January 7, 2009

How to Respond to Demand Letters

By

 

cservais120ds

 

When a Recovery Audit Contractor (RAC) issues a demand for recoupment of funds resulting from an overpayment (called a “demand letter”), the RAC must specify for each finding, which coverage, coding, payment policy or article was violated.  It must also advise the provider of its appeal rights.

 

A demand letter will be issued only if the amount of overpayment is over $10.00. A copy of the demand letter will be sent to the Fiscal Intermediary (FI) or carrier or Medicare Administrative Contractor (MAC).    The recoupment of funds by the FI, carrier, or MAC from the provider cannot occur for 40 days.

 

The provider has three options for responding to the demand letter:

 

  • Do nothing and let the FI, Carrier or MAC recoup the funds.  This option will be taken when the provider agrees with the RAC finding or the amount to be recouped does not warrant further action
  • Rebut the RAC finding within 15 days and/or
  • File an appeal with the FI, Carrier or MAC

 

Rebuttal Letter

 

If the provider decides to submit a rebuttal letter to the RAC, it must review the reason the RAC gave for the overpayment and then cite specific medical record documentation or coding, payment, coverage regulations or articles that refute the RAC’s position.  The letter must be specific and detailed.  If the RAC agrees with the rebuttal logic, it will notify the payer organization that the monies are not to be recouped.

 

Filing a rebuttal letter with the RAC is not part of the formal appeals process.  It is merely a step to try to prevent the recoupment of funds by addressing the findings with the RAC and convincing the RAC to reverse its overpayment decision.

 

Appeal Process

 

The formal appeal process is the same as that for any Medicare payment issue (a new process was implemented in May 2005). The provider has 120 days in which to file a Level 1 appeal with the FI or Carrier or MAC.  However, because funds can be recouped after 40 days from the date of the demand letter, it makes sense for the provider to file the appeal before this deadline.

 

When an FI, Carrier or MAC is placed on notice regarding an appeal, they cannot recoup the funds. Interest on the amount in question, however, continues to accumulate during the appeal process.  Should the provider lose the appeal, the FI, Carrier or MAC will recoup the amount in question plus any interest due.

 

Level 1 Appeal

 

To file a Level 1 appeal, the provider completes the CMS 20027 Redetermination Form (click PDF below).  The provider should also attach any documentation to support their reasons for the redetermination (copies of medical records, coding or billing regulations or articles, etc.).

 

pdfLogo34

CMS 20027 - REDETERMINATION FORM (PDF)
Click to open the PDF form in a new window. Close window when done.

 

If the provider loses the appeal at Level 1, it may continue on to a Level 2 appeal or Reconsideration.  Again the provider submits a form (CMA 20033 PDF – click below) and documentation to support the provider’s claim.

 

pdfLogo34

CMA 20033 - APPEAL OR RECONSIDERATION FORM (PDF)
Click to open the PDF form in a new window. Close window when done.

 

If the provider loses the Reconsideration, the provider must determine, together with legal counsel, whether it wishes to file a Level 3 appeal with an Administrative Law Judge (ALJ).   Additional appeals may subsequently be filed with the Medicare Appeals Council and then with the Federal District Court.

 

RACs are not allowed to appeal the Redetermination or Reconsideration finding if the provider is successful in its appeal.

 

To date, about 5 percent of the RAC findings have been overturned on appeal. This percentage, however, is likely to rise as a number of claims are still under appeal.

 

Whether a rebuttal or appeal is submitted or not, the provider should take time to thoroughly understand the reasons for overpayment or underpayment determinations.

 

The logic used may apply to other types of claims or to claims that continue to be filed.  The provider must make any coding, billing, documentation changes indicated by the findings in the demand letters to avoid future review issues or additional audits by other agencies.

 

Cheryl E. Servais, MPH, RHIA, is Vice President, Compliance and Privacy Officer for Precyse Solutions

About the Author | Contact the Author

Cheryl E. Servais, MPH, RHIA

This email address is being protected from spambots. You need JavaScript enabled to view it.