Updated on: June 22, 2012

CMS Report to Congress: $135.6 Million in RAC Overpayment Demands; $92.3 Million Corrected

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Original story posted on: October 6, 2011

v-axsombrownThe Centers for Medicare & Medicaid Services CMS released its first report to Congress on the Recovery Audit Contractor (RAC) program, covering the time period of Oct. 1, 2009 to Sept. 30, 2010.(1) While some of the report is more of a RAC primer, other parts provide clear information that every provider should know and use in response to the program’s activities and impact. The report was made on Thursday, Sept. 29.

CMS continues to emphasize collaboration among auditors and all other CMS entities to maximize efficiency and proficiency. More information has been provided on the ongoing evolution of the CMS New Issue Review Board – the evaluating entity and decision-maker for proposed audits submitted by the RACs. Specifically, CMS’s approval process for new issues involves clinical, non-clinical, policy-making and RAC validation contractors in the evaluation of proposed issues, supportive data, reasons for overpayment, types of review determinations (automated, semi-automated, complex, etc.), preventive/corrective actions (if applicable) and short- and long-term impacts of findings. CMS’s reported intent to streamline this approval process further supports their proclaimed goal of accelerating collaborative RAC efforts directed towards the identification and submission of collective issues.

 

Highlighted CMS system improvements include the secure coordination of all claims data exchanges between all CMS auditing entities; the 2010 implementation of a national “mass” adjustment system that allows a large number of claims to be processed automatically by MACs, producing quicker decisions and enhanced processing; and RAC Data Warehouse (RACDW) enhancements. The RACDW is the repository for all claims data reviewed by RACs, and it is used by CMS to generate reports that illustrate trends regarding the most frequently corrected types of claims. Based on this information, additional adjustments can be made to systems, policies/procedures, auditor focus and other CMS auditors’ referrals (i.e. ZPICs, OIG, etc.). CMS is tightening all gaps to ensure fulfillment of its 2011 mission and goals.(2)

 

The Message:

 

Stay abreast of all related published information on auditing efforts, findings and corrective actions that address identified issues.

 

The results summary for the 2010 fiscal year identified $135.6 million in RAC overpayment demands, of which $92.3 million was identified and corrected (improper payments accounted for $75 million of this total, or 82 percent, while underpayments accounted for $16.9 million, or 18 percent). Only 2.4 percent ($2.6 million) of the 2010 claims collected were challenged and overturned on appeal, the report further indicated. This figure is expected to decrease in the future, when CMS and the RACs are expected to participate actively or take a party status in appealed cases.

 

The Message:

 

Enhance internal auditing used to identify improper payment trends with, at a minimum, a particular focus on this report’s information/findings as well as information provided by CMS via quarterly provider updates and the websites of individual RACs and Claims Processing Contractors (CPCs). As internal auditing is performed, look for other potential improper payment errors and expand audits to address these areas as well. Self-report improper payment findings and stay ahead of the audit curve.

 

CMS also reported that major findings now are being posted on RAC websites, with quarterly provider education newsletters being generated so providers can use the compiled information to conduct their own internal reviews.

 

As mentioned previously, the approval process for new issues continues to be streamlined to permit quicker approval of RAC issues. In the last six months of 2010, RAC findings have been used by some DME claims processing contractors to input local system edits for five identified issues, and CMS has authored three national claims systems changes to prevent improper payments. CMS activities reveal collaborative data sharing and application revisions that also reduce improper payments.

 

The Message:

 

Essential to success is the commitment of time and resources to stay abreast of and apply key websites’ information regarding findings, errors and potential issues.

 

 


 

 

 

 



 

The appendices of the report contain information that all providers should use as a guide for internal audit practices. While regional differences are important to consider, application of all supplied data provides a preparatory edge. With CMS focusing on collaboration, information sharing and process management efficiencies, RACs will continue to expand audit activities accordingly when trends indicate that an issue is not just a regional matter. The following summarizes key provider information and reconcilable data.

 

· Appendix B: Breakdown of Improper Payments by state, region, and collected or restored funds. Total corrected improper payments – the states with $3 million or more in corrected claims are California ($8.63 million), Florida ($7.76 million), Washington ($6.2 million), Texas ($6 million), Arizona ($5.69 million), Missouri ($5.35 million), Ohio ($3.33 million) and Oregon ($3.15 million). Of these states, five are from Region D.

 

· Table B4: Corrections by Contractor and by Part A, B and DME Claims shows the claims volumes and associated amounts for demanded, collected and restored (underpayment) claims represented in the $92,335,395 of corrected funds. Overall, inpatient claims represented $41.4 million of this total; DME represented $18.9 million (with $12.8 million being DME supplier and $6.1 million being DME physician); outpatient claims represented $8.8 million, physician claims represented $5.4 million and SNF, home health and other was $900,000.

