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Recovery Audit Contractors (RACs): the acronym alone is enough to send chills down the spines of even the most conscientious coders, billers, and revenue cycle executives. And their reactions are understandable, especially considering that hospitals and health systems have had a somewhat contentious relationship with RACs since 2010.

But recent changes suggest that the Centers for Medicare & Medicaid Services (CMS) is making more of an effort to work with providers to improve both their experiences dealing with RACs and the integrity of the RAC program, which has been the source of considerable controversy.

Much of the dispute has revolved around RAC contingency fees and the lack of adequate checks and balances within the system. In other words, if the RACs are watching the hospitals, who is watching the RACs?

Data Validation Contractors (DVCs) at a Glance

Data Validation Contractors (DVCs) will be the auditing body for CMS oversight of the RAC program. They are intended to fill the void of accountability and monitoring that has been sorely lacking in the RAC program. DVCs are designated to:

  1. Verify that what the RAC states as “improper” is actually an improper payment to the provider. If the DVC confirms that payment was indeed improper, the RAC audit findings are deemed valid.
  2. Look at RAC statistical data to monitor and measure RAC accuracy rates. RAC statistical data analyzed by the DVCs will most likely be used for other purposes by CMS, such as during contract negotiations and renegotiations with providers.

With so much RAC data available, it is imperative that providers level up their audit analytic capabilities to proactively prevent audits and Medicare reimbursement recoupments. Only one DVC, Livanta, LLC, has been appointed by CMS as of April 2017.

Livanta Appointed to Audit Medicare Part D

Directly addressing the need to help ensure the integrity of its RAC program, CMS has appointed Livanta as DVC for Medicare Part D (prescription drugs). Livanta is a Beneficiary and Family Centered Care (BFCC) Quality Improvement Organization (QIO), which focuses on Medicare beneficiaries’ rights, handles discharge appeals, and protects beneficiaries by reviewing the quality of healthcare complaints. (Another type of QIO, Quality Innovation Networks (QINs), work with providers to improve care.)

Through the DVC, CMS is able to confirm or deny Medicare Part D RAC improper payment findings, and measure and track Medicare Part D RAC accuracy rates. CMS has not yet announced what organizations besides Livanta will act as DVCs for other claims areas.

Under the Patient Protection and Affordable Care Act (PPACA), Medicare’s RAC program was intended to eventually be expanded to Medicare Advantage and Part D plans. Though an exact timeline for this was not stipulated in the PPACA, this DVC program is clearly a result of that RAC expansion.

Devil’s in the Details for Medicare Part D DVC

Livanta will analyze random examples of prescription drug events (PDEs) for which the RAC issued an improper payment determination, usually due to coding errors or failure to properly document medical necessity. Livanta will then review a sample of these cases.

So far, CMS has not provided many more specifics about the DVC program or Livanta’s scope of work. But here’s what we know so far:

  • Livanta will monitor RAC decisions for both inpatient and outpatient prescriptions.
  • Anytime a drug is prescribed or administered to a Medicare Part D patient, there is the possibility a RAC could flag it as improper. Everyone from physicians to pharmacies could be included in the review.
  • CMS says Livanta will be under “very careful guidance,” but it has provided no details or further clarifications. As of April 2017, CMS has not published any specifics on exactly what this means.
  • Livanta may request and review documents including prescriptions, hospital medical records, and physician office notes.

How CMS Will Handle Disputes between the DVC and the RAC

If the DVC and the RAC concur that payment to the provider was improper, the hospital and/or pharmacy will be notified. If they disagree, the DVC is to provide a letter with full documentation of the reasons why it believes the RAC is wrong, including the amount the RAC owes the hospital and/or pharmacy. “For those RAC findings the DVC disagrees with, the DVC must provide a rejection reason and explanatory comments, including their recovery calculations,” according to CMS.

The RAC then has the opportunity to reject or accept the DVC’s finding, but there’s no guidance as to what happens if they disagree. Evidently, the RAC and DVC are expected to collaborate, resolve the situation, and come up with a solution. However, they can involve CMS as a last resort.

Six Steps to Take Now

Awareness plus proactivity remains the rallying cry for healthcare organizations when it comes to audits. Until more information is released by CMS, organizations can ideate their vision of the Medicare DVC program by fully understanding Livanta’s role and responsibilities. To prepare for closer scrutiny of Medicare Part D claims, the following six steps are recommended:

  • Expand clinical documentation improvement (CDI) programs to include e-prescribing software and pharmacy documentation;
  • Educate the pharmacy department, and owned or affiliated pharmacies, about the DVC program;
  • Make sure all prescription drug information is correct and up to date in chargemasters and formularies;
  • If a drug is prescribed for off-label use, be sure the prescriber documents rationale with supporting research from medical journals to indicate why the drug was prescribed and dispensed (precedent is required);
  • Look carefully at LCDs and NCDs when billing for the drug and the number of units (amount) of the drug administered; and
  • Use medical records (hospital or physician) to ensure payment for the medication.  

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