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CMS Recovery Audit Program Myths The Centers for Medicare & Medicaid Services (CMS) last month released a document titled “Medicare Fee-For Service Recovery Audit Program Myths.” The document contained 14 so-called myths, yet at least half are issues I have never heard raised by a reputable source – and the remainder appeared to be defensive explanations of the RAC Statement of Work that lacked detail on RAC activities. My jaw ended up hanging so low at the conclusion of these four pages that I felt that nothing short of a point-by-point rebuttal was warranted – so I present the following:

Myth No. 1 – RACs deny every claim that they review. I have never heard anyone make this claim, though I am sure some hospitals may feel this way, given the way RACs tend to hyper-focus on some facilities in the same way armed robbers look at unarmed owners of urban liquor stores. CMS went into a tortