Health Information Management

Senate report recommends RAC payment changes

HIM-HIPAA Insider, August 18, 2014

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by Jaclyn Fitzgerald

The Senate’s Special Committee on Aging recently released a report about improving Medicare audits and suggested a shift in the payment structure for Medicare Recovery Audit Contractors. The report states that the basis of RAC payments should shift from the number of recovered improper payments to success in reducing the improper payment rate in a jurisdiction.

Under the current payment system, RACs earned 9%–12.5% in contingency fees for fiscal years (FYs) 2009 and 2010 based on the number of improper payments identified. In its report, the Special Committee on Aging said it suspected the current payment structure may encourage RACs to keep improper payment rates high. The committee recommended that CMS consolidate its post-payment review activities and consider offering RACs financial incentives based on their ability to reduce improper payment rates in their jurisdiction.

As a result of the Improper Payments Elimination and Recovery Act, payment accuracy rose to 96.5% across the federal government for FY 2013, according to the report. However, improper Medicare fee-for-service payment rates increased from 8.5% in FY 2012 to 10.1% in FY 2013. The Special Committee on Aging took aim at CMS for its “duplicative and poorly coordinated” claims review processes, stating in its report that current methods places a burden upon providers and fail to adequately reduce improper payments.

The committee reviewed feedback from providers, health systems, and the American Hospital Association. It also dug into CMS’ pre-payment and post-payment claims review programs and HHS’ FY2013 Agency Financial Report, which was intended to expand the RAC program. Through its report, the committee expressed its concern that CMS’ current strategy may not be proactive because it appears to focus on identifying and recovering payments that are already inappropriate rather than reducing improper payments in the first place.

Due to the continued delay in awarding new RAC contracts, CMS announced August 4 that it made modifications to the current contracts so reviews can resume. Most reviews will be automated, but a limited number will be complex reviews of topics selected by CMS. In the meantime, CMS will continue to work on the procurement process for the four Part A/Part B Regions and the national DMEPOS/HH&H Region. CMS remains hopeful that the new round of RAC contracts will be awarded this year, the agency said in its announcement.

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