New Medicare Audit Program to Launch in January 2010

Starting in January 2010, Medicare's Recovery Audit Contractors (RACs) will begin conducting audits of Medicare fee-for-service claims throughout the United States. The RACs were created by the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA), and from 2005 to 2008, the RACs conducted a demonstration project. The audits of provider and supplier claims that were part of the demonstration project began in New York, California, and Florida in 2005 and were expanded to include South Carolina and Arizona in 2007.

On the basis of the demonstration project, the RACs were deemed to be a success. They are funded by contingency fees, or, in lay terms, on a bounty system: the RACs get a percentage of the overpayments they uncover, but they also report underpayments as well. In 2007 they collected $124.6 million in Medicare overpayments and refunded $14.3 million in underpayments to Medicare providers.

For 2010, the country has been divided into four regions (A to D), each one with a different RAC assigned to it.

The RACs conduct two kinds of audits: automated and review. The automated audits are done electronically and can be expected to capture the “low-hanging fruit”—such as payments for the same procedure for the same patient on the same day (the example that the Centers for Medicare and Medicaid Services [CMS] provides in a press release is three colonoscopies on the same patient on the same day), duplicate claims that were both paid, and claims that were paid using an outdated fee schedule. In the beginning, it is expected most audits will be of this type.

The review audits will be done on the basis of examining claims documentation. CMS, which contracts with the RACs, has set limits on the number of documentation requests a RAC can make in a 45-day period. A solo practitioner can be asked for only 10 medical records, while a partnership of two to five physicians, for example, can be asked for 20 records.

If you have a claim denied on the basis of a RAC audit, you will have the same appeals process available to you as when the Medicare contractor (carrier or fiscal intermediary) that paid the claim issues a denial. In fact, the appeals of a RAC denial will revert to the Medicare contractor that originally paid the claim.

If you believe a claim has been inappropriately denied, APA's Office of Healthcare Systems and Financing advises you to appeal—experience has shown that it is usually worth the effort. With appropriate documentation, it is very likely that you will win your appeal, although you may have to go through several levels of the process to reach this outcome. The good news is that neither the RAC nor your Medicare contractor may collect monies it says you owe if an appeal is in process, although if you lose your appeal, you will have to pay interest on the money owed.

This topic presents a good opportunity to once again remind APA members of the need to maintain appropriate documentation. Although all physicians understand the importance of accurate and thorough documentation as part of providing quality patient care, documentation is also essential for protecting you in a claims audit.

If your claims are audited by a RAC or Medicare and you lack the documentation for the services provided, as far as the auditors are concerned, the services never occurred.

More information about RACs is posted at <www.cms.hhs.gov/RAC/01_Overview.asp#TopOfPage>. Information on Medicare audits is posted on APA's Web site at <http://psych.org/MainMenu/PsychiatricPractice/MedicareMedicaid/AppealingMedicareCarrierDecisions.aspx>. You can also contact APA's Managed Care HelpLine at (800) 343-7924.