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David McGill Blogger

A New OIG Report ... On RACs

Posted by David McGill | September 05, 2013

Yesterday, OIG published a new report. Like all OIG reports, it has a less-than-compelling but descriptive title: Medicare Recovery Audit Contractors and CMS's Actions To Address Improper Payments, Referrals of Potential Fraud, and Performance. 

OIG lists 4 main objectives leading to the publication of this report. First, ​it wanted to determine the extent to which the RACs identified improper payments. Second, did CMS take "corrective actions to address vulnerabilities[?]" Third, did the RACs refer potential fraud to CMS and did CMS in turn take action in response? And lastly, did CMS evaluate the RACs on all performance requirements?

Report Background

The Background section of the report lists some random but relevant facts: 

  • ​Roughly 40 states have implemented RACs for Medicaid claims.
  • A Medicare Advantage RAC will exist sometime in the not-so-distant future.
  • CMS defines a "vulnerability" as a specific issue associated with more than $500,000 in improper payments. Vulnerabilities receive high priority for "corrective action," with higher amounts and problems spanning multiple RAC regions getting triaged higher than lower, local amounts.
  • CMS uses an online database to prevent RACs from reviewing claims that have already been reviewed, or claims that are under review by other contractors (e.g., MACs, ZPICs) and law enforcement. (Anecdotal reports from multiple O&P's across the U.S. suggest that duplicate audits do occur, notwithstanding this alleged safeguard.)
OIG reviewed financial years 2010 and 2011 for this report.


Key Findings

Our review of the OIG's report leads to 6 key findings*: 

  1. For the 2 years reviewed by OIG, 50% of the claims reviewed by RACs involved improper payments. Overpayments to providers accounted for 85% ($768M) of the improper payments. The other 15% ($135M) represented underpayments by Medicare.
  2. Over half of the improper payments (57%) resulted from two causes: (1) medical services delivered in inappropriate facilities (32%), or providers billing incorrect codes (25%).
  3. Doctors (88%) and physicians/non-physician practitioners (5%) account for 93% of improper payments. In addition, 23% of all improper payments involved only two states: California and New York.
  4. For the two years studied, providers appealed only 6% of the time when a RAC identified an overpayment. But for those who did appeal, close to half (44%) ultimately won a reversal of the RAC's determination.
  5. Region D featured the highest RAC appeal win rate, at 50%, followed by Region B (40%), Region C (36%), and Region A (27%). The Region that appealed the most was Region B (14% of overpayment claims appealed), followed by Region D (7%), and Regions A and C (both 3%).** 
  6. CMS failed to evaluate the RACs in multiple key areas (e.g., half of the evaluations didn't describe RACs' ability, accuracy, or effectiveness in identifying improper payments) as required  

What does this mean for you?

As we've discussed previously, the data show that you should appeal a claim identified by the RAC as an overpayment. Nationally, you have close to a 50% chance of keeping the money Medicare paid you if you simply take the time to appeal. While we see significant geographic variations - particularly in the "DME" category listed in the second footnote below - the importance of good documentation and a strong appeal-writing process can't be overstated.

In addition, the fact that CMS has failed to regularly and comprehensively rate the RACs tends to support the kinds of concerns that ultimately led AOPA to file suit against HHS/CMS earlier this year. While no one - including AOPA - disputes the right of Medicare to audit claims in order to ensure proper payment, the RACs' process (or lack thereof) and (lack of) accountability underscores many of the issues identified by AOPA in its original complaint and more recent opposition to the government's motion to dismiss the lawsuit.  

* Note: the OIG's "big print" conclusions in its report tend to be extremely high-level - e.g., CMS should take action on vulnerabilities pending corrective action and evaluate the effectiveness of implemented corrective actions - and thus, not particularly instructive. Forecasting the impact of such a recommendation on O&P specifically is so speculative as to be meaningless. Our "Key Findings," in contrast, extract information from the Report that we think is relevant and applicable within the world of O&P.

** Appendix A of the report further breaks out appeals by type of service. While O&P isn't listed, "DME" is. Assuming that O&P is part of DME, the numbers change slightly. The Region with the highest number of claims overturned is Region C (59%), followed by Region D (49%), Region A (16%) and Region B (2%).

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