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CMS has released a report to Congress on “Recovery Auditing in the Medicare and Medicaid Programs for Fiscal Year 2011”.  According to CMS, recovery auditors identified and corrected 887,291 claims amounting to $939.3 million in improper payments in fiscal year 2011; while most of the improper payments ($797.4 million) were overpayments, the auditors also were responsible for $141.9 million in underpayments being repaid to providers and suppliers. After considering all fees (including contingency fees), costs, appeals, and underpayments, the Medicare fee-for-service (FFS) Recovery Audit Program returned $488.2 million to the Medicare Trust Fund in FY 2011. CMS discusses procedural changes adopted to decrease the Recovery Auditors errors, and according to CMS, only 2.9% of all Recovery Auditor determinations were challenged and later overturned on appeal. The report notes that short-stay inpatient hospital admission issues represented a significant portion of the Medicare FFS error rate and also represent a large portion of FY 2011 overpayment collections. The report also includes, among other things, an update on the status of recovery audit contracting in the Medicare Advantage, Medicare prescription drug, and Medicaid programs, along with a RAC prepayment review demonstration. On a related note, CMS has posted a “Recovery Audit Program Myths” document, addressing such issues as claims denial rates and review criteria, presumably to combat persistent provider criticism of the program.

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This post was written by Scot Hasselman and Debra McCurdy.

An OIG report released November 13, 2012 estimates that one-fourth of Medicare SNF claims in 2009 were in error, resulting in more than $1 billion in inappropriate payments. Note that the OIG’s findings were based on a medical record review of a random sample of only 245 SNF stays and 499 claims, which the OIG projected to the 6.4 million claims in the population. Based on this limited sample, the OIG found that 20.3% of SNF claims were upcoded, with about half of these claims involved SNFs billing for ultrahigh therapy resource utilization groups (RUGs) instead of lower levels of therapy or nontherapy RUGs. In addition, 2.5% of claims were downcoded and 2.1% did not meet coverage requirements because the beneficiaries were not eligible for SNF care. The OIG concludes that while “CMS has made several significant changes to SNF payments for FYs 2011 and 2012…more needs to be done to reduce inappropriate payments to SNFs.” The OIG therefore recommends that CMS: (1) increase and expand reviews of SNF claims; (2) use its Fraud Prevention System to identify SNFs that are billing for higher paying RUGs; (3) monitor compliance with new therapy assessments (including through Medicare Administrative Contractor (MAC) and Recovery Audit Contractor (RAC) analysis and review); (4) change the methodology for determining how much therapy is needed; (5) improve the accuracy of MDS items, and (6) follow up on the SNFs that billed in error. CMS concurred with the recommendations, set forth in the report entitled “Inappropriate Payments to Skilled Nursing Facilities Cost Medicare More Than a Billion Dollars in 2009.”

The OIG report follows an earlier report published in December of 2010. That report, entitled, “Questionable Billing by Skilled Nursing Facilities,” has been discredited as an overwhelming majority of the disallowed claims underlying the report were overturned on appeal; OIG ignored the judicial dispensation of these claims in makings its allegations. The report is the latest in a series of federal effort to narrow the scope of coverage for beneficiaries in SNFs, which is interesting in light of the recent CMS settlement regarding the “Improvement Standard” in a case entitled Jimmo v. Sebelius. In Jimmo, the plaintiff alleged that HHS had adopted an “unlawful and clandestine standard” (known as the “Improvement Standard”) to determine whether Medicare beneficiaries are entitled to coverage. HHS/CMS recently settled this matter and agreed to revise the appropriate Medicare manuals, and to engage in a nationwide education campaign to inform providers and Medicare contractors of maintenance coverage standards. As in Jimmo, we believe that the federal government has adopted a clandestine policy to restrict Medicare coverage in SNFs, which is being implemented via the OIG, MAC and RAC audits, and Zone Program Integrity Contractor and Department of Justice investigations.

