Just before the ball dropped to start the new year, the Centers for Medicare & Medicaid Services approved the Recovery Audit Contractor (RAC) to identify and recoup improper payments for durable medical equipment, home health and hospice care on a national basis (known as region 5). The contract, dated December 30, 2014, is the first one issued since Recovery Audit contracts were halted last summer. Providers must be vigilant when responding to an audit both because of the value of claims being questioned, but also because these audits can lead to civil and criminal fraud investigations.

Fortunately, the new contract incorporates changes addressing provider concerns with prior RAC arrangements, and these changes will apply to all future contracts with RACs. Other contracts have been delayed because of contract protest litigation.

Notable changes to the contracts will include:

  • Limiting the size of Additional Document Requests based upon the denial record of the provider; lower denial rates mean lower document limits;
  • Limiting the look back-period to six months from the date of service for hospital claims submitted within three months of the date of service;
  • Imposing a 30 day delay to allow for a discussion request by the provider before a RAC can send a denial to be processed by the Medicare Administrative Contractor;
  • Withholding payment of the contingency fee to the RAC until after a claim has gone through the second level of appeals; and
  • Requiring RACs to maintain an accuracy rate of at least 95% and penalizing RACs for high overturn rates on appeal.

A detailed list of the changes can be found here.