CMS recently issued new guidance regarding the appeal process available to healthcare providers who wish to contest a Part A overpayment determination by a recovery audit contractor ("RAC"), Medicare administrative contractor ('MAC") or fiscal intermediary ("FI"). Currently, Medicare begins the overpayment recovery process from a healthcare provider as soon as the overpayment is identified. Under the new guidance, which was adopted to conform to the statutory requirements of Section 935(a) of the Medicare Prescription Drug Improvement and Modernization Act of 2003 ("MMA"), healthcare providers will have 30 days to submit an appeal for redetermination before Medicare contractors may begin recouping an overpayment. If the appeal is submitted within the 30-day period, the recoupment will be further delayed until a redetermination decision is issued. If the overpayment determination is affirmed at the first level of the appeal process, Medicare contractors may begin recoupment 60 days after the decision is affirmed unless the provider appeals to a Qualified Independent Contractor ("QIC") for reconsideration. If the provider requests reconsideration, recoupment is again delayed while the second level of the appeal process is underway. If the QIC denies the provider's appeal for reconsideration, recoupment may begin immediately after the QIC issues its decision, even if the provider appeals to an administrative law judge (the third level of the appeal process). Interest will continue to accrue but will not be assessed when recoupment is stopped at either the redetermination or reconsideration (the first and second levels of appeal). According to CMS, the new guidance will be effective on July 1, 2008; however, the limitation on recoupment provisions of the MMA upon which the new guidance is based was effective upon passage of the MMA.

The delays in recoupment will create greater incentives for providers to appeal overpayment determinations and examine the accuracy and appropriateness of such determination. With the increasing presence of RACs in the process, this may provide a needed level of scrutiny to their overpayment demands. According to CMS, RACs identified and collected $371.5 million in improper Medicare payments. Of this amount, approximately 96 percent were overpayments collected from healthcare providers; the remaining four percent were underpayments repaid to healthcare providers. More than 85 percent of the overpayments collected by the RACs and almost all underpayments refunded by the RACs were from claims submitted by inpatient hospitals. Typical errors identified by the RACs included incorrect coding, use of outdated fee schedules, payment based on duplicate claims and multiple claims for the same service / same patient in a single day.

For more information about the RAC program, please see the February 6, 2008, and December 13, 2007, issues of the Health Law Update.