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DME RAC Contingency Fee Up 5% to 17.5%

On December 30, 2011, CMS issued an informational bulletin CPI-B 12-01 entitled, Affordable Care Act Program integrity Provisions – Guidance to States – Section 6411(a) – Expansion of the Recovery Audit Contractor (RAC) Program to Medicaid (“Bulletin”).

By way of brief background, Section 6411(a) of the Patient Protection and Affordable Care Act (“PPACA”) expands the RAC Program to Medicaid and requires, in part, that the fees paid to the contractors be made on a contingent basis. 42 CFR §455.510 provides that States determine the contingency fees to be paid to the Medicaid RACs. 42 CFR §455.510(b)(4) delineates the requirements for paying Medicaid RACs, specifically stating the following:

Except as provided in paragraph (5) of this section, the contingency fee may not exceed that of the highest Medicare RAC, as specified by CMS in the Federal Register, unless the State submits, and CMS approves, a waiver of the specified maximum rate. If a State does not obtain a waiver of the specified maximum rate, any amount exceeding the specified maximum rate is not eligible for FFP, either from the collected overpayment amounts, or in the form of any other administrative or medical assistance claimed expenditure.

According to the Bulletin, CMS increased the contingency fee for recovery of improper payments associated with durable medical equipment (“DME”) claims. The contingency fee paid to a Medicare RAC is now 17.5% (up 5%) for DME claims. As such, absent a waiver, the Medicaid RAC contingency fees may not exceed 17.5% for DME claims.

For more information regarding audits, please contact Abby Pendleton, Esq. or Jessica L. Gustafson, Esq. at (248) 996-8510 or (212) 734-0128 or visit the HLP website.

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