CMS Announces RAC Auditor Exclusively Focused on Home Health Care Industry

The Centers for Medicare & Medicaid Services (CMS) recently announced its next round of Medicare Fee-for-Service Recovery Audit Contractor (RAC) contracts, which include for the first time a firm hired to focus exclusively on home health care, hospice and durable medical equipment (DME) claims. According to the CMS, California-based Performant Recovery, Inc. is charged with auditing home health care, hospice and DME claims nationwide. This means that home health care providers, hospices, and DMEs will be facing greater scrutiny of their Medicare payments under the RAC program.

The RAC program was initially set up as a pilot to help the CMS identify improper Medicare payments. The CMS utilized recovery auditors to identify Medicare overpayments and underpayments to health care providers and suppliers in randomly selected states. These auditors were paid on a contingency fee basis for the overpayments they discovered. The pilot, according to the CMS, corrected over $1 billion of Medicare improper payments from 2005 through March 27, 2008. About 96% of the improper payments ($992.7 million) were overpayments collected from providers, while the remaining 4% ($37.8 million) were underpayments repaid to providers.

Due to the success of the pilot, Congress required the Secretary of the Department of Health and Human Services to institute a permanent and national RAC program to recoup overpayments, which it did under the Tax Relief and Health Care Act of 2006. The national RAC program was put into place January 1, 2010. In the CMS’ most recent report to Congress, the fiscal year 2014 involved RACs correcting $1.1 million claims for improper payments, which resulted in $2.6 billion in improper payments being collected.

How does the RAC process work?

Each RAC uses its own proprietary software and focuses its auditing efforts on companies and individuals whose billings for Medicare services trend higher than the majority of providers and suppliers in their community. In these cases, the RAC proprietary software has determined there is a possibility that the claim may contain an error. Typically, RAC will request medical records from the provider to determine whether overpayment(s) and/or underpayment(s) have occurred. When medical records are submitted, the process is called a Complex Review. In these cases, the RAC proprietary software has determined there is a high probability (but not a certainty) that the claim contains an overpayment.

In some situations, the RAC may use automated reviews to demand monetary recoupment (where NO medical record is involved in the review), such as when the RAC proprietary process determines with certainty that the claim contains an overpayment. An automated review must have a clear policy that serves as the basis for the overpayment, be based on a medically unbelievable service, or occur when no timely response is received to a medical record request letter.

The RAC works directly with beneficiaries; for example, to ensure they received the home health care services for which Medicare was billed and that the items and services were medically necessary. The RAC will review paid claims for all Medicare Part A and B providers to ensure their claims met Medicare statutory, regulatory and policy requirements and regulations.

Payments will be deemed improper when:
  • Payments are made for services that were medically unnecessary or did not meet the Medicare medical necessity criteria.
  • Payments are made for services that are coded improperly (for example, the provider submits a claim for a certain procedure, but the medical record indicates that a different procedure was actually performed).
  • Providers fail to submit documentation to support the services provided when requested or fail to submit enough documentation to support the claim.
  • The provider is paid twice because duplicate claims were submitted.
  • Other errors are made (such as a carrier pays the claim according to an outdated fee schedule).
  • Medicare pays a claim that should have been paid by a different health insurance company.

With CMS’ Performant Recovery contract announcement, it is critical that home health care agencies, hospice facilities, and DMEs put an increased focus on documentation compliance, educating referring physicians and their own staff to ensure documentation is thorough, complete and timely.

About Manchester Specialty

Manchester Specialty provides Regulatory Audit Insurance Coverage (RAC) for home health care and hospice providers, DMEs and Visiting Nursing Associations. This coverage, offered as part of our Directors & Officers (D&O) Liability insurance, can help to address alleged violations of RAC and has the ability to cover defense costs, audit fines, and penalties. Our insurance carrier can also provide compliance assistance and audit preparation and response services. Administrative Defense Coverage is also an alternative available as part of our Professional Liability program.  For more information about our insurance solutions, you or your local agent/broker may contact us at 855.972.9399.