CMS RAC Program Updates for New RAC Contracts as of January 7, 2015

Now that the first of the new RAC contracts has been awarded, as reported by Modern Healthcare, we should review a few of the changes that CMS has made to the program, especially those that are most confusing.

We have previously conducted an extensive review of the new SOW, such as we know it, based upon draft SOWs found as long ago as May 2013. Since then, however, some new changes to program operations have been made by CMS, although the regulatory references are difficult to locate, if not non-existent. For example, I have yet to find a document relating to the new limited look-back period for patient status reviews (discussed more, below). At least we do have one document that promises changes being made, despite the lack of details and dearth of regulation quotations and links.

As you review these improvements, you should keep in mind that they only apply to NEW contracts, and will not go into effect until new RAC contracts are awarded.

RAC Program Improvements – The List

The most recent posts by CMS concerning the RAC program can be found at the Recent Updates page.

On that page, the most recent update posted is as follows:

“December 30, 2014 – CMS has awarded the Region 5 Recovery Audit contract to Connolly, LLC. The purpose of this contract will be to support the Centers for Medicare & Medicaid Services (CMS) in completing this mission through the identification and correction of improper payments for durable medical equipment, prosthetics, orthotics and supplies (DMEPOS), and home health/hospice (HH/H) claims submitted under Title XVIII of the Social Security Act (the Act). The Recovery Auditor will review all applicable claims types through the appropriate review methods and work with CMS and the DME and HH/H MACs to adjust claims to recoup overpayments and pay underpayments.  This award marks the beginning of the new Recovery Audit contracts and is the start date of the implementation of many improvements to reduce provider burden and increase transparency in the program.  A detailed list of these improvements can be found at Recovery Audit Program Improvements.”

These “improvements” are presented as CMS’s “response to industry feedback.” They are grouped into three categories – reduced provider burden, enhanced oversight by CMS, and increased program transparency.

At Least Two Welcome Changes

One of the changes offered is a reduction in the time that RACs have to do a complex review – now set to 30 days, reduced from 60 days.010815_2026_CMSRACProgr1.png

One wonders if this can be more than lip service, however, as such deadlines have a history of being ignored by both CMS and its contractors. What difference does it make to set a shorter period when the longer one was never enforced to begin with? This change is therefore of dubious value.

There is one other welcome change: a 30-day Discussion Period is now protected, if requested.010815_2026_CMSRACProgr2.png

This would allow that providers no longer have to choose between starting a discussion period versus filing an appeal. Previously, filing an appeal invalidated any discussion, regardless of how well or how poorly it might be progressing. It was just over, end of story. Now, if the guidance is followed, a provider can engage in both, with no fear of a conflict between the two. If the recent trend seen in at least one region is any indicator, this would be a welcome change. (In the most recent RACTrac Survey, 52% of participating hospitals reported successfully reversing a denial during the Discussion Period, ranging from 31% to 71% of the time. See slide 27.)

Now let’s review two of these so-called “improvements” which may nevertheless be cause for concern in the provider community.

Are These Improvements Really Improvements?

On the surface, a few of the changes can reasonably be labelled as “improvements” from the viewpoint of a hospital provider, and might even “reduce provider burden” as billed.

However, the first two listed are worthy of more than a cursory review.010815_2026_CMSRACProgr3.png

Improvement A1:  Perhaps this is a good thing and perhaps not. (And I’ll forego pointing out their poor grammar.) For some hospitals, this may be or may become a nightmare, especially if the hospital has an undetected historical problem that suddenly bumps their “denial rates” in such a way as to blow their ADR limits sky high. Of course, for those with “low” denial rates, this is a welcome respite.

The related question arises, since the recent Global Settlement Offer program left all “settled” claims as denials, do those denials count toward the denial rate to be used when calculating ADR limits? According to the latest update (10/31/14) to the Hospital Appeals Settlement FAQs, they will NOT be used in such calculations:

“21. Will claims involved in the Settlement be used to calculate a provider’s Additional Documentation Request limits for the Recovery Auditors?

