Get Ready for Increased Medicare Audit Activity: Recovery Audit Contractors to Begin Auditing Nationwide

-- End Ad Box --->				examined the patient and is most familiar with the
The financial pressure on hospitals, physicians and				patient's condition, is in the best position to make
other healthcare providers, as a result of				medical necessity determinations.
increased scrutiny of claims and audit activity by				In 2005, a new uniform Medicare appeals process
third party payors, will not end soon. To the				was created resulting in the same appeals process
contrary, as part of the Tax Relief and Health				for both Part A and Part B providers. This
Care Act of 2006, Congress directed that the				process includes:
Medicare Recovery Audit Contractor				 A redetermination appeal to the Carrier
(RAC) demonstration program expand to				or Intermediary;
all 50 states by no later than 2010. CMS plans to				 A reconsideration submitted to a
aggressively move forward with this expansion.				Qualified Independent Contractor (QIC);
CMS has already announced the expansion of its				 An appeal to an Administrative Law
program from three states to an additional nine				Judge (ALJ);
states, with intentions for nationwide RAC auditing				 An appeal to the Medicare Appeals
to take place by spring 2008, three-years ahead				Council (MAC); and
of schedule. Providers are well advised to prepare				 An appeal to Federal district court.
now for the expansion of the RACs and				In order to pursue the various levels of appeal,
increasing Medicare audit activity.				certain requirements must be met a certain
Recovery Audit Contractors				stages in the appeals process. Although many
The original three-year RAC pilot demonstration				providers have not seen much success at the
project was a result of Section 306 of the				redetermination stage of the appeal, the later
Medicare Modernization Act, which directed CMS				stages of appeal, particularly the ALJ stage, may
to investigate Medicare claims payments using				prove more successful. Providers must use due
RACs to identify overpayments and				care in complying with the timeframes and other
underpayments. The pilot demonstration project,				requirements set forth in the appeals process.
which began in March of 2005, targeted the three				Failure to do so may result in the inability to
states with the highest Medicare expenditures				pursue the appeal.
(New York, Florida and California), and has proven				As noted above, the first level in the appeals
highly successful from the financial perspective of				process is redetermination. Providers must submit
CMS and the RACs. The CMS RAC Status				a redetermination request in writing within 120
Document for FY 2006 reflects $303.5 million as				calendar days of receiving notice of an initial
total improper payments identified by the RACs				determination. There is no amount in controversy
for FY 2006, with a high percentage being linked				requirement.
to inpatient hospital claims.				Providers dissatisfied with a Carrier’s or
The RAC process is designed to identify and				Intermediary’s redetermination decision
recover overpayments (and underpayments)				may file a request for reconsideration to be
made by Medicare to providers. This process has				conducted by the QIC. This second level of appeal
ramifications that may significantly impact the				must be filed within 180 calendar days of receiving
financial status of providers. The current RAC				notice of the redetermination decision. As with the
experiences of many California hospitals highlights				redetermination stage, there is no amount in
the significant impact the RACs will have on				controversy requirement. The QIC reconsideration
Medicare providers as the project goes				stage of appeal has important ramifications for
nationwide. To date, providers have found the				both Part A and Part B providers. For Part A
RAC process burdensome; significant resources				providers, the QIC reconsideration constitutes an
have been dedicated to responding to volumes of				additional step in the appeals process that was
record requests and defending claims denials. While				not afforded under prior regulations. With respect
RACs are responsible for detecting medical				to Part B providers, the QIC reconsideration stage
underpayments as well as overpayments, it is the				replaces the in-person Carrier Hearing that was
process of recouping overpayments that is of				afforded under the prior regulations. In an
particular importance to hospitals, physicians and				important negative change for Part B providers,
other provider types. The overpayments for				the QIC reconsideration is an on-the-record
which the RAC auditors will be searching include				review, rather than an in-person hearing. The
payment errors, diagnostic related group (DRG)				previous process afforded Part B providers with
and coding errors, non-covered services, medically				an actual in-person hearing.
unnecessary services, duplicate or incorrectly				Moreover, it is important to note, as many
coded claims, and medically unlikely edits and				providers may be unaware, that the
technical denials.				reconsideration stage of the appeals process
Notably, CMS compensates RACs on a				contains an early presentation of evidence
contingency fee basis, and RACs are entitled to				requirement. This means that a provider’s
keep their fee if a denial is upheld at the first level				failure to submit evidence to the QIC at the
of Medicare appeal (i.e., redetermination to the				reconsideration stage of appeal will likely preclude
Carrier or Fiscal Intermediary), regardless of				the provider from introducing the evidence to an
whether the provider prevails at a later stage in				ALJ or later stages in the appeals process.
