RAC is Back

After a pause in the action while CMS tweaked the RAC program and began the interview process for new auditors, RACs are back … with a few new twists and turns.

authors Cindy Sanders

They’re baaaaaaack.

After hitting the pause button on the much despised recovery audit contractor (RAC) program, the Centers for Medicare & Medicaid Services (CMS) pushed play again at the end of last year, albeit with some changes in place.


Red Light, Green Light

Like the popular childhood game, CMS has called red light, green light on the program for the past 24 months. In February 2014, CMS issued an edict to hold additional documentation requests (ADRs) until new RAC contracts were put in place. However, the federal agency reminded providers that automated reviews could continue.

In June 2014, CMS established a provider relations coordinator to act as a conduit to ‘more efficient resolutions.’ By late August of that year, CMS initiated contract modifications to allow the current auditors to restart some reviews when it became apparent the contract procurement process wasn’t going to happen quickly. In a statement, CMS officials noted, “Most reviews will be done on an automated basis, but a limited number will be complex reviews of topics selected by CMS.”

In late 2014, CMS noted a further delay in awarding contracts for several regions because of pre-award protests. Although Connolly, LLC was awarded the Region 5 contract, that decision became the subject of a post-award protest filed by the Government Accountability Office in January 2015. Throughout the spring and summer of 2015, CMS tweaked the program and requirements for contractors to address several complaints, as well as the internal issue of recovering money from the contractor if an overpayment decision was overturned on appeal.

On Nov. 6, 2015, CMS submitted requests for proposals for the next round of recovery auditor contractors but extended existing contracts, with modifications, to current auditors to allow the continuation of activities through July 31, 2016. CMS then announced that effective Nov. 13, 2015 all recovery auditors had agreed to the modifications and could continue auditing activities, including sending out new ADRs.


Flag on the Play

Donna K. Thiel, a shareholder in the Washington, D.C. office of Baker Donelson, said providers have expressed numerous complaints about the RAC program since its inception. One of the biggest issues has been the sheer volume of requested records.

“A RAC audit would overwhelm the provider with requests for information,” she said. “Even electronic health records take time to access, review and duplicate. RAC audits are time and resource demanding.”

Thiel said the demands were also overwhelming because RACs are not alone in their audit activities. Similar information was being requested by ZPIC and CERT auditors. “So in addition to being overwhelmed, there was a sense of ‘piling on,’” she continued.

Providers also were frustrated that CMS seemed not to be holding its auditors to the same standards that were applied to providers, Thiel noted. After jumping through hoops to provide reams of information within strict time limits under the threat of stiff consequences, providers then experienced delays and extended audit periods with no apparent consequences for the auditors.

And, not surprisingly, the biggest provider complaint has been with the inherent program design. With auditors receiving a percentage of funds recovered when overpayments are discovered, Thiel said the provider community has long felt RACs have no real incentive to pay claims and a very lucrative incentive not to pay claims on review.

She added, CMS spent $454.1 million to operate the Medicare FFS Recovery Audit Program, of which $301.7 million was paid to recovery auditors in the form of contingency fees. Providers have pointed out their high success rate on appeal of RAC findings is evidence the auditors have been taking too hard a line on medical necessity. Additionally, Thiel explained, as the denials increased and recoupment levels rose, the appeals process became overwhelmed to the point where hearings to challenge RAC determinations became harder and harder to schedule.


Compare & Contrast

After members of the U.S. Congress heard these complaints from angry providers , the RAC process came under increased fire, and CMS was persuaded to review the program and institute several reforms.

“In the changes that were brought about at the end of last year, some of these provider issues were addressed,” Thiel said of the RAC program modifications.

“Last year, CMS limited the number of claims that can be requested by RACs,” she said, adding there is a formula as to how many document requests could be made of hospitals. “There’s been a limit on physician requests since 2011 and DMEs since 2013 so this new one is for facilities … hospitals, skilled nursing facilities, rehabilitation centers,” Thiel explained.

She continued, “CMS is also going to evaluate RAC auditors based on a stricter set of criteria with consequences to the RAC if they make decisions that are consistently reversed on appeal.”

Although the exact penalties for the RACs have not been spelled out, the CMS website did indicate limits also would be put on the number of ADRs that could be requested if auditors have a high rate of overturn on appeal. “The fewer claims they review, the fewer may be denied and so RACs start to lose revenue,” Thiel said.

She also noted CMS has announced auditors won’t receive contingency fees until after the second level of appeal is exhausted under the new RAC contracts that will be awarded later this year. Auditors must maintain an overturn rate of less than 10 percent at the first level of appeal under the new plan. “Failure to do so may land a RAC auditor on a corrective action plan,” Thiel said.

“CMS has also said, as of January of this year, the ADR limits are going to be indexed to denial rates,” Thiel continued. “therefore a provider with a low rate of denials, should be getting fewer ADRs.”

Another key change is how far back auditors are allowed to go in reviewing claims. Previously, claims could be reopened for four years. Now, RAC auditors must limit their look-back period to six months.

“By limiting that review window for hospitals, in particular, you will have RAC auditors looking at claims under current coverage rules, as opposed to trying to evaluate older claims under older coverage policies,” she said.

However, Thiel stressed this new look-back timeframe is only for RAC contractors so providers should be prepared to go back further for other government audits.



“There are also a couple of ‘to be determined’ items that will probably be addressed with new RAC contracts,” noted Thiel.

The first is that auditors will have 30 days to complete complex reviews. Previously, they had 60 days … but realistically it often took much longer with seemingly little consequence if the contractor missed the deadline.

Perhaps one of the most significant modifications is the addition of a ‘real’ discussion period between the time a RAC auditor presents results to a provider and forwards those findings to Medicare Administrative Contractors (MACs).

“The RAC auditor, in the new contract, will be required to wait 30 days to send the results of their audit to the MAC,” Thiel said, noting that currently reports are sent almost simultaneously to the provider and MAC for recovery overpayments.

Since the clock begins ticking on the appeal process as soon as the MAC sends a demand, providers realistically have had little or no window for rebuttal with the RAC to stop recoupment before they needed to appeal.

“The whole rebuttal period was, in my view, an ineffective process for providers to attempt to correct errors or misinterpretations by the RAC,” Thiel said. “There was a good chance a provider would have had to file an appeal before the RAC even responded to a rebuttal,” she added.

By pumping the brakes a bit, Thiel continued, the rebuttal period should become more meaningful and potentially relieve some downstream pressure on ALJ hearings by clarifying disputed information before money changes hands.


RAC Program Enhancements Status as of Nov. 6, 2015 (post PDF link)

RAC Recent Updates Timeline

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