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CMS has released its 2011 Ombudsman Report to Congress, which describes the activities of the Office of the Medicare Ombudsman (OMO) and sets forth the OMO’s recommendations for improving beneficiaries’ experiences with Medicare. Specific recommendations to CMS cover three topics: (1) recovery of conditional payments from beneficiaries by the Medicare Secondary Payer Recovery Contractor; (2) the indirect effects on beneficiaries of Recovery Audit Contractors’ retroactive identification and recovery of improper fee-for-service (FFS) Medicare payments; and (3) negative beneficiary consequences stemming from the use of hospital observation services for extended periods of time.

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CMS has announced that its Recovery Audit Prepayment Review Demonstration, originally scheduled to launch on January 1, 2012, is now scheduled to begin on August 27, 2012. Under this program, CMS plans to expand the use of Medicare Recovery Auditors in the Medicare fee-for-service program to review claims before they are paid. The demonstration will include seven states with what CMS calls “high populations of fraud- and error-prone providers” (FL, CA, MI, TX, NY, LA, IL) and four states with high claims volumes of short inpatient hospital stays (PA, OH, NC, MO). On an August 9, 2012 provider call, CMS announced that one MS-DRG will be reviewed initially: MS-DRG 312 (Syncope & Collapse). The following codes are scheduled to be included at date to be determined: MS-DRG 069 (Transient Ischemia); MS-DRGs 377-379 (GI Hemorrhage); and MS-DRGs 637-639 (Diabetes). CMS also specified that the demonstration will not replace Medicare Administrative Contractor (MAC) prepayment review, but CMS expects contractors to coordinate review areas to not duplicate efforts. 

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CMS has developed a “Provider Compliance Interactive Map” web page as a reference tool with state-specific contact information for the following types of Medicare contractors: Payment Error Rate Measurement (PERM), Comprehensive Error Rate Testing (CERT), Medicare Recovery Audit Operations (RACs), and Medicare Administrative Contractor (MACs).  

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CMS has announced that its Recovery Audit Prepayment Review Demonstration, originally scheduled to launch on January 1, 2012, is now scheduled to begin on August 27, 2012. Under this program, CMS plans to expand the use of Medicare Recovery Auditors in the Medicare fee-for-service program to review claims before they are paid.  The demonstration will include seven states with what CMS calls “high populations of fraud- and error-prone providers” (FL, CA, MI, TX, NY, LA, IL) and four states with high claims volumes of short inpatient hospital stays (PA, OH, NC, MO). During a December 21, 2011 provider call on the demonstration, CMS announced that the following MS-DRGs are scheduled to be included in the project:  MS-DRG 312 (Syncope & Collapse); MS-DRG 069 (Transient Ischemia); MS-DRGs 377-379 (GI Hemorrhage); and MS-DRGs 637-639 (Diabetes).  It is unclear whether CMS will make any changes to the DRGs or other aspects of the program when it gets underway. CMS is holding a Special Open Door Forum on the demonstration on August 9. 

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On February 24, 2012, CMS published a notice announcing an increase to the maximum contingency fee that may be paid to Medicaid Recovery Audit Contractors (RACs) for which federal financial participation (FFP) will be available. Specifically, CMS now authorize states to pay their respective Medicaid RACs a contingency fee of up to 17.5% of the recovered overpayment for the recovery of improper payments made for medical supplies, equipment and appliances suitable for use in the home found within the Medicaid home health services. This 5% increase corresponds to a 5% increase in the contingency fee payable to Medicare Recovery Auditors for overpayments associated with Medicare durable medical equipment (DME) claims adopted by CMS effective June 1, 2011.

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On December 21, 2011, CMS is hosting a special open door forum provider call on its Medicare Fee-For-Service Recovery Auditor Prepayment Review Demonstration, which will expand the use of Medicare Recovery Auditors in the Medicare fee-for-service program to review claims before they are paid. This demonstration will focus on seven states with high populations of what CMS characterizes as “fraud-and error-prone providers” (FL, CA, MI, TX, NY, LA, IL), along with four states with high volumes of claims for short inpatient hospital stays (PA, OH, NC, MO).

