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RAC Program Further Expanding

The Medicare RAC program is expanding even further. By way of a Fact Sheet issued on November 15, 2011, CMS announced three new initiatives with respect to its Medicare RAC program. Beginning January 1, 2012, CMS will conduct demonstration projects with the goal to eliminate fraud, waste, and abuse in the Medicare program. The three demonstration projects are described by CMS as follows:

• Recovery Audit Prepayment Review: The Recovery Audit Prepayment Review demonstration will allow Medicare Recovery Auditors (RACs) to review claims before they are paid to ensure that the provider complied with all Medicare payment rules. The RACs will conduct prepayment reviews on certain types of claims that historically result in high rates of improper payments. These reviews will focus on seven states with high populations of fraud- and error-prone providers (FL, CA, MI, TX, NY, LA, IL) and four states with high claims volumes of short inpatient hospital stays (PA, OH, NC, MO) for a total of 11 states. This demonstration will also help lower the error rate by preventing improper payments rather than the traditional “pay and chase” methods of looking for improper payments after they have been made.

• Prior Authorization for Certain Medical Equipment: The second demonstration… will require Prior Authorization for certain medical equipment for all people with Medicare who reside in seven states with high populations of fraud- and error-prone providers (CA, FL, IL, MI, NY, NC and TX). This is an important step toward paying appropriately for certain medical equipment that has a high error rate. This demonstration will help ensure that a beneficiary’s medical condition warrants their medical equipment under existing coverage guidelines…

• Part A to Part B Rebilling: The third initiative will allow 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. Currently, when outpatient services are billed as inpatient services, the entire claim is denied in full…

The third demonstration project, allowing 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 will have important financial implications for hospitals. Currently, if a RAC issues this type of denial, the entire claim is denied in full. In order to obtain reimbursement, the hospitals need to appeal the claim and seek relief through the Medicare appeals process. According to an FAQ on the CMS website:

Providers can re-bill for Inpatient Part B services, also known as ancillary services, but only for the services on the list in the Benefit Policy Manual. That list can be found in Ch. 6, Section 10: http://www.cms.hhs.gov/manuals/Downloads/bp102c06.pdf. Rebilling for any service will only be allowed if all claim processing rules and claim timeliness rules are met. There are no exceptions to the rules in the national program. Normal timely filing rules can be found in the Claims Processing Manual, Chapter 1, Section 70: http://www.cms.hhs.gov/manuals/downloads/clm104c01.pdf.

Of note, the third demonstration listed above, which would allow hospitals to rebill Part B claims when an inpatient hospital claim is denied as not reasonable and necessary due to the hospital billing for the wrong setting, will be limited to a representative sample of 380 hospitals nationwide that volunteer to be part of the program. A Fact Sheet regarding the rebilling initiative is also available on the CMS website.

For more information regarding the RAC program, please contact Abby Pendleton, Esq. or Jessica L. Gustafson, Esq. at (248) 996-8510 or visit the RAC page of The HLP’s website.

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