CMS Announces Halt to RAC Activities, Prepares for New Contracts

As contracts for the current crop of Recovery Auditors (RACs) head to expiration, the Centers for Medicare and Medicaid Services is promising to overhaul the controversial system and has already announced a series of changes that will be applied to the companies that win the contracts.

At the same time CMS as of Friday has suspended the current contractors from issuing Additional Documentation Requests to healthcare providers, and will suspend the ability of Medicare Audit Contractors to send prepayment ADRs for the Recovery Auditor Prepayment Review Demonstration  on March 1. “It is important that CMS transition down the current contracts so that the Recovery Auditors can complete all outstanding claim reviews and other processes by the end date of the current contracts,” CMS states on its website announcing the change.

Additionally, the current RACs must cease sending improper payment notices to the MACs by June 1.

New RAC regions

With the new contracts CMS plans to redistribute the states to the four new RACs. Several states will find themselves in a new region, namely:

• Nebraska, Iowa, Kansas, and Missouri will shift from Region D (The West, now called “Region 4″) to Region B (The Midwest, now to be known as “Region 2″);
• Half of the Southern District (Region C, now to be called “Region 3″)–Utah, Colorado, Texas, Oklahoma, Louisiana, Mississippi, and Arkansas–will be split off and put in Region 2;
• Pennsylvania, New Jersey, Delaware, and Maryland will be split off from Region A (The Northeast, now called Region 1) and put into Region 4 with the western states;
• Half of Region B–Minnesota, Wisconsin, Illinois–will now be part of the new Midwest Region 2; the other half of Region B, Ohio, Michigan, Indiana, and Kentucky–will become part of Region 1.

RAC changes promised

CMS has released a handful of promised changes based on “industry feedback” that will apply to the new RACs when they take over. The changes, according to CMS, are as follows:

RAC Program Improvements

The CMS is pleased to announce a number of changes to the Recovery Audit Program in response to industry feedback. The CMS is confident that these changes will result in a more effective and efficient program, including improved accuracy, less provider burden, and more program transparency. These changes will be effective with the next Recovery Audit Program contract awards.

Concern: Upon notification of an appeal by a provider, the Recovery Auditor is required to stop the discussion period.
Program Change: Recovery Auditors must wait 30 days to allow for a discussion before sending the claim to the MAC for adjustment. Providers will not have to choose between initiating a discussion and an appeal.

Concern: Providers do not receive confirmation that their discussion request has been received.
Program Change: Recovery Auditors must confirm receipt of a discussion request within three days.

Concern: Recovery Auditors are paid their contingency fee after recoupment of improper payments, even if the provider chooses to appeal.
Program Change: Recovery Auditors must wait until the second level of appeal is exhausted before they receive their contingency fee.

Concern: Additional documentation request (ADR) limits are based on the entire facility, without regard to the differences in department within the facility.
Program Change: The CMS is establishing revised ADR limits that will be diversified across different claim types (e.g., inpatient, outpatient).

Concern: ADR limits are the same for all providers of similar size and are not adjusted based on a provider’s compliance with Medicare rules.
Program Change: CMS will require Recovery Auditors to adjust the ADR limits in accordance with a provider’s denial rate. Providers with low denial rates will have lower ADR limits while provider with high denial rates will have higher ADR limits.