Medicare, Recovery Audit Contractor (RAC), Medicaid, Medicaid Integrity Contractor (MIC), and Other Payor Audits
Providers and suppliers are experiencing a time of unprecedented auditing activity. Medicare, Medicaid and third party payors are engaging in significant auditing activity and are engaging the services of outside contractors to assist in their claim reviews. Providers and suppliers should act now to prepare for increased claims scrutiny.
The attorneys of The Health Law Partners, P.C. (The HLP) have years of experience successfully appealing all types of claim denials, including Medicare and Recovery Audit Contractor (RAC) claim denials. Attorneys Abby Pendleton and Jessica L. Gustafson lead the firm’s audit practice group. During the RAC demonstration program, which took place from 2005 to 2008, Ms. Pendleton and Ms. Gustafson personally appealed hundreds of RAC claim denials made against hospitals, inpatient rehabilitation facilities (IRFs) and physicians with very successful results. During this same time period, Ms. Pendleton and Ms. Gustafson successfully appealed thousands of other Medicare claim denials. They have prepared successful legal analyses and presented arguments to Administrative Law Judges in RAC cases. They have achieved excellent results and recovered millions of dollars on behalf of providers and suppliers. The attorneys of The HLP also have experience appealing Medicaid and other Third Party Payor denials.
Abby Pendleton, Esq. and Jessica Gustafson, Esq. are contributing authors in numerous publications and have presented speaking engagements on the topic of RACs and successfully appealing Medicare, Medicaid and Third Party Payor claim denials. A sampling of these publications and speeches includes the following:
"Medicare Appeals Adjudication Delays: Implications for Healthcare Providers and Suppliers", by Abby Pendleton, Esq. and Jessica Gustafson, Esq., The Health Lawyer, Volume 26, Number 5, June 2014.
"2-Midnight Rule Update: Hospitals Must Continue Implementation of the 2-Midnight Rule", by Jessica Gustafson, Esq. and Abby Pendleton, Esq., The Health Lawyer, Volume 26, Number 4, April 2014.
"Billing for and Appealing Denials of Inpatient Hospital Services: Where have we been? Where are we now? What does the future hold?" ABA Health Law Section, The Health Lawyer, by Jessica L. Gustafson, Esq. and Abby Pendleton, Esq., December 2013.
Abby Pendleton, Esq. and Jessica Gustafson, Esq. were interviewed and quoted in, "Facing an Audit? Here's What You Need to Know", an article on The Recovery Audit Contractor (RAC) program, by Deborah Abrams Kaplan, Diagnostic Imaging, February 6, 2013.
"Anesthesia Practices Should Prepare for More Audit Activity", by Abby Pendleton, Esq. and Jessica L. Gustafson, Esq., Communique, Winter 2011.
" Sleeping Giants: Compliance in the Age of Electronic Medical Records", by Ranjan Sachdev, MD, MBA, CHC, Abby Pendleton, Esq., and Jessica L. Gustafson, Esq., Association of Healthcare Internal Auditors New Perspectives, Winter 2011.
"The Future of the Recovery Audit Contractor Program", by Abby Pendleton, Esq. and Jessica L. Gustafson, Esq., ABA eSource, August 2011
"The Recovery Audit Contractor ("RAC") Program: What Can Laboratories and Pathologists Expect?", by Abby Pendleton, Esq. and Jessica L. Gustafson, Esq., G-2 Compliance Report, February 2011.
"The Anesthesia Community Must Be Prepared for Increased Audit Activity by RACS and Others," by Abby Pendleton, Esq., The Communique, Spring 2010.
"The RAC Program: What Can Radiology Providers Expect as RACs Begin Auditing?" by Abby Pendleton, Esq. and Jessica L. Gustafson, Esq., Radiology Management, November/December 2009.
