Overview of the Recovery Audit Contractor (RAC) Program

January 28, 2010 by  
Filed under Featured, Medicare Audits

(January 28, 2010): Prior to HIPAA’s passage in 1996, CMS relied heavily on fraud detection efforts by Carriers (Part B) and Fiscal Intermediaries (Part A) to identify providers suspected of engaging in wrongful coding and billing practices

Among its far-reaching provisions, HIPAA established the Medicare Integrity Program (MIP).  This program was established in an effort to strengthen CMS’ ability to reduce fraud and abuse in the Medicare program.  Pursuant to this program, CMS began transferring the responsibility for detecting and deterring Part A and Part B fraud and abuse to Program Safeguard Contractors (PSCs).  Over the last decade, PSCs have aggressively pursued alleged Medicare overpayments from CMHCs and other health care providers around the country. Notably, PSCs are now in the process of being replaced around the country by ZPICs (Zone Program Integrity Contractors).

Despite the successes achieved by PSCs, Congress believed that additional measures to safeguard the Medicare Trust Funds were needed.  As part of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA), Congress directed HHS to conduct a three year demonstration project examining the use of  Recovery Audit Contractors (RACs) to detect and correct improper payments.

The demonstration project began with two types of RACs – Medicare Secondary Payor (MSP) RACs and Claim RACs. CMS instructed the MSP RACs to focus on finding improper payments made by Medicare that other health insurance companies should have paid while Claim RACs were instructed to identify improper payments made for services that did not qualify for payment.

Examples of services not qualifying for payment included: (1) those that were not medically necessary, (2) those that were incorrectly coded, (3) those with no documentation or insufficient documentation to support the level of service coded by the provider, (4) duplicate claims.

Initially, the Claim RAC program was limited to three states (California, Florida, and New York).  Medicare expenditures for these states were among the highest in the country.  Based on the program’s early achievements, the demonstration project was expanded to include three additional states. In light of the successful results achieved, Congress included provisions in the Tax Relief and Health Care Act of 2006 to make the RAC program permanent.

Although RACs are compensated to identify both overpayments and underpayments, the amount of overpayments recovered in the demonstration program vastly overshadowed the amount of underpayments. Approximately 96% ($992.7 million) of the improper payments were overpayments, with only approximately 4% ($37.8 million) of the improperly paid claims being identified as underpayments. Broken down by type of error, the RAC found that claims were:

  • 0.86% were denied based on “medically unnecessary” services.
  • 34.66% were denied based on incorrect claims coding.
  • 7.76% were denied based on insufficient documentation.
  • 16.72% were denied based on other reasons.

The nationwide expansion of the RAC program has been completed. CMS has contracted with four RACS, each of which will have their own jurisdiction matching the DME Medicare Administrative Contractors’ jurisdictions. The contractors include:

  • Region A: Diversified Collection Services, Inc. (Livermore, CA): — Covering CT, DE, DC, ME, MD, MA, NH, NJ, NY, PA, RI and VT.
  • Region B: CGI Technologies and Solutions, Inc. (Fairfax, VA): — MI, OH, IN, KY, IL, WI and MN.
  • Region C: Connolly Consulting Associates, Inc. (Wilton, CT):  Identified as working in 15 states – WV, VA, NC, SC, GA, FL, AL, LA, TN, AR, TX, OK, NM, CO, plus the territories of Puerto Rico and the US Virgin Islands.
  • Region D: Health Data Insights, Inc. (Las Vegas, NV):  AK, AR, CA, HI, IA, KS, MO, MT, ND, NE, NV, OR, SD, UT, WA, WY, Guam, American Somoa and Northern Marianas.

To date, most CMHCs who have contacted our Firm in connection with a Medicare audit have been subjected to reviews by PSCs or ZPICs, not by a RAC.  Nevertheless, the day may come when RACs do, in fact, focus on partial hospitalization program claims.

Should you have any questions regarding these changes, don’t hesitate to contact us.  For a complementary consultation, you may call Robert W. Liles or one of our other attorneys at 1 (800) 475-1906.


