Firm News & Legal Alerts

Thursday, February 5, 2015

CMS Makes Changes to its Overpayment Recovery Process

Physicians in New York are all too familiar with Medicare and Medicaid audits, which can result in millions of dollars in recoupment by the Centers for Medicare & Medicaid Services (“CMS”). CMS recoups money that it believes was overpaid to providers as a result of improper billing practices, among other reasons. For far too long, providers have complained that the process is tipped in CMS’ favor and deeply flawed. For example, CMS retains Recovery Audit Contractors (“RACs”) to audit Medicare claims submitted by health care providers, including physicians and hospitals, on a contingency fee basis. Thus, some would argue, improperly incentivizing the RACs.   

Due to the ongoing issues with the process, CMS suspended new RAC audit activities in February 2014, until new contracts could be awarded. RACs are still permitted to conclude ongoing investigations during that time.

Recently, on December 30, 2014, CMS released the Recovery Audit Program Improvement Plan (the “Plan”) in an effort to increase transparency and reduce the administrative burden on providers. These changes will become effective with each new RAC contract awarded by CMS. The first of such contracts was awarded simultaneously with the release of the Plan. Some of the more notable changes are as follows:

  • Limiting the number of documents requested from providers based on a provider’s prior Medicare compliance.
  • Diversification of document requests across all claim types, to address concerns that current audits focus primarily on inpatient claims.
  • Limiting RACs’ review and “look-back” period to six months in cases where providers submit claims within three months of the date of service.
  • Requiring RACs to complete complex reviews and inform physicians and facilities of their results within 30 days.
  • Requiring RACs to confirm receipt of a physician’s correspondence within three business days.
  • RACs will no longer receive their contingency fees until the second level appeal is complete.
  • Requiring RACs to keep their overturn rate to less than 10% during the first level appeal.
  • Establishing a provider relations coordinator to address provider complaints and questions.
  • Requiring RACs to post more uniform and specific review information on their websites.

While some of these amendments, such as the shorter look-back period, should have a positive impact on providers, other amendments may have missed the mark. For example, despite the general requirement of “diverse” reviews, RACs still retain authority over which provider types to target. Because RACs receive commissions based on a percentage of the amount of money they recoup for CMS, they still have a financial incentive to focus on certain provider types. Similarly, the Plan does not require RACs to have a provider’s review conducted by another physician within their specialty. CMS merely encourages RACs to have a panel of specialists available for consultation.

As more new RAC contracts are awarded, the amendments to CMS’ overpayment recovery process will have a growing impact on the practices and reimbursements of providers who submit Medicare and Medicaid claims. Therefore, providers should be aware of how these changes might affect their practices, and consider preparations for their implementation.


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