the appeals process. Amazingly, subsequent				Accordingly, it will be crucial for providers to fully
appeals after the first level of appeal do not				work up their cases at the reconsideration stage
impact a RAC’s ability to retain the				of appeal.
contingency payment. This fee arrangement				The third level of appeal is the ALJ hearing. A
appears troublesome, as it provides incentives to				provider dissatisfied with a reconsideration decision
private companies to aggressively review and				may request an ALJ hearing. The request must
deny claims. This includes denying claims alleging				be filed within 60 days following receipt of the
that services were not medically necessary or				QIC’s decision and must meet the amount
appropriately documented, areas that contain				in controversy requirement. ALJ hearings can be
much subjectivity and are often highly disputed				conducted by video-teleconference (VTC),
by the provider. CMS’ payment agreement				in-person, or by telephone. The final rule requires
seems to guarantee that RACs will audit with a				the hearing to be conducted by VTC if the
highly motivated work ethic to identify as many				technology is available; however, if VTC is
overpayments as possible.				unavailable, or in other extraordinary
While the RACs cannot review claims at random,				circumstances the ALJ may hold an in-person
they are authorized to use data analysis to				hearing. Additionally, the ALJ may offer a
identify which claims likely contain overpayments,				telephone hearing. Notably, the provider is not
a process called targeted review. As a				automatically entitled to an in-person hearing at
result, particular healthcare providers could				the ALJ stage of appeal.
potentially get hit with large volumes of requests.				The fourth level of appeal is the MAC Review.
Given what New York, Florida, and especially				The MAC is within the Departmental Appeals
California providers are experiencing in the pilot				Board of the U.S. Department of Health and
RAC demonstration project, Medicare providers				Human Services. A MAC Review request must be
are well advised to begin the process of preparing				filed within 60 days following receipt of the
for the RACs now. Although providers may not				ALJ’s decision. Among other requirements,
be able to stop RAC audits, providers can engage				a request for MAC Review must identify and
in activities that should assist with the process.				explain the parts of the ALJ action with which the
For example, providers need to prepare by				provider disagrees. Unless the request is from an
dedicating resources to:				unrepresented beneficiary, the MAC will limit its
(1) Internal monitoring protocols to better identify				review to the issues raised in the written request
and monitor areas that may be subject to				for review.
review;				The final step in the appeals process is judicial
(2) Responding to record requests;				review in federal district court. A request for
(3) Compliance efforts including, but not limited to,				review in district court must be filed within 60
documentation and coding education; and				days of receipt of the MAC’s decision. In a
(4) Dedicating personnel and resources to properly				federal district court action, the findings of fact by
work up and defend denials in the appeals				the Secretary of HHS are deemed conclusive if
process. With regard to medical necessity and				supported by substantial evidence.
similar denials, this will clearly entail physician				Summary
involvement, which many hospitals find difficult to				CMS has announced its intention to aggressively
obtain.				expand the RAC pilot demonstration project, with
Medicare Appeals Process				plans for nationwide auditing to take place as early
Notably, claims denied as a result of a RAC audit				as spring 2008. The contingency payment
are subject to the standard Medicare appeals				arrangement between CMS and the RACs
process. Medicare providers should utilize the				ensures that the RACs will aggressively audit
appeals process and should consider working with				providers, with an eye towards denying as many
qualified healthcare attorneys in order to make				claims as possible. Providers are well advised to
the best case possible. In addition to substantive				act now to prepare for the expansion of RAC
arguments, such as attacking claim denials on the				activity. Providers should dedicate resources
merits, it is important for providers to understand				towards compliance education and towards timely
that other legal arguments and strategies exist				addressing any document requests and/or claim
and can be utilized in the appeals process. These				denials made by RACs, Carriers or Intermediaries.
legal arguments and strategies may prove				Because claim denials made by the RACs will be
invaluable to the case. For example, the Social				subject to the Medicare appeals regulations,
Security Act contains provisions, such as the				providers must be cognizant of the recent
Medicare Provider Without Fault and Waiver of				changes made to these regulations, which impact
Liability provisions, which can be used and				the rights of providers to challenge claim denials.
developed with certain facts and circumstances				For example, a provider that is unaware of the
that may exist in the case. Moreover, it may be				early presentation of evidence requirement could
appropriate in many appeals to assert the				be precluded from raising valid and often
Treating Physician Rule, which involves the				successful defenses as it moves through the
legal principle that the treating physician, who has				appeals process.

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Get Ready for Increased Medicare Audit Activity: Recovery Audit Contractors to Begin Auditing Nationwide