Recent Changes in Recoupment Limitations and the Impact on ZPIC / PSC Medicare Overpayment Appeals Cases  

January 22, 2010 by  
Filed under Featured, Medicare Audits

(January 22, 2010):  CMS has recently published its Final Rule addressing limitations on the recoupment of alleged overpayments by its contractors.  This Final Rule finalizes (at least for now) how contractors are to proceed when pursuing recoupment actions.   “Recoupment” is defined as the recovery of a Medicare overpayment by reducing present or future Medicare payments and applying the amount withheld against the debt.

Under existing regulations, providers may challenge recoupment through either the rebuttal or appeals process.  Prior to passage of the Medicare Modernization Act (MMA), CMS could recoup overpayments, regardless of whether the provider or supplier had filed an appeal.  With CMS’ Final Rule in place, limitations have been set on the ability of its contractors to pursue a recoupment action.  As the Federal Register states:

“This final rule defines the overpayments to which the limitation on recoupment applies, how the limitation works in concert with the appeals process, and sets time limits for recouping overpayments, specifically providing 41 days for a provider or supplier to file the first level of appeal before the contractor can begin recoupment and providing the provider or supplier 60 days to appeal at the second level before the contractor can begin recoupment” (74 Fed. Reg. 47458, 47458 (Sept. 16, 2009)).

Notably, a Medicare contractor may freely initiate recoupment on an overpayment once a reconsideration decision has been rendered, regardless if an Administrative Law Judge (ALJ) appeal is filed.

Should a provider elect to delay recoupment, the amount owed will be subject to the Medicare interest rate. This amount varies but is generally quite high. For example, as of 07/17/09, it was 11.25%. As such, it is especially important that providers consider the following:

    (1) If an overpayment determination is overturned past the reconsideration level of appeals, CMS is liable for interest on recouped overpayments that has accrued.(2) If a provider or supplier takes advantage of the limitation on recoupment and ultimately loses an appeal, it will still be liable for all interest accrued since the original determination, along with the overpayment.

With so much at stake, it is vital that health care providers and suppliers fully understand the nuances of the overpayment appeals and recoupment process.   By timely filing appeals or  rebuttals, providers can effectively delay  recoupment  but unfortunately cannot avoid it altogether. Ultimately, CMS’ final rule will make it more important than ever that health care providers undergoing overpayment review get qualified legal advice to help guide them through the process.

Over the last year, our Firm has handled the administrative appeals of literally thousands of Medicare claims denied as a result of post-payment Medicare audits by Program SafeGuard Contractors (PSCs) and / or Zone Program Integrity Contractors (ZPICs). 

Should you have any questions regarding these changes, don’t hesitate to contact us.  For a complementary consultation, you may call Robert W. Liles or one of our other attorneys at 1 (800) 475-1906.


Health Care Providers in Brooklyn NY, Tampa FL and Baton Rouge LA, Find Themselves in DOJ’s Cross-Hairs

January 22, 2010 by  
Filed under Featured, HEAT Enforcement

(January 22, 2010):  Late last May, Attorney General Eric Holder (U.S. Department of Justice) and Secretary Kathleen Sebelius (Department of Health and Human Services) announced the establishment of a new interagency effort, the Health Care Fraud Prevention and Enforcement Action Team (HEAT).  This new initiative is intended to further supplement existing DOJ / HHS-OIG efforts to identify, investigate and prosecute health care fraud violations.  At this time DOJ announced that Strike Force team operations would be expanded from South Florida to include operations in Houston and Detroit.

Over the next six months, multiple indictments and arrests were made by HEAT teams in these cities. Following these successes, the government has now expanded the HEAT program, setting up units in Brooklyn NY, Tampa FL and Baton Rouge LA. As HHS Secretary stated when announcing this expansion:

“When President Obama took office, he promised a new commitment to cracking down on the criminals who steal billions of dollars from Medicare each year through fraudulent claims. . .  ”Today, HHS and DOJ are following through on that commitment with the announcement of three new Medicare Fraud Strike Force teams in Baton Rouge, Tampa, and in Brooklyn. Along with teams already operating in Miami, Los Angeles, Houston and Detroit, these Strike Force operations will allow us to concentrate our agents and resources on the criminal hubs where we know a significant share of fraud occurs.  Medicare is a sacred promise to America’s seniors and we will do everything we can to protect it.  The announcement we’re making today is a significant step towards securing Medicare for seniors today and generations to come.”