 

· Figure B3: Collections by Claim Type and Recovery Auditor is the most interesting. Pie graphs illustrate auditor comparisons by claims/service type.

 

o Region A: For DCS, inpatient claims accounted for $3.4 million in adjustments.

o Region B: For CGI, inpatient claims accounted for $10,3 million and outpatient claims came in at $4.2 million.

o Region C: For Connolly, inpatient claims accounted for $18.2 million, followed by DME ($3.8 million) and outpatient ($2.2 million).

o Region D: For HDI, DME claims accounted for $14 million, followed by inpatient ($9.5 million), physician ($5 million), outpatient ($2.2 million) and other ($100,000).

o Of all the RACs, HDI appeared to have the most diverse claims audit focus.

 

· Appendix C: Top Four Issue Codes by Recovery Auditor (Collections) lists each contractor’s top four issue codes by total number of claims, total amount and mean claims total. In reviewing the data trends, it appears that HDI’s claims review volumes and returns are high even though the mean claims amounts do not exceed $622 per claim in any category. All other RACs appear to have gained their collected amounts on lower-volume claims with higher mean claim averages, and this notion is supported by the data reflected in Table B4. Use this data to identify and correct areas of financial risk regardless of RAC region focus.

 

· Table C2: Top Four Issue Codes by Recovery Auditor (Underpayments) lists each contractor’s top four issue codes by claims, total amount and mean claims amount. Use this data to evaluate claims for lost billing opportunities.

 

· Table D1: Top Error Codes for Collections by Recovery Auditor lists the top error codes, number of claims, total amount and mean claim amount by error code reason. Use this information to assess internal coding processes and operations to minimize or eliminate these types of errors. Table D2 provides the same information for underpayments.

 

· Appendix E: Appeals shows appeal types (Part A, B, DME) by contractor. A total of 163,639 claims were cited, with overpayments generating 8,449 claim appeals (5.2 percent of the total). Of the appealed claims, 3,902 (46.2 percent) were decided in the provider’s favor.

 

o Region B: CGI (third in total overpayment claims, with 19,827) had a 12.3 percent claims-overturned rate for Part A and a 2.7percent overturn rate for Part B. Overall, CGI had a 60 percent (2,169 claims) overturn rate among the 3,621 (18.2 percent) appealed claims, producing an appeal success rate for all claims of 10.9 percent: above CMS’s goal rate of 8.2 percent or lower.

o Region D: HDI (first in total overpayment claims, with 112,975) had a 2.3 percent overturn rate for Part A, a 2 percent overturn rate for DME and a 0.1 percent overturn rate for Part B. Overall, this RAC had a 42 percent (1,556 claims) overturn rate for 3,749 (3.3 percent) appealed claims, producing an appeal rate for all claims of 1.4 percent.

o Region C: Connolly (second in in total overpayment claims, with 21,033) had a 1.1 percent overturn rate for Part A. Overall, this contractor had an 18 percent (150 claims) overturn rate for the 819 (3.9 percent) appealed claims, producing an appeal rate for all claims of 0.7 percent. All appeals in this region were Part A claims.

o Region A: DCS (fourth in total overpayment claims, with 9,804) had a 0.3 percent overturn rate for DME. Overall, this RAC had a 10 percent (27 claims) overturn rate for the 269 (2.7 percent) appealed claims, producing an appeal rate for all claims of 0.3 percent.

 



 

One must ask why the appeal rate is at 5.2 percent when the overturn rate in favor of the provider is at 46.2 percent.

 

The Message:

Only you can answer this question, and the answer may be an indicator of your organization’s long-term success in the CMS audit-driven market.

 

· Appendix F: Accuracy Scores lists the accuracy scores by RAC. Region D (HDI) came in at 99.4, with Region B (CGI) at 99.2, Region A (DCS) at 98.6 and Region C (Connolly) at 97.6.

 

These scores are based on a monthly audit of 100 claims of all types per contractor. What is your organization’s accuracy score?

 

About the Author

 

Vickie Axsom-Brown is a government healthcare and auditing consultant for BHM Healthcare Solutions. She is a 20-year managed care veteran with diverse experience in administering private, state and federal healthcare services. Her management experience includes time spent as the vice president of Region D RAC services (as the principal lead for CMS, claims processing contractors and HDI services) and as CEO/COO of multidisciplinary, multi-site adult and pediatric medical/surgical providers, including oncology/radiology services, laboratory services, ambulatory surgery centers, upright MRIs, PETs, and others.

 

Contact the Author

 

vaxsombrn@aol.com

 

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