The Centers for Medicare & Medicaid Services (CMS) recently published an announcement indicating that the agency is “in the procurement process for the next round of Recovery Audit Program Contracts” and is winding down its current contracts to enable Recovery Auditors to complete all outstanding claim reviews and other processes by the end date of existing contracts. In the interim, CMS will “pause” operations of current RACs pending award of the new contracts. According to the agency, this pause will allow it to “continue to review and refine” the RAC program, e.g., by examining Additional Documentation Request (ADR) limits, timeframes for review and communications between Recovery Auditors and providers.

CMS already has accepted a number of changes to the Recovery Audit Program which are intended “to result in a more effective and efficient program, including improved accuracy, less provider burden, and more program transparency.” These changes, summarized in a chart by CMS, specify that:

  • RACs must wait 30 days to allow for a discussion before sending the claim to the Medicare Administrative Contractor (MAC) for adjustment. Providers will not have to choose between initiating a discussion and an appeal.
  • RACs must confirm receipt of a discussion request within three days.
  • RACs must wait until the second level of appeal is exhausted before they receive their contingency fee.
  • CMS is establishing revised ADR limits that will be diversified across different claim types (e.g., inpatient vs. outpatient).
  • CMS will require RACs to adjust the ADR limits in accordance with a provider’s denial rate. Providers with low denial rates will have lower ADR limits while providers with high denial rates will have higher ADR limits.

In its announcement, CMS also flagged the following three important dates:

  • February 21 was the last day a Recovery Auditor could send a postpayment ADR.
  • February 28 was the last day a MAC could send prepayment ADRs for the Recovery Auditor Prepayment Review Demonstration.
  • June 1 is the last day a Recovery Auditor may send improper payment files to the MACs for adjustment.

The new Recovery Audit Program contracts likely will be awarded in the spring of 2014, though CMS has not announced an official date, and are projected to terminate sometime in 2018. Once the new contracts are in effect, RACs may audit claims for dates of service occurring during the pause.

This announcement arrives on the heels of a “scathing” Office of Medicare Hearings and Appeals forum, where industry stakeholders discussed a workload that has resulted in a “backlog of 460,000 appeals and the suspension of the assignment of appeals to administrative law judges (ALJs) for up to two years.” While some commentators believe the pause may bring providers relief and welcome the change, they also point out that the revisions “won’t address the multi-year backlog that inappropriate RAC denials have created in the Medicare appeals system.” Nor will the changes provide stakeholders with long-term relief from the substantial burden imposed by such audits. For further suggestions regarding improvements to the RAC program, please see the American Hospital Association’s January 14, 2014, letter addressed to CMS.

As CMS releases additional guidance regarding the RAC program and improvements thereto, we will continue to provide updates. In the meantime, further information regarding this program can be accessed here.