Updated on: May 24, 2018

Medicare RAC Hot Topics and the Evolution of Regulatory Audits

Original story posted on: May 23, 2018

New RAC targets are being proposed by CMS as the agency seeks to consolidate Medicare audits.

You have to stay on your toes when you deal with Recovery Audit Contractors (RAC) audits— not to mention all the other types of regulatory audits that health care providers undergo.

This article investigates a possible evolutionary shift in Medicare regulatory audits, as well as discusses the breaking news of newly targeted health care services in RAC audits across the country (just proposed this month, May 2018).

Medicare Audit Evolution

The Centers for Medicare & Medicaid Services (CMS) recently announced a $25 billion quality initiative and consolidation for Medicare audits. The model of regulatory audits may be shifting—or trying to shift. Introducing the “Network of Quality Improvement and Innovation Contractors” (NQIIC). CMS will award multiple organizations “Indefinite Delivery/Indefinite Quality” contracts with a 10-year ordering period.

QIOs or QIO-like entities are not new. But the amount of money now dedicated to the program warrants another look. A Quality Improvement Organization (QIO) is a group of health quality experts, clinicians, and consumers organized to improve the quality of care delivered to people with Medicare. Juxtapose the auditors for RAC audits, who are, usually, not clinicians. For example, an RN may audit a hospital’s billings. Also, the RAC audits are typically conducted by one or two auditors who make the determinations rather than a group of people with different backgrounds. I am not saying one is better than the other; I am simply explaining the variances, although it seems CMS and hospitals prefer QIO claims audits over RAC claims audits, because QIO audits are often overseen by clinicians instead of non-clinical auditors. 

CMS plans to consolidate various Medicare quality improvement programs, including Quality Improvement Networks and Organizations (QIN-QIOs), End Stage Renal Disease (ESRD) Networks, and Hospital Improvement Innovation Networks (HIINs) into a single contract worth up to $25 billion. 

Medicare RAC Hot Topics

The following services have been newly proposed as RAC targets:

Facet Injections – Outpatient Hospital or Ambulatory Surgical Centers: All states.

Facet Joint Injections are reasonable and necessary for chronic pain (persistent pain for three months or greater) suspected to originate from the facet joint. Medical documentation will be reviewed to determine that services were medically reasonable and necessary.

MSU Under and Overpayments: – All states.

Multiple surgery units (MSUs) are separate procedures performed on the same patient at the same operative session or on the same day for which separate payment may be allowed. Payment of the procedure with the highest value is based on 100 percent of the fee schedule amount. Subsequent procedures are paid based on 50 percent of the fee schedule amount. Underpayments occur when claim lines are improperly reduced due to incorrect primary procedure ranking determinations and when modifier 51 is submitted for non-reducible procedures. Overpayment occurs when secondary/subsequent procedure claim lines are not properly reduced due to incorrect primary procedure ranking determinations.

Unbundling of Critical Care: – All states.

Certain services, when performed on the day a physician bills for critical care, are included in the critical care service and should not be reported separately.

Skilled Nursing Facility Consolidated Billing: – All states.

Payment for the majority of skilled nursing facility (SNF) services provided to beneficiaries in a Medicare-covered Part A SNF stay are included in a bundled prospective payment. Entities that provide these services should look to the SNF for payment. Under the consolidated billing requirement, the SNF must submit all Medicare claims.

Good luck and keep on those toes!


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Knicole C. Emanuel Esq.

Knicole C. Emanuel is a partner at the Potomac Law Group, PLLC.

For more than 16 years, Ms. Emanuel has maintained a litigation practice, concentrating on Medicare and Medicaid litigation, healthcare regulatory compliance, administrative law, and regulatory law. She understands the intricate Medicare and Medicaid payment system, the unique business of healthcare providers, the overlay of federal and state Medicare and Medicaid rules and regulations, and actions of state agencies that affect the way healthcare entities operate. She has tried over 1,000 administrative cases and has appeared before arbitration panels and in various appellate forums. Knicole is is a member of the RACmonitor editorial board and a popular panelist on Monitor Monday.

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

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