law Blog for updates on UPICs and other important health law issues. If you have any questions regarding how UPICs may affect your practice, please contact an experienced health care attorney at Wachler & Associates attorney at 248-544-0888.

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On June 24, 2013, the U.S. Department of Health and Human Services (HHS) Office of Inspector General (OIG) issued an advisory opinion announcing that by request of a surgical products manufacturer (the “Requestor”), based on the certifications and information provided, a proposed tiered rebate program will meet the requirements of the discount safe harbor of the anti-kickback statute (AKS) and will not generate prohibited remuneration under the AKS. Thus, the OIG concluded that it would not impose administrative sanctions in connection with the proposed arrangement.

The AKS makes it a criminal offense to knowingly and willfully offer, pay, solicit, or receive any remuneration to induce or reward referrals of items or services reimbursable by a Federal health care program. At the discretion of the OIG, a violation of the AKS may constitute a felony punishable by imprisonment fines, or both, possible exclusion from Federal health care programs, and possible administrative proceedings and civil monetary penalties. However, safe harbor protection may be afforded to arrangements that meet all of the conditions set forth in the applicable AKS safe harbor. The regulatory AKS safe harbor for discounts interprets the Social Security Act’s exception for discounts, which protects “a discount or other reduction in price obtained by a provider of services or other entity under a Federal health care program if the reduction in price is properly disclosed and appropriately reflected in the costs claimed or charges made by the provider or entity under a Federal health care program.”

In this advisory opinion, the Requestor, a corporation that manufactures ophthalmologic products including pharmaceuticals, surgical equipment, and vision aids, sought an advisory opinion on whether a proposed arrangement would generate prohibited remuneration under the AKS. The Requestor’s proposed arrangement involved tiered, percentage-based rebates based on customer purchases of federally reimbursable and non-federally reimbursable surgical products. The rebate would be calculated based on a customer’s total annual purchases of such products regardless of whether such products are reimbursable by Federal health care programs and would not vary based on the volume of Federally reimbursable products purchased. In addition, the Requestor certified the various manners in which it would notify all customers receiving rebates of their obligation to report any rebates received based on sales of Federally reimbursable surgical products. Further, the Requestor certified that it would refrain from doing anything to impede the customer’s ability to meet its obligations under the AKS discount safe harbor.

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This morning, the Senate Finance Committee, a committee responsible for the oversight of Medicare, met with providers to discuss their experience with the Medicare Recovery Audit Contractors (RACs). The Centers for Medicare & Medicaid Services (CMS) contract RACs to detect and recuperate improper Medicare program payments.

At the hearing, Chairman Max Baucus (D-Mont.) and Ranking Member Orrin G. Hatch (R- Utah) urged the seriousness of the improper Medicare payments problem. The senators issued statements stressing the importance of RACs working efficiently to ensure the best use of the Medicare trust fund. They voiced their concerns at the high numbers of RAC decisions which are overturned on appeal and the senseless red tape which frustrates providers.

Two providers and one prominent contractor gave witness testimonies to the Committee. Jennifer J. Carmody, CPA, Director of Reimbursement Services for the Billings Clinic of Billing, Montana, discussed the time and expense her organization has incurred appealing inappropriate payment denials. In her witness testimony, she disclosed, “… the combined audit activity becomes overwhelming. In total, we are currently being audited by the Medicare RAC, Medicaid, Medicare Advantage, commercial payers and others.” The Billings Clinic pays an outside contractor, EHR, to assist the clinic with their overflow of audits and appeals. Amongst other recommendations, Ms. Carmody told the Finance Committee that clearer guidance, a limit to the number of record requests, and more effective supervision of the RACs’ performance would help improve the overall RAC process.

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Today the Department of Health and Human Services (HHS) Office of Inspector General (OIG) issued a report revealing new data on prescribers with questionable billing patterns under the Medicare Part D program. The OIG conducted this study to investigate rising concerns of Medicare prescriber fraud.

According to the OIG’s report, over 700 of nearly 87,000 general-care providers had “questionable” Part D prescribing patterns. A total of 2,238 general-care providers were labeled as outliers, but 736 doctors had what the OIG considered to be “extreme” prescriber patterns. A majority of these “extreme” outlier physicians ordered what the OIG considered to be extraordinary quantities of Schedule II or III drugs. Other examples of “extreme” patterns included doctors writing over 400 prescriptions for one patient and the number of pharmacies dispensing a single doctor’s orders. The OIG’s report noted that “Although some of this prescribing may be appropriate, such questionable patterns warrant further scrutiny.”

