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A Look at RACs — Part III: What Medicare Providers Know about RAC Audit Recoupment Rules.

A Medicare Provider Should Understand RAC Audit Recoupment Issues (July 2, 2010):  The Centers for Medicare and Medicaid Services (CMS) audit program involving Recovery Audit Contractors (RACs) is now permanent and nationwide.  As we discussed in Part I of this series, while small providers were largely ignored during the demonstration program, physicians, home health, hospice, and durable medical equipment (DME) suppliers should be on the lookout for increased attention.  In Part II, we discussed some ways providers can prepare for and respond to an audit request.  In this Part III, we will discuss RAC audit recoupment issues.

At the outset, it is important to remember that RACs are paid on a contingency fee basis and so are highly incentivized to seek out overpayment errors. CMS’s enthusiastic trumpeting of the RAC demonstration program results seems to ignore the RACs’ reputation for overly aggressive auditing.  Indeed, a June 2010 CMS program update reveals that, when providers chose to appeal a RAC determination, providers won 64.4% of the time.  CMS has since implemented a requirement that the RAC remit its contingency fee if its audit determination is overturned at any level of appeal, not just the first level.  Whether this will improve RACs dismal win rate on appeal remains to be seen.

I.  What Are the Options to Appeal a RAC Determination of Overpayment?

First, providers that want to challenge the determination should be aware they have a  very limited period of time to file for redetermination appeal if they wish to avoid recoupment.  While a provider has 120 days to file for redetermination appeal, if they wait past day 30, the Medicare contractor (not the RAC) will initiate recoupment.  Additional information regarding recoupment is discussed below.  Appealing a RAC claims denial follows the uniform Medicare Part A and Part B appeals process.    The following deadlines are strictly adhered to.

                                           Medicare Appeal Deadlines

Level StageReviewing Entity

Filing Deadline

 1st RedeterminationMedicare Administrative Contractor (MAC)120 days of receiving notice of initial determination
2ndReconsiderationQualified Independent Contract (QIC)180 days of receiving notice of redetermination decision
3rdHearingAdministrative Law Judge (ALJ)60 days of receipt of the QIC’s decision
4thAdministrative Review (HHS)Medicare Appeals Council (MAC)60 days of receipt of the ALJ’s decision
5thJudicial ReviewFederal District Court60 days of receipt of the MAC’s decision

Our experience has shown that ALJs are honest brokers who are the most willing to hear arguments from providers.  While they will follow the law andapplicable coverage provisions, they tend to be much more thorough and consider the provider’s arguments in support of payment.  In many cases, this has been the first level that a fair and reasonable consideration of the evidence has occurred.

II.  What RAC Audit Recoupment Issues Will a Provider Encounter?

Notably, the deadlines above are filing deadlines only.  Medicare begins recouping funds well before the time frame for appeal has lapsed at each stage.  Medicare begins recouping funds only 30 days after the RAC’s initial determination and only 60 days after its redetermination decision.  This puts significant pressure on providers to file for first and second level appeals more rapidly than they otherwise might.  In later stages, recoupment cannot be stayed by filing the appeal.

 Recoupment Timeframes 
Day One – Initial Demand of a RAC Overpayment DeterminationFirst Level AppealSecond Level AppealAppeals to Administrative Law
 The process begins when a Demand Letter, with appeal rights, is sent to Provider.  If there is no appeal and the provider does not remit the demanded amount, offset begins on day 41. To avoid recoupment starting on day 41, the provider must request the 1st level appeal within 30 daysfrom the date of the Demand Letter.  If an appeal is received after day 30 and recoupment started on day 41, the recoupment process will stop on the remaining balance. To avoid recoupment beginning or resuming after a Redetermination, the provider must submit the 2nd level appeal request to the QIC within 60 daysfrom the overpayment letter (if applicable) or from the decision letter.  If an appeal request is received after day 60, the recoupment process will stop on the remaining balance. Limitation on recoupment ends after the 2nd level appeal.  Recoupment shall begin 30 days from the appeal decision and will continue until debt is satisfied, whether or not the provider appeals to the ALJ or subsequent levels.

Separate from and prior to the appeals process, a provider may rebut any proposed recoupment action within 15 days of the notice of impending recoupment.  A provider may issue a statement to the claims processing contractor providing evidence as to why the overpayment action should not take place.  This process does NOT provide an opportunity to review the medical documentation or the audit determination itself.

Read A Look at RACs — Part I

Read A Look at RACs — Part II

Health Care AttorneyShould you have any questions regarding these issues, don’t hesitate to contact us.  For a complementary consultation, you may call Robert W. Liles or one of our other attorneys at: 1 (800) 475-1906.

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