Is a RAC Prepayment Review of Your Medicare Claims on the Horizon?

Is a RAC Prepayment Review of Your Medicare Claims on the Horizon?

(December 19, 2011): As you know, RACs play an important role in the identification of Part A and Part B overpayments. Since the inception of the RAC Demonstration Project in 2005, RACs have successfully identified a number of improper claims, denying payment for reasons ranging from mere technical errors to broad concerns about medical necessity. Now it looks like the RACs' scope of work is expanding. RAC prepayment reviews are on the horizon. Unlike other contractors engaged in post-payment audits (such as Zone Program Integrity Contractors and Program Safeguard Contractors), RACs are not compensated on a fixed contract or cost-plus basis. Instead, their compensation is based on the amount of overpayments they identify (which remain overpayments after any administrative appeals have been pursued). This arrangement has roundly been criticized by providers. Regardless of whether or not you agree with the RAC concept, the program is here to stay. After reviewing the results of the RAC Demonstration Project, the government expanded the program and made it permanent.

I. Expansion of the RAC’s Responsibilities:

On November 15th, 2011, CMS announced that it was initiating a new demonstration project designed to help ensure that Medicare claims billed to the government are medically necessary and otherwise proper before they are paid. RACs will now be performing prepayment audits of provider claims. These reviews will likely be conducted in much the same manner as those currently initiated by other Medicare contractors. With the addition of RAC prepayment reviews, CMS hopes to further reduce the number of improper claims paid by the government each year.

II. States to be Covered in the RAC Prepayment Demonstration Project:

The RAC Prepayment Review Demonstration Project is initially slated to target physicians, hospitals and other Medicare providers in Florida, California, Mississippi, Texas, New York, Louisiana, Illinois, Pennsylvania, Ohio, North Carolina and Missouri. Implementation of the new pilot project is set to begin in January 2012.

III. Impact of Being Placed on RAC Prepayment Review:

Importantly, there is no administrative appeals process covering prepayment audits. As a result, it is not uncommon for providers placed on prepayment review to remain in this status for four to six months or until the provider is able to show the contractor that the services billed are both medically necessary and fully meet Medicare’s coverage and documentation requirements. Unfortunately, being placed on prepayment review can prove disastrous for providers with a large Medicare patient load. It can effectively delay payment for several months, even if the contractor ultimately finds that the claims qualify for coverage and payment.

IV. Avoiding RAC Prepayment Review:

Unfortunately, there is no “silver bullet” you can use to completely eliminate the risk of being placed on prepayment review. Nevertheless, there are a number of preemptive steps you can take to reduce the likelihood of such an occurrence. To start, you should conduct a “gap analysis” of your claims. In doing so, you will be able to learn whether or not the services you are billing meet Medicare’s medical necessity, coverage and documentation requirements. Additionally, you will likely learn whether your utilization of services is less than, comparable to, or exceeds that of your peers. Any deficiencies noted can be promptly addressed and added to the risk areas covered in your Compliance Plan. At this point, you will likely be well situated to respond to any prepayment audits initiated by a RAC or another Medicare contractor.

Liles Parker attorneys and staff have extensive experience conducting gap analyses and providing compliance guidance to health care providers. Additionally, our attorneys are skilled in assisting providers who have been placed on prepayment review. For more information, please call us today for a free consultation at 1 (800) 475-1906.