"Get Ready -- Recovery Audit Contractors Are Coming to Michigan," co-authored: Abby Pendleton, Esq. and Jessica L. Gustafson, Esq., Michigan Medical Law Report, Vol. 4, No. 4, Winter, 2009
"What Anesthesiologists And Pain Management Physicians Need To Know About The RAC Program," by Abby Pendleton, Esq. and Jessica Gustafson, Esq., Communique, Summer 2009
“Recovery Audit Contractors And Medicare Audits: What Can Hospitals and Health Systems Expect as the RAC Program Expands Nationwide?" co-authored: Abby Pendleton, Esq. and Jessica L. Gustafson, Esq., American Health Lawyers Association, Hospitals and Health Systems Practice Group Member Briefing, January 2009.
"Recovery Audit Contractors and Medicare Audits: Successful Strategies for Defending Audits," co-authored: Jessica L. Gustafson, Esq., Radiology Business Journal, Vol. 3, No. 8, August 13, 2008
“RAC to the Future: What Can Medicare Providers and Suppliers Expect from the Recovery Audit Contractor Program?" co-authored: Abby Pendleton, Esq. and Jessica L. Gustafson, Esq., The Health Lawyer, The ABA Health Law Section, Vol. 21, No. 2, December, 2008
“The RACs Are Coming – Are You Ready?" co-authored: Abby Pendleton, Esq. and Jessica L. Gustafson, Esq., The RAP Sheet, American Health Lawyers Association, Regulation, Accreditation and Payment Practice Group, December 2008.
“Recovery Audit Contractors and Medicare Audits: Successful Strategies for Defending Audits,” co-authored: Abby Pendleton, Esq. and Jessica L. Gustafson, Esq., Caring, National Association of Home Care and Hospice, November 2008.
“Recovery Audit Contractors and Medicare Audits: Successful Strategies for Preparing for and Defending Audits,” co-authored: Jessica L. Gustafson, Esq., Journal of Health Care Compliance, September-October, 2008
“The Medicare Appeals Process and Strategies for Successful Appeals,” co-authored: Jessica L. Gustafson, Esq., American Health Lawyers Association, Physician Organizations, Vol. 10, Issue 1, Winter, 2007
“Get ready for increased nationwide Medicare audit activity,” co-authored: Abby Pendleton, Esq., and Jessica L. Gustafson, Esq., Michigan Medical Law Report, Vol. 3, No. 3, Fall, 2007
“Get Ready: The RACs May Be Nationwide Sooner Than Expected!” co-authored: Abby Pendleton, Esq. and Jessica L. Gustafson, Esq., HCCA Compliance Today, 2007.
“The New Medicare Part A and Part B Appeals Process,” co-authored: Abby Pendleton, Esq., Health Law Handbook 2006, Part I, Chapter I, 2006.
“The New Medicare Appeals Process,” co-authored: Abby Pendleton, Esq., The Health Lawyer, The ABA Health Law Section, June 2005.
Abby Pendleton, Esq. and Jessica Gustafson, Esq. are featured speakers at the upcoming RAC Summit in July in Chicago. For more information click here.
Abby Pendleton, Esq., Jessica Gustafson, Esq., and Michael Salvatore, MD presented, "Successfully Deal with Denials", Pre-Summit Workshops, Hotel Caribe Royale, Orlando, Florida, March 24, 2014.Abby Pendleton, Esq. and Jessica Gustafson, Esq. presented, "Overview and Recap of the 2014 CMS IPPS Final Rule", Pre-Summit Workshops, Hotel Caribe Royale, Orlando, Florida, March 24, 2014.
“The Medicaid RAC Final Rule: What Legal Counsel Representing Healthcare Providers Need to Know,” by Jessica L. Gustafson, Esq. and Susan Emanual, moderated by Abby Pendleton, Esq., an American Health Lawyers Association Webinar, January 25, 2012.
“The Michigan Audit Landscape: Medicare, Medicaid, and Private Payor Audits,” by Jessica L. Gustafson, Esq. and Connie Blachut, MPH, MBA, moderated by Abby Pendleton, Esq., State Bar of Michigan Health Care Law Section Teleconference, June 15, 2011.
