Medicare Proposes to Increase RAC Use

11 January 2016 Health Care Law Today Blog

By now, providers are very familiar with Medicare recovery audit contractors, or RACs – the private companies who have authority to review medical records at a moment’s notice. For every dollar they opine has been improperly billed, the RACs recover a share of the bounty, creating a perverse incentive and an appeal process years behind schedule. So far, the RACs have been limited to a review of Medicare Parts A and B . . . but not for long.

If the Centers for Medicare and Medicaid Services (CMS) has its way, RACs soon will be expanding the scope of their review to Medicare Advantage claims, and it has published a detailed, 58-point work plan to hire a RAC “to identify underpayments and overpayments and recouping overpayments associated with diagnosis data submitted to CMS by Medicare Advantage Organizations.” In sum, the RAC would conduct risk adjustment data valuation (RADV) reviews, to determine whether all criteria were met prior to setting a RADV score to a patient, thereby determining the reimbursement value based on risk.

The notion of RACs is not new. Nor are CMS’ audits of RADV determinations, which it has performed at a relatively slow pace since Medicare Advantage Plans were first approved and implemented. But the scope of work published by CMS over the holidays ensures there will be more audits, more findings, and more demands for repayment. Importantly, under the proposal CMS published last week, the RAC selected by CMS “shall work with CMS and its contractors to update, develop and/or maintain a Coder Guidance document that coders may reference when reviewing medical records . . . .” By giving the RAC a hand in developing review criteria, CMS is virtually guaranteeing bounty payments will ensue. The proposal also tasks RACs and CMS with developing “condition specific RADV audits,” focused on high-risk conditions such as diabetes. The tools for these audits also will be developed in partnerships between RACs and CMS.

CMS is seeking comments on its proposal by February 1, 2016, and has not identified a timeline for implementation. But because RACs have an incentive to find errors, the process is likely to be running before long. Hospitals, physician groups and individual providers who participate in (or were considering joining) the Medicare Advantage program should take matters into their own hands now by:

  • developing coding guidance based on RADV criteria;
  • designing internal audits; training physicians and coders;
  • ensuring ICD-10 is properly applied; and,
  • regularly reviewing risk assessments and your own high risk diagnoses.

By proactively planning for RAC audits of RADV reviews, providers can decrease auditors’ incentives, and even reduce whistleblower risk. After all, bounty hunters often are in competition for their prey.

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