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CMS Issues The Medicare Recovery Audit Contractor (RAC) Program: Update to the Evaluation of the Three-Year Demonstration Program

On June 14, 2010, CMS published a report entitled, “The Medicare Recovery Audit Contractor (RAC) Program: Update to the Evaluation of the 3-Year Demonstration Program.” This report contains statistics through March 9, 2010 and includes updated appeals data.

The new report reveals a much lower number of appeals than had previously been reflected. Specifically, the new report states that providers chose to appeal 12.7 percent of the RAC determinations made in the demonstration program (76,073 claims appealed). Previously, CMS reported that 22.5 percent of the RAC determinations made in the demonstration program were appealed (118,051 claims appealed). According to CMS, this number decreased for several reasons:

• First, the previous method of totaling claims counted claims appealed to multiple levels of appeal at each stage of appeal. The revised figure counts each appealed claim once, regardless of whether the claim was appealed through multiple stages of appeal.

• In addition, duplicate claims were identified and removed.

• Appeals withdrawn by the provider were removed from the total.

• Finally, claims reversed by the claims processing contractor when additional documentation was submitted were removed from the total.

From the provider’s perspective, it is unclear why claims reversed when additional documentation was submitted to the claims processing contractor were removed from the total. These claims constitute denials made during the RAC demonstration program that were overturned on appeal. The failure to include these claims paints a picture that the RAC was more accurate in its claim denials than it actually was.

Even with the omission of this first-level appeals data, the numbers still reflect that when providers chose to appeal claims, they oftentimes were successful. For example, of the 76,073 claims appealed, according to CMS’s calculations, 48,993 claims were overturned on appeal, constituting an overall appeals success rate of 64.4 percent.

Notably, despite the fact that the RAC demonstration concluded in 2008, there still may be claims decided favorably that are not included in these statistics. The Administrative Law Judges were overwhelmed by the volume of appeals they received. As recently as April 2010, our office alone received dozens of favorable decisions arising from RAC denials made during the demonstration program, which would not have been included in the most-recent CMS data.

For more information regarding the RAC program, or with any other questions regarding Medicare or other third party payor audits, please contact Abby Pendleton or Jessica Gustafson at (248) 996-8510. We also invite you to visit The HLP’s RAC page for more information regarding Medicare and RAC audits.

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