Updated on: April 2, 2014

CMS Orders RACs to Cease Requests for Medical Records

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Original story posted on: February 20, 2014

Under mounting pressure from healthcare providers, coupled with a massive backlog of cases pending appeal, the Centers for Medicare & Medicaid Services has ordered recovery auditors to cease in their requests for medical records effective tomorrow.

In an announcement that took the healthcare community by surprise, CMS said the document requests and auditing would resume when the new RAC contracts are awarded, but did not specify the status and start dates for the new contracts. CMS also outlined other changes to the program, which rolled out nationally in 2010.

Healthcare professionals across the country were scrambling to absorb the announcement, and had a variety of reactions. Andrew Wachler, Esq., a longtime champion of providers being paid for Part B claims when Part A has been denied, expressed a cautious note of optimism.

“From my review of the CMS publication, it appears that, as a result of provider input as well as recent legislative participation, CMS is recognizing the challenges to providers of intense RAC scrutiny and withholding of payment without the corresponding appeal rights afforded under the statute,” said Wachler, managing partner at Wachler & Associates. 

“We are hopeful, from reading this notice, that the ADRs will cease virtually immediately from the RACs and that, as of June 1, the MAC will not be able to effectuate offset for initial denials of RACs. Hopefully, this will provide some needed relief to Medicare providers and give OMHA a chance to reduce its backlog so that in the future providers may receive due process in the timely manner that they are entitled to.”

Noting that he was not surprised by the action taken by CMS, J. Paul Spencer, the director of regulatory and coding compliance for Providence Health Services in Washington, D.C., was more concerned with other changes being discussed by CMS.

“The ‘RAC Pause’ doesn’t particularly surprise me, as it was announced in 2013 that February would see the wrap-up of activity for the current contractors,” said Spencer. “What does surprise me is the listing of changes that are coming to the RAC program, and I believe that this may very well be a partial response to issues raised eight days ago at the (Office of Medicare Hearings and Appeals) OMHA Appellant Forum.”

Spencer, who covered the recent forum in Washington for RACmonitor, said two of those issues have to do with the discussion period. One issue that was raised at the OMHA forum was the needlessly high volume of technical denials getting to the ALJ level.

“By having a discussion period that will now no longer run concurrently with the decision to appeal claims, I see the number of technical denials entering the appeals process declining sharply,” said Spencer. “That has a positive effect on all levels of appeal.”

Cautious Optimism

“This is definitely good news, but it is too early to crack out the champagne,” said David M. Glaser of Fredrikson & Byron in Minneapolis, Minn. “There are two important points to keep in mind. First, this is only a pause. The fact that there is another round of procurement contracts means that this isn’t the death of RACs; it is merely a respite in what has been a pretty rough ride. While it is possible CMS will change the RAC program, this pause doesn’t mean major changes are inevitable, or even likely. Second, RACs are far from the only body that can audit you. BISCs, ZPICs, MACs, and other acronyms continue to assess overpayments, and those audits have many of the same problems that plague the RAC program, but often with larger sums of money involved. The pause is like a quick rain shower during a drought. It’s a good thing, but it doesn’t solve the problem.”

“Programs that fight fraud waste and abuse in the healthcare system are supposed to make some people mad, but the RAC program was making everybody mad—the providers, Congress, HHS, and even the RACs themselves,” noted Emily Evans, partner at Obsidian Research Group. “CMS’ suspension of RAC audits to conduct the re-procurement of new contracts and ‘refine’ the program provides a graceful mechanism to stop the accumulation of ALJ backlog and address the mounting concerns of providers and Members of Congress. I anticipate this suspension will be prolonged as CMS leadership sifts through the various stakeholder concerns.”

Medicare Trust Fund at Risk?

The American Coalition for Healthcare Claims Integrity took the opposing view. “This announcement is very disappointing and presents yet another hurdle for the highly effective RAC program,” said coalition spokesperson Becky Reeves. “This decision will undoubtedly have negative implications for the Medicare Trust Fund and, most importantly, taxpayers. The RAC program recovers more than $1 billion per quarter in misused Medicare funds, while reviewing only 2 percent of medical records. Constraints to the program like this compromise these savings, perpetuate rampant waste in Medicare, and weaken our healthcare system overall.