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CMS has posted FY 2011 statistics on the Medicare Fee-for-Service Recovery Audit Contractor (RAC) program, under which CMS contractors are tasked with detecting and correcting past improper Medicare payments. From October 2010 through September 2011, CMS states that RACs have corrected $939.4 million in total payments, the bulk of which ($797.4 million) were recoupments of alleged overpayments. Top overpayment issues identified by the RACs include undocumented medical necessity for renal and urinary tract disorders, surgical cardiovascular procedures, and acute inpatient admissions for neurological disorders, along with the medical necessity of minor surgery and other treatment billed as inpatient care.

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CMS has released a report entitled “Implementation of Recovery Auditing at the Centers for Medicare & Medicaid Services.”  The report discusses the evolution of the Recovery Audit Contractor (RAC) program, describes key program components, and provides detailed FY 2010 results, including collection and underpayment data by claim type and issue.

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On September 16, 2011, CMS published a final rule to implement section 6411 of the ACA, which requires all states to contract with Recovery Audit Contractors (RACs) to audit Medicaid claims, identify underpayments and overpayments, and recover overpayments or correct underpayments (similar to the Medicare RAC program). RACs will be paid a contingency fee out of improper payments they recover that took place in the previous three years. The rule provides guidance to states related to federal/state funding of state start-up, operation and maintenance costs of Medicaid RACs, and the payment methodology for state payments to Medicaid RACs. States are required to assure that adequate appeal processes are in place for providers to dispute adverse determinations made by Medicaid RACs.  In addition, the rule directs states to coordinate with other contractors and entities auditing Medicaid providers and with state and federal law enforcement agencies. The rule is effective January 1, 2012. 

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CMS has released new statistics on the Medicare Fee-for-Service Recovery Audit Contractor (RAC) program, under which CMS contractors are tasked with detecting and correcting past improper Medicare payments. As of the third quarter of FY 2011, RACs have corrected $592.5 million in total payments, including $233.4 million in provider overpayments and $55.9 million in underpayments. Top overpayment issues identified by the RACs include undocumented medical necessity for renal and urinary tract disorders, extensive operating room procedure unrelated to the principal diagnosis, improper Medicare payments for DMEPOS provided during an inpatient stay, and the medical necessity of minor surgery and other treatment billed as inpatient care.

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CMS has released new statistics on the Medicare Fee-for-Service Recovery Audit Contractor (RAC) program, under which CMS contractors are tasked with detecting and correcting past improper Medicare payments. In the first three months of 2011 alone, RACs corrected $184.6 million in total payments, including $162 million in provider overpayments and $22.6 million in underpayments. This compares to a total of $92.3 million in corrections for all of FY 2010, of which $75.4 million were overpayments.   Since October 2009, the RAC program has collected $313.2 million in overpayments. Top overpayment issues identified by the RACs during FY 2010 through March 2011 include excessive ventilator hours, billing for extensive operating room procedures that are unrelated to the principal diagnosis, and improper Medicare payments for durable medical equipment (DME), prosthetics, orthotics, and supplies provided during an inpatient stay.

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Under the ACA, states and territories must establish Medicaid Recovery Audit Contractors (RACs) to identify and recover Medicaid overpayments and identify underpayments. CMS had previously called on states to fully implement their RAC programs by April 1, 2011. In light of operational issues and a pending rulemaking implementing the Medicaid RAC program, however, CMS has withdrawn the April 1, 2011 implementation deadline. Instead, when CMS finalizes its November 10, 2010 proposed rule, it will indicate a new implementation timeline. In a related development, CMS has compiled information on the status of state Medicaid RAC programs on its website.

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On November 10, 2010, CMS published a proposed rule that would provide guidance to states on funding and operation for the Medicaid RAC program. By way of background, the ACA requires all states to contract with RACs to audit Medicaid claims, identify underpayments and overpayments, and recover overpayments or correct underpayments (similar to the Medicare RAC program). The proposed rule would address federal/state funding of Medicaid RAC costs, state payments to RACs, provider appeal provisions, and requirements to coordinate with other program integrity efforts. Comments on the proposal will be accepted until January 10, 2011.

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