You have seen the many statistics indicating that healthcare costs are rising an

Question

You have seen the many statistics indicating that healthcare costs are rising and continue to rise. Many of you have probably felt this first hand, by way of increases in premiums for your health insurance and/or the increase in patient responsibility for medications.

1) What is the purpose of RAC and what does their success rate look like in recovering reimbursed funds, from what they feel are unnecessary procedures or tests occurring in the healthcare industry?

2) Through the RAC audits, what is Medicare attempting to do to control excessive billing and other possibly fraudulent events from occurring in the healthcare industry?

PLEASE IN YOUR OWN WORDS Be sure to clearly define equity in your own terms and use this to support your statements.

Explanation / Answer

The Recovery Audit Contractor, or RAC, program was created through the Medicare Modernization Act of 2003 (MMA) to identify and recover improper Medicare payments paid to healthcare providers under fee-for-service (FFS) Medicare plans.

CMS introduced Recovery Audit Contractors as a demonstration project in 2005 for the purpose of identifying underpayments and overpayments then recouping overpayments. The demonstration project found more $1 billion

RACs have the authority to review three years of provider data and claim submission for hospital inpatient and outpatient services, skilled-nursing facilities, physician, ambulance, laboratory and durable medical equipment. Auditors use internally created and managed computer programs to detect likely payment errors, such as duplicate payments, intermediary mistakes, necessity of service and coding errors. Much like ZPICs, RAC audits can be triggered using statistical analysis of historical submission data and identifying outliers. Claim and medical record discrepancies, rejection rates of claims, and beneficiary complaints can also prompt an examination.

CMS began prepayment review under Recovery Audit Prepayment Demonstration (RAPD) in August. This demonstration project was initially scheduled to begin in January this year, but was postponed to allow for comment, and will run until Aug. 26, 2105. It will involve 11 statesFlorida, California, Michigan, Texas, New York, Louisiana, Illinois, Pennsylvania, Ohio, North Carolina and Missouriand focus on claims with a high risk of fraud, beginning with those involving short stay inpatient hospital services. The program will expand to include specific types of claims with a high incidence of fraud.

The program will attempt to prevent improper payments as well as help providers understand how to accurately bill future claims. As such, there will be a review of claims before they are paid to ensure the hospital or provider complies with all Medicare payment rules. RAPD will not replace prepayment reviews by Medicare administrative contractors (MACs). RACs and MACs are supposed to coordinate activities so as to avoid duplicate efforts.

History

In section 306 of the Medicare Modernization Act of 2003, the United States Congress directed the DHHS to conduct a three-year demonstration program to detect and correct improper payments in the Medicare FFS program. DHHS, through its Centers for Medicare and Medicaid Services (CMS) branch, began the program in 2005, using Recovery Audit Contractors to perform the actual work of reviewing, auditing, and identifying improper Medicare payments. At the inception of the program, it focused on Medicare payments in the states of California, New York, and Florida. The program eventually expanded to Massachusetts and South Carolina before ending in March 2007. By the end of the demonstration, the program had recovered nearly $693.6M on behalf of CMS.

RACs

CMS introduced Recovery Audit Contractors as a demonstration project in 2005 for the purpose of identifying underpayments and overpayments then recouping overpayments. The demonstration project found more $1 billion of improper payments of which 96% were overpayments. The program was subsequently implemented on a permanent basis.

Unlike ZPICs, which sign a contract at a specific payment, RACs are paid on a contingent basis for detecting and correcting overpayments and underpayments. This includes both collecting overpayments from providers as well as refunding underpayments to providers.

There are two types of reviews: automated and complex. An automated review is a computerized analysis of claims and coding practices. Typically, only billing errors are found. In a complex medical review, auditors study the actual medical record or other documentation.

RACs have the authority to review three years of provider data and claim submission for hospital inpatient and outpatient services, skilled-nursing facilities, physician, ambulance, laboratory and durable medical equipment. Auditors use internally created and managed computer programs to detect likely payment errors, such as duplicate payments, intermediary mistakes, necessity of service and coding errors. Much like ZPICs, RAC audits can be triggered using statistical analysis of historical submission data and identifying outliers. Claim and medical record discrepancies, rejection rates of claims, and beneficiary complaints can also prompt an examination.

CMS began prepayment review under Recovery Audit Prepayment Demonstration (RAPD) in August. This demonstration project was initially scheduled to begin in January this year, but was postponed to allow for comment, and will run until Aug. 26, 2105. It will involve 11 statesFlorida, California, Michigan, Texas, New York, Louisiana, Illinois, Pennsylvania, Ohio, North Carolina and Missouriand focus on claims with a high risk of fraud, beginning with those involving short stay inpatient hospital services. The program will expand to include specific types of claims with a high incidence of fraud.

The program will attempt to prevent improper payments as well as help providers understand how to accurately bill future claims. As such, there will be a review of claims before they are paid to ensure the hospital or provider complies with all Medicare payment rules. RAPD will not replace prepayment reviews by Medicare administrative contractors (MACs). RACs and MACs are supposed to coordinate activities so as to avoid duplicate efforts.

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