Congressional Complicity

“The ongoing efforts by hospitals to eliminate Medicare oversight, and the complicity of Congress, is deeply concerning,” continued Reeves. “In 2013, Medicare lost $36 billion to waste, more than any other federal government program. And, according to CMS, for the first time since the RAC program began in 2009, recoveries are decreasing despite an increase in Medicare improper payments. Our coalition urges lawmakers to declare their commitment to our nation’s most vulnerable citizens and reinstate oversight in Medicare.”

Compensation Questioned 

“My opinion continues to be that until and unless CMS creates a disincentive for the RACs to reign in abusive practices, the problems we are seeing now, particularly with the ALJ backlog, will continue,” said Frank Cohen, senior healthcare analyst for the Frank Cohen Group. “Think about this: providers have a 70 percent to 80 percent success rate at the ALJ level. Why is that? It’s because the ALJ is a disinterested and unbiased party. If the ALJ reverses 70 percent to 80 percent of the RAC findings, why aren’t we seeing a higher level of reversal at levels 1 and 2? For exactly the opposite reason: bias and interest. The ALJ doesn’t have a dog in the fight, but everyone else does.” Cohen continued, “So, until and unless the CMS imposes a fine on the RAC for abusive practices, the problem will only continue to get worse. RACs are introducing millions of overpayment findings into the system that simply don’t belong there.” 

“The CMS announcement regarding the Recovery Audit Program is very welcome news for healthcare,” said David J. Muhs, chief financial officer at Henry County Health Center, a Critical Access Hospital in Mt. Pleasant, Iowa. “I am glad to hear that CMS is going to ‘re-evaluate’ the program. Anytime you introduce a third party that gets paid on a contingence, there are going to be issues. The cost associated with submitting the claims to the RAC could be put to better use in healthcare. I think the concept of the RAC has its merits, but the implementation of the program has been overly burdensome. Although the audits did not affect our organization, I have heard many stories regarding the processes of the some of the RAC contractors. Let’s hope CMS takes the issues that have been reported to it by the healthcare industry into consideration in revising the program.”

Cohen offered a proposal to current RAC program that compensates recovery auditors on a commission basis.

“For every reversal in excess of, say, 10 percent, the RAC not only loses its commission, it has to pay to the provider some amount that would approximate the cost of filing the appeal and fighting the overpayment finding. In a court of law, when someone brings a frivolous lawsuit and does not prevail, they are required to pay the defendants’ legal fees and other costs. If we are truly a system of due process, then why can’t we do the same for the RAC audit? Limiting ADRs is a smoke screen to take our eyes off the real problem: over-incentivized government contractors who have absolutely no motivation to just do the next right thing.” 

CMS Motivation Questioned

While the CMS announcement was greeted a degree of cautious optimism, Steven J. Meyerson, M.D., vice president at Accretive Physician Advisory Services, seemed skeptical.

“CMS has yet to explain why it is stirring up the program by rewriting all the contracts and the statement of work, and changing contractors,” wrote Meyerson in an email to RACmonitor. “But it (CMS) seems to be recognizing that there are serious problems in the recovery auditor program that require ‘refinement and improvement.’ Contrary to the statement that CMS claims it is constantly listening to feedback from providers, providers have never felt there was an ear for them at CMS concerning the behavior of the RAC auditors.”

Meyerson continued, “The improvements in the program CMS announced appear to be a step in the right direction, but what is really needed is more transparency in the program itself. Providers would also like some relief from all the technical denials. Except for a few bad apples, the hospital industry has always striven to bill honestly for the services it provided, but it is finding it increasingly difficult to understand and comply with new Medicare regulations that are ambiguous to begin with and are constantly undergoing reinterpretation by the regulation writers themselves. RAC auditors are given wide latitude in their interpretation of the regulations backed by the ability to recoup Medicare funds and cause financial harm to hospitals. A program with this much power over a hospital’s finances needs to be carefully planned and monitored. Hopefully CMS has learned some lessons from the current program and RAC 2.0 will be a new and improved product.”

About the Author

Chuck Buck is publisher of RACmonitor

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Chuck Buck

Chuck Buck is the publisher of RACmonitor and is the program host and executive producer of Monitor Monday.

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