No, claims settled through this resolution will not be used in any calculation to determine a provider’s denial rate for purposes of establishing ADR limits.”

Of course, under no circumstances should you accept any calculations coming from CMS, as they have a notoriously biased calculator. (It is probably manufactured in Pyongyang, North Korea.)

Do your own calculations, and ask CMS for the basis of their calculations, and to “show your work,” as my Algebra teach used to say…


Improvement A2:  This appears to be a huge change, and *may* be a major step towards avoiding a repeat of the scenario that wound up clogging up the Medicare Appeals process with a backlog of 800,000+ appeals. That said, this reporter’s suspicion is that RACs will find a way around this limitation, which will only reignite the conflagration that burned down the courthouse known as OMHA.

A “patient status” review is only one type of review that can be conducted and result in a Full Denial for a Part A claim.

Therefore, what appears to be good news is still clouded by other allowances for RAC review.

Yes, claims that have been disallowed from patient status reviews by RACs (thru March 2015 due to recent legislation) and are disallowed permanently. See A1.1 on page 2 of this FAQ document:

“CMS will not permit Recovery Auditors to conduct patient status reviews on inpatient claims with dates of admission between October 1, 2013 and September 30, 2014. These reviews will be disallowed permanently; that is, the Recovery Auditors will never be allowed to conduct patient status reviews for claims with dates of admission during that time period.”

However… in the same breath, so to speak, CMS goes on and leaves the door open for other types of reviews by RACs:

“CMS reminds providers that a claim subject to the 2 midnight presumption may still be reviewed for issues unrelated to appropriateness of inpatient admission in accord with the 2-midnight benchmark (i.e. patient status). Medicare review contractors may review claims to ensure the services provided during the inpatient stay were reasonable and necessary in the treatment of the beneficiary, to ensure accurate coding and documentation, and may conduct other reviews as dictated by CMS and/or another authoritative governmental agency.”

Nevertheless, at the least, the patient status reviews, which have been a plague on the community, are now being limited, in a fairly reasonable manner. So now rebilling will be available, if not exactly viable, as an alternative to the total loss of revenue for so many inpatient claims.

If indeed this guidance is followed by the RACs, then a significant portion of RAC denials may be avoided, as evidenced by the latest figures published in the AHA’s October 2014 RACTrac Survey. In that survey, over 50% of participating hospitals reported that 75% of their RAC ADRs were requested for claims that would fall outside the timely filing window. (See slide 18)aha ractrac oct 2014 slide 18

While we have no figures on the number of denials finally issued for those ADRs for claims falling outside the timely filing window, if we apply the national average RAC “batting average” of .430 (an average of 621 Complex Denials from an average of 1,436 ADRs during Q1-Q3 of 2014, so 621/1436 = 0.43 or 43% or .430 batting average) to those figures, we could project that hospitals might see quite a significant difference in at least the population make-up of ADRs, under the new RAC contracts. We would at least expect to see these types of ADRs and requests decline in number, but there is little reason to expect that the RACs will not “mistakenly” submit such requests and denials.

After all… they’ve been wrong 55% of the time so far, according to my figures. So why expect them to get much better, until they get slapped with real financial penalties by CMS?


To me, this is simple. Will the improvements have significant benefit to the provider community?

Call me a pessimist, but I’m not holding my breath.

Useful References

The latest published document containing related FAQs can be found at FREQUENTLY ASKED QUESTIONS for 2 Midnight Inpatient Admission Guidance & Patient Status Reviews for Admissions on or after October 1, 2013.

Two documents concerning  Selecting Hospital Claims for Patient Status Reviews: Admissions On or After October 1, 2013 were last updated 11/04/13 and 02/24/2014.

The latest publically available guidance on how such reviews are to be conducted can be found at Reviewing Hospital Claims for Patient Status: Admissions On or After October 1, 2013.

The latest RACTrac results can be found at  AHA’s October 2014 RACTrac Survey

For an excellent reference resource, see this article written by The Health Law Partners, published in The Health Lawyer, June 2014 –  with an amazing 77 references.

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One Response to CMS RAC Program Updates for New RAC Contracts as of January 7, 2015

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