"Navigating Claim Denials," World Research Group Panel Discussion, March 2, 2011.
"Recovery Audit Contractors and Medicare Audits," The Association for Medical Imaging Management (AHRA) 38th Annual Meeting & Exposition, August 22-26, 2010.
"Recovery Audit Contractors: Is Your Organization Ready for the RAC Attack?"American Association of Nurse Anesthetists (AANA) Annual Meeting, August 11, 2010, Seattle, WA.
"RAC Attack," The Medical Group Management Association 2010 Anesthesia Administration Assembly Conference, May 24-26, 2010, San Antonio, TX.
"RAC and Medicare Appeals: What Physicians Need to Know," The Michigan Osteopathic Association 10th Annual Michigan Osteopathic Association Practice Manager Program, May 13-14, 2010.
"The Audit Landscape for Michigan Providers and Suppliers," Michigan Health Care Law Section Teleconference, March 18, 2010.
"Recovery Audit Contractors and Medicare Audits: Strategies for Successful Appeals," 2010 Georgia Hospice and Palliative Care Organization Annual Leadership and Clinical Conference, February 25, 2010.
"Managing the RAC Appeals Process," A World Research Group Healthcare Management Conference: Reducing RAC and MIC Audit Exposure, December 7 through 8, 2009.
"Recovery Audit Contractors and Medicare Audits: Lessons Learned and the Road Ahead," 2009 American Health Lawyers Association Fraud and Compliance Forum, October 4 through 6, 2009 (with co-presenters Don Romano, attorney and Connie Leonard, Director, CMS Division of Recovery Audit Operations).
Recovery Audit Contractors (RACs) and Other Medicare Audits
Medicare’s Recovery Audit Contractor (RAC) program is now operational nationwide. Medicare providers and suppliers are well-advised to understand the RAC program, and initiate and/or update compliance efforts to prepare for the increased claims scrutiny brought by the RACs.
Providers and suppliers should be aware that the RAC auditing activity is done in conjunction with other existing Medicare auditing activity. Therefore, providers and suppliers may still see audits conducted by the Medicare Affiliated Contractors (i.e., Carriers and Fiscal Intermediaries) and Zone Program Integrity Contractors (i.e., Program Safeguard Contractors). Providers and suppliers are experiencing increasing audit activity by all types of Medicare contractors.
Who Are the RACs?
Recovery Audit Contractors (RACs) are bounty hunters employed by Medicare, tasked to identify and correct improper Medicare payments. Although the RACs are charged to identify and correct both underpayments and overpayments, RACs concentrate on overpayments.
The RACs are compensated on a contingency fee basis, based upon the principal amount collected from and/or returned to the provider or supplier. This contingency fee is significant, ranging from 9 to 12.5 percent, depending upon the RAC contract. Thus, the RACs are highly-incentivized to identify improper payments once a claim review is initiated.
There are four RAC contractors, each servicing a certain region of the United States:
- Diversified Collection Services, Inc. (DCS), servicing Region A (Northeast states)
- CGI Technologies and Solutions, Inc. (CGI), servicing Region B (Midwest states)
- Connolly Consulting Associates, Inc. (Connolly), servicing Region C (Southern states)
- HealthDataInsights, Inc. (HDI), servicing Region D (Western states)
The Past, Present and Future of RAC Activity
The RAC program began as a demonstration mandated by Section 306 of the Medicare Prescription Drug, Improvement and Modernization Act of 2003 (MMA). The RAC demonstration program began in 2005 in the states with the highest Medicare expenditures, California, Florida and New York, and later expanded to include Arizona, Massachusetts and South Carolina. RAC auditing activity under the demonstration concluded in 2008. The most recent information regarding the results of the RAC demonstration is available from the CMS website.
Section 302 of the Tax Relief and Health Care Act of 2006 made the RAC program permanent and required its expansion nationwide by no later than 2010. The program is currently operational in all states.
