RAC Activity Increasing During the First Quarter of FY 2013

CMS reports that Recovery Audit Contractors (RACs) collected $744.8 million in overpayments in the first quarter of fiscal year (FY) 2013. At this rate RACs will collect $2.8 billion  in FY 2013. This  would be a 30 percent increase from the $2.3 billion collected in FY 2012. Since the implementation  of the RAC program throughout the nation in  October of 2009,  RACs have collected $3.9 billion in overpayments.

Common errors in FY 2013. RACs reported that during the first quarter of FY 2013,  providers did not make available all the documentation necessary to support claims for cardiovascular procedures performed in the inpatient setting. The RACs stressed that Medicare pays for cardiovascular services only when provided in the appropriate setting. The RAC for region D reported that providers were billing for procedures in the inpatient setting when they were really outpatient procedures.  This RAC, HealthDataInsights, reminded providers that when beneficiaries are admitted to a hospital for a known procedure as an inpatient, but are there less than 24 hours, the service should be billed under the outpatient payment system.  HealthDataInSight stressed that it does not  matter if the patient was  in the hospital past midnight, used a bed, or the hour that the patient checked in when determining if a patient was an inpatient or an outpatient.

Underpayments. During the first quarter of FY 2013 RACs repaid $34.4 million in underpayments as well, also an increase from FY 2012.  In FY 2012, $109.4 million was paid to providers who were underpaid.  Based on the data from the first quarter of 2013, RACs are expected to return $137.6 million in underpayment,s representing a 25 percent increase over FY 2012.

RAC procedures. In a document released by CMS on December 17, 2012, entitled “Medicare Fee-For-Service Recovery Audit Program Myths” CMS states that although all claims are reviewed by RACs, not every review results in an overpayment determination. CMS noted that improper payments commonly result from claims for incorrect payment amounts; non-covered services, including services that are not reasonable or necessary; incorrectly coded services; and duplicate services. CMS stressed that each RAC has to have at least one full-time medical director who must be either a Doctor of Medicine or Doctor of Osteopathy. All reviews are conducted within the United States, CMS said in response to a question as to whether reviews are conducted in India or the Philippines. Also, RAC employees must follow National Coverage Determinations, coverage provisions in interpretive manuals, and local coverage determinations.

RACs are paid a contingent fee based on the amount of overpayments collected. In FY 2009 and FY 2010, CMS reports, contingent fees ranged from 9.0 percent to 12.5 percent.  Fees are paid to a RAC only when the overpayment has been collected, not when it is first identified. In response to providers’ complaints that RACs were looking too far into the past at claims, CMS instituted a three-year limitation on claims eligible for RAC review and limited the number of document requests that a RAC can make.