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The Centers for Medicare & Medicaid Services (“CMS”) has issued a Statement of Work and a Request for Information to companies serving as Recovery Audit Contractors (“RAC”) to solicit feedback and to gauge interest in expanding the RAC program to Medicare Advantage plans.

The RACs were established to detect and correct past improper payments made on claims submitted to Medicare.  The RACs use data mining and other audit tools to identify overpayments and underpayments.  There are currently four RAC contractors assigned to different regions of the country to audit Medicare Part A (hospital) and Medicare Part B (physician and DME) claims.

The RAC program has been subject to strong criticism from physicians, hospitals, and some members of Congress.  One focus of the criticism is that the RAC auditors are paid a contingency fee based on overpayments identified and returned to the Medicare program, which many providers believe incents the RACs to inappropriately inflate overpayment determinations.

CMS now intends to expand the RAC program to Medicare Part C (Medicare plans offered by private health insurers).  The goal is to use the RAC auditors to identify improper payments to Medicare Advantage plans and to recoup overpayments associated with diagnosis data submitted by Medicare Advantage Organizations to CMS.  CMS pays Medicare Advantage Organizations a fee per Medicare beneficiary per month adjusted for that beneficiary’s relative health status.  CMS uses diagnosis data provided by the Medicare Advantage Organizations to determine a beneficiary’s relative health status.  Currently CMS audits 30 Medicare Advantage contracts a year and has found a 9.5% improper payment rate.  CMS’ ultimate goal is to audit all Medicare Advantage contracts.

The Request for Information asks the RAC contractors to respond to a series of specific questions based on the Statement of Work by February 1, 2016.

Whatley Kallas, LLP regularly publishes articles of interest to providers and patients on a number of topics, including topics related to RAC audits and the Medicare program.