On October 16, 2012, Representatives Sam Graves (R-MO), Billy Long (R-MO), Todd Akin (R-MO) and Adam Schiff (D-CA) introduced legislation (H.R. 6575) focused on improving accountability for Medicare Recovery Audit Contractors (RACs).

Congress included the RAC program in the Medicare Modernization Act of 2003 in an effort to increase Medicare payment accuracy. As a result, the Centers for Medicare & Medicaid Services (CMS) established a RAC demonstration in Florida, California, and New York in 2005—and later in Massachusetts, South Carolina, and Arizona.

Congress expanded the RAC program in section 302 of the Tax Relief and Health Care Act of 2006, requiring CMS to implement a national and permanent recovery audit contractor program. Section 6411 of the Affordable Care Act of 2010 required states to establish Medicaid RAC programs and expanded the RAC program to Medicare Parts C and D.

Here is what you need to know:

  • The legislation limits the number of medical record requests that can be made by a Medicare RAC to the lesser of 2 percent of total yearly claims or 500 additional documentation requests during any 45-day period. This would apply to claims furnished on or after January 1, 2013.
  • The legislation requires the Secretary of Health and Human Services to include financial penalties in RAC contracts for “patterns of failure” in meeting program requirements such as audit deadlines and timely communication with a hospital. The Secretary would establish procedures for implementing penalties as well as specific penalty amounts.
  • HR 6575 requires a RAC to pay a fee to a hospital or other provider for each claim denial overturned on appeal.
  • Legislation prohibits a RAC from conducting a postpayment or prepayment medical necessity audit unless the review addresses a widespread payment error rate of at least 40 percent (as determined by the Secretary using a statistically significant sampling of claims submitted by hospitals in the jurisdiction of the RAC contractor and adjusted to take into account claim denials overturned on appeal.)
  • The legislation requires the Secretary to establish prepayment review guidelines for RACs—including specific criteria for minimum payment error rates or improper billing practices bring about prepayment reviews. Guidelines would include criteria for termination of prepayment reviews, including termination dates.
  • HR 6575 requires the CMS to include language in its RAC contracts that postpayment and prepayment reviews may only occur as part of a widespread payment error rate of at least 40 percent in that region. Language also requires a RAC to conclude an audit if there is not a widespread error rate of at least 40 percent.
  • All new or renewed RAC contracts would be required to include any new requirements created as part of HR 6575.
  • Legislation requires CMS to host a public website and publish performance data—including audit rates, denials and appeals outcomes—for each recovery audit contractor.
  • CMS would be required to publish the aggregate number of audits conducted by each RAC on a yearly basis as well as the specific number of audits of automated and complex claims, medical necessity reviews, Part A and B claims, durable medical equipment (DME) claims and Part A medical necessity claims. The new website would include data on denial rates for Part A and B claims and DME claims, appeals, appeal rates, appeal outcomes at each of the five stages of appeal and the net denials for each audit type.
  • All transparency provisions created by HR 6575 would take effect upon date of enactment of legislation for new or renewed contracts occurring after that time.
  • Legislation would restore due process rights under the AB Rebilling Demonstration for claims denied as an inpatient admission by a RAC due to a finding that the service was not reasonable and medically necessary. The Demonstration allows hospitals to rebill for 90 percent of the Part B payment when a Medicare contractor denies a Part A inpatient short stay claim as not reasonable and necessary due to the hospital billing for the wrong setting.
  • The legislation would allow denied inpatient claims to be billed as outpatient claims when appropriate.
  • The legislation requires physician review, signature, and certification for any RAC denial based on medical necessity.
  • If enacted, this legislation will impact Zone Program Integrity Contractor (ZPIC), Comprehensive Error Rate Testing (CERT) and Fiscal Intermediary (FI) audit activity.