The Centers for Medicare and Medicaid Services (CMS) contracts with sponsors that provide drug coverage to beneficiaries enrolled in Medicare Part D. In addition, CMS contracts with a Medicare Drug Integrity Contractor (MEDIC), a contractor responsible for detecting and preventing fraud and abuse. The OIG recommended that CMS heighten its oversight of the Medicare Part D program by working in conjunction with MEDIC and the private insurers. According to the report, CMS has agreed to the OIG’s following recommendations:

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The Region D Recovery Audit Contractor (RAC), HealthDataInsights (HDI), has posted a new issue which states that it will begin pre-payment review of medical necessity for MS-DRG 312 (syncope and collapse). The issue is part of the pre-payment review demonstration program, and is the first approved issue posted as part of the program.

HDI posted the issue for all Region D states, but the pre-payment review program has only been approved by the Centers for Medicare and Medicaid Services (CMS) for 11 states: California, Florida, Illinois, Louisiana, Michigan, Missouri, New York, North Carolina, Ohio, Pennsylvania, and Texas.

CMS intends the pre-payment review demonstration program to prevent improper payments and lower the payment error rate. The program will focus on claims with high improper payment rates. The program will be concurrent with MAC pre-payment review programs, but CMS has advised that the contractors will make efforts to coordinate in order to prevent duplicate review of the same claims.
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On September 11, 2012 the United States Court of Appeals for the Ninth Circuit held that a Recovery Audit Contractor’s (RAC’s) initial decision to reopen a claim is not subject to judicial review. The case, Palomar Medical Center v. Sebelius, involved Palomar Medical Center arguing that a RAC has to establish good cause for an initial reopening decision. The Court of Appeals affirmed the ruling of the United States District Court for the Southern District of California, which held that the issue of good cause for reopening a claim cannot be raised after the audit’s conclusion and the revision of a paid claim.

Palomar v Sebelius.pdf

In 2007, the RAC notified Palomar that a claim from 2005 totaling $7,992.92 was under review and that records were requested to support medical necessity. Subsequently, after it submitted the requested documentation, Palomar was notified that an overpayment had been identified and the overpayment must be repaid. The overpayment was affirmed at the redetermination and reconsideration levels. Palomar then requested a hearing with an Administrative Law Judge (ALJ).

The ALJ affirmed that the services were not medically necessary, but found that the RAC did not make a showing of good cause for the late reopening. Finally, the Medicare Appeals Council (MAC) decided that:

1. Neither the ALJ nor the MAC had jurisdiction to assess whether good cause existed for reopening because the RAC’s decision to reopen was not subject to the administrative appeals process, and
2. The services were not medically reasonable and necessary.

Palomar appealed to the District Court and then the Court of Appeals on the issue of reviewability of the reopening, but not on the issue of medical necessity of the services.

The Court of Appeals for the Ninth Circuit held that because Congress established the RAC program, and expressly stated that reopenings were allowed under regulations promulgated by the Secretary, the regulations would control. Since the regulations explicitly state that there may be no appeal of a reopening decision because reopening decisions are final, the question of good cause to reopen a claim cannot be litigated after a RAC has revised a claim determination.

Although the court determined that the issue of good cause for reopening is not appealable, the court conceded that it was not an easy question to answer because of two competing principles: (1) Congress wanted an effective recovery audit program to reduce Medicare payments with resulting benefits for Medicare beneficiaries and taxpayers, under procedures set by the Secretary and (2) the provider has a legitimate interest in finality of determinations on its revenue for medical services. Despite the competing principles, the court ultimately concluded that to allow a provider to challenge the good cause for reopening during the appeals process could lead to the waste of resources and administrative inefficiency if the good cause was later rejected during the appeals process.
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On August 15, 2012 the Recovery Audit Contractor (RAC) for Region A changed its name from Diversified Collection Services (DCS) to Performant Recovery, Inc.

According to the website, processes, people, and contact information will remain the same.
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On August 22, 2012 the American Hospital Association (AHA) published the results of a survey which indicates that Recovery Audit Contractor (RAC) claim denials were up in the second quarter of 2012 from the first quarter. The results of the survey include data collected from more than 2,000 hospitals nationwide.

The survey reveals that hospitals saw an increase in RAC denials in the second quarter of 2012 of 24%. Additionally, medical record requests rose 22% and the dollar value of claims denied increased 21%. Hospitals reported Short Stay Medically Unnecessary as the most common reason for denial. According to the survey 70% of denials were listed as Short Stay Medically Unnecessary, which is a rise of 1% from the first quarter of 2012.

Hospitals are spending an increasing amount on RAC issues. In the second quarter of 2012, 55% of the hospitals in the survey indicated they spent more than $10,000 on RAC issues. Hospitals also spent an average of $24,064 on external legal counsel in the same quarter.
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