Friday, October 3, 2014

CMS Annual RAC Report Released

Dianne De La Mare

The US Department of Health and Human Services, Centers for Medicare & Medicaid Services (CMS) has just released its annual Recovery Auditor (RAC) report, Recovery Auditing in Medicare for Fiscal Year 2013, to Congress as required under the Social Security Act. In FY 2013, Recovery Auditors (RACs) identified and corrected over 1.5 million claims for improper Medicare and Medicaid payments, resulting in $3.75 billion in payment errors. CMS collected $3.65 billion in overpayments and reimbursed providers and suppliers $102.4 million in underpayments. The Medicare Fee-for-Service (FFS) Audit program returned over $3 billion to the Medicare Trust Fund after considering all fees, costs and first level appeals (note: there are five levels in the Medicare Appeals Process). The report notes that the $3 billion in savings do not take into account program costs and administrative expenses incurred at the third (Office of Medicare hearings and Appeals [OMHA]) and fourth (Medicare Appeals Council within the Departmental Appeals Board [DAB])levels of the Medicare appeal process because these programs do not receive RAC Program funding for those appeals.  

Recovery Auditor reviews were initially implemented on a post-payment basis.  However, in late FY 2012, CMS implemented a demonstration to use RACs for reviewing claims before they were paid. FY 2013, was the first full year of the RAC Prepayment Review Demonstration. The demonstration started on September 1, 2012 and is scheduled to continue for 3 years (2015) in 11 states (FL, CA, MI, TX, NY, LA, IL, PA, OH, NC and MO). The goal of the demonstration is to lower the number of improper payments for those claims, which are shown through the Comprehensive Error Rate Testing (CERT) reports and other data analysis to have high rates of improper payments.

Since the beginning of the demonstration, RACs have prevented $22.3 million in improper payments, and CMS is currently evaluating the demonstration’s effectiveness and including additional error-prone services for review. CMS uses the results of RAC audits to identify program vulnerabilities and to take appropriate corrective actions to prevent future improper payments. CMS hosts regular meetings with RACs, Medicare Administrative Contractors (MACs) and CMS staff to discuss best practices, as well as particular vulnerabilities and future corrective actions.  

Interesting to note is the skilled nursing facility (SNF) overpayments collected $1.84 million; underpayments restored $19,567 and total amount of corrected $1.86 million (Appendix F1, page 35); resulted in only a small percentage of the total $3.75 billion recovery. However, this could be more of a reflection that RACs were focusing on short-stay hospital admission claims in FY 2013, and that there is no assurance that SNF claims will not be under increased scrutiny in the future.   


Additionally, there is no data provided in the report specific to the congressionally mandated therapy Medical Manual Review (MMR) process, in which RACs assumed the complex medical review function on April 1, 2013. We presume that since outpatient therapy data is stored in the CMS “Outpatient” claim type file for facility based Part B therapy claims, and “Physician” claim type file for office based physician and therapist in private practice, that the therapy MMR data represents a portion of the $46.6 “Outpatient” and a portion of the $56.8 million “Physician” overpayments collected identified in Appendix F1. AHCA has requested more detailed information from CMS pertaining to the therapy MMR RAC audits.


To obtain a copy of the complete report go to : http://www.cms.gov/Research-Statistics-Data-and-Systems/Monitoring-Programs/Medicare-FFS-Compliance-Programs/Recovery-Audit-Program/Downloads/FY-2013-Report-To-Congress.pdf. The CMS Recovery Audit Program webpage is available here.

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