HEAT teams typically employ a “data-driven” approach to “identify unexplainable billing patterns and investigating these providers for possible fraudulent activity.” Notably, the Medicare Fraud Strike Force team operating in South Florida has already convicted 146 defendants and secured $186 million in criminal fines and civil recoveries.  As Attorney General Holder stated last May:

“We know these strike forces work. I believe a targeted civil and criminal enforcement strategy in these locations will have a substantial impact on deterring fraud and abuse, protecting patients and the elderly from scams, and ensuring that taxpayer funds are not stolen.”

As always, health care providers must remain vigilant in their efforts to ensure that Medicare coding, billing and operational practices fully comply with applicable statutory and regulatory requirements.

As a final point, it is essential to remember that HEAT teams are only one of the many enforcement entities reviewing the coding, billing and business practices of Medicare providers. A number of CMHCs around the country have been subjected to Medicare audits by Program SafeGuard Contractors (PSCs) and / or Zone Program Integrity Contractors (ZPICs). If you have not already done so, we strongly encourage CMHCs to implement and adhere to an effective Compliance Plan. Far too often, we have found that CMHCs have implemented a general Compliance Plan which does not address the unique risks faced by CMHCs when providing partial hospitalization care and treatment services.

Should you have any questions regarding these changes, don’t hesitate to contact us.  For a complementary consultation, you may call Robert W. Liles or one of our other attorneys at 1 (800) 475-1906.


Changes to the False Claims Act and their impact on CMHCs

January 22, 2010 by  
Filed under False Claims Act, Featured

(January 22, 2010):  The civil False Claims Act (31 U.S.C. 3729) is the primary civil enforcement tool relied upon by the U.S. Department of Justice (DOJ).  On May 20, 2009, the Act’s provisions were further strengthened as a result of amendments contained under the “Fraud Enforcement and Recovery Act of 2009.”  These amendments have significantly increased existing risks faced by Community Mental Health Centers (CMHCs) around the country.  Among the many changes, several are of particular concern for CMHCs.  These amendments:

  • Extended the whistleblower protection provisions to cover both “contractors” and “agents” in addition to employees who allege that they were subjected to retaliation when they tried to put an end to False Claims Act violations by their employer.  From a practical standpoint, CMHCs have long engaged the services of “contractors” and “agents” not merely employees in support of operations, marketing and the provision of professional services.  Prior to the recent amendments, the whistleblower provisions only typically applied to actual employees of the CMHC.  Now, both “contractors” and “agents” may avail themselves of the Act’s whistleblower protections.
  • Revised the definition of “obligation” to expressly include knowingly retaining mere overpayments despite the fact that a CMHC may have accidentally been overpaid.  CMHCs may now find themselves liable under the False Claims Act, regardless of whether the overpayment was caused as a result of a mistake caused by the provider or by a government contractor, such as a MAC.  This presents significant exposure for CMHCs who knowingly fail to promptly return the funds. Your CMHC may now find itself subject to liability under the False Claims Act, including its penalty and damages provisions even though the overpayment innocently occurred.
  • Expanded the scope of Civil Investigative Demands (CIDs) to now make it easier for DOJ to use these investigative tools.  Additionally, the changes enhanced the ability of DOJ to issue CIDs.  From a practical standpoint, this will make it much easier for DOJ prosecutors to initiate an investigation of your CMHC without first filing a case.

Now more than ever, CMHCs must affirmatively work to ensure that all applicable statutory and regulatory requirements are met.  If your CMHC has not already done so, we recommend that an effective Compliance Plan be implemented. 

Should you have any questions regarding these changes, don’t hesitate to contact us.  For a complementary consultation, you may call Robert W. Liles or one of our other attorneys at 1 (800) 475-1906.