Section 6411 of the Patient Protection and Affordable Care Act (i.e., the health care reform bill), expanded the RAC program to include Medicare Advantage (Part C), Medicare Prescription Drug (Part D) and Medicaid claims. Note that this expansion is in line with a recent White House Memorandum, in which President Obama expressed his support for the use of “high-tech bounty hunters” to help find health care fraud in government-run Medicare and Medicaid programs.
More information regarding the RAC program is available from CMS’ RAC website.
How to Prepare Your Organization for a RAC Attack
When Medicare providers and suppliers are selected for a RAC audit involving a review of medical records, they must endure an often-burdensome and time-consuming process, involving dedicating resources to the timely submission of records and appealing claim denials, if necessary. Accordingly, The HLP recommends that providers begin now to take steps to prepare for RAC auditing activity, including:
- Create a point-person responsible for communications with the RAC (or responsible for all audit correspondences). This point-person should be responsible for tracking records requests and ensuring timely responses; tracking claim denials and monitoring appeals deadlines; and preparing for appeals.
- Carefully monitor areas that may be subject to RAC scrutiny and increase compliance efforts in those areas. Approved audit issues are listed on each RAC’s webpage, and new approved issues are regularly added. Providers and suppliers may get an idea of the types of claims that may be subject to scrutiny by reviewing the denials made during the RAC demonstration program, and reviewing other Medicare guidance, such is the Office of Inspector General’s (OIG’s) annual Work Plan document.
- Create and implement and/or update your organization’s effective compliance plan. Steps to improve compliance could include the following:
- Improving documentation to support the medical necessity for office visits and medical procedures;
- For hospitals, carefully reviewing admissions and Utilization Review procedures;
- Reviewing coding practices; and
- Providing education.
What to Do if Your Organization Receives Medicare Claim Denials – How to Appeal
Providers and suppliers dissatisfied with a RAC review determination may appeal through the standard Medicare appeals process (applicable to Part A and Part B claims). This process includes five potential stages:
(1) Redetermination to the Medicare Affiliated Contractor (MAC) (or Medicare Carrier or Fiscal Intermediary)
(2) Reconsideration submitted to a Qualified Independent Contractor
(3) Administrative Law Judge hearing
(4) Medicare Appeals Council
(5) Federal district court.
It is imperative that providers and suppliers follow the regulatory appeals time frames to preserve appeal rights associated with denied claims. Failure to meet appeal deadlines could result in a devastating financial impact to a provider and supplier.
RAC Updates – The HLP RAC Sheet
Every month, The HLP releases The HLP RAC Sheet, which provides news and updates regarding the RAC program. The most recent The HLP RAC Sheet, along with archived editions, are available on The HLP RAC Sheet Archives page.
Medicaid Integrity Contractors (MICs)
Similar to the Medicare RAC program, Medicaid has entered into agreements with third party contractors, known as Medicaid Integrity Contractors (MICs).
The Deficit Reduction Act of 2005 added Section 1936 to the Social Security Act, which created the Medicaid Integrity Program (MIP) and required the Centers for Medicare and Medicaid Services (CMS) to procure contractors to perform the following four functions:
- Review provider actions;
- Audit claims;
- Identify overpayments; and
- Educate providers and others with respect to program integrity and quality of care.
In order to perform the functions listed above, CMS awarded contracts to contractors known as MICs. There are three types of MICs:
- Review MICs
- Audit MICs
- Education MICs
Audit MICs are entities with which CMS has contracted to perform audits of certain Medicaid providers, who have been identified through data analysis as providers with “truly aberrant” billing practices. Unlike RACs, Audit MICs are not compensated on a contingency fee basis, and are tasked to ensure that paid claims are:
- For services provided and properly documented;
- For services billed using appropriate procedure codes;
- For covered services; and
- In accordance with Federal and State laws, regulations and policies.
More information regarding the MIC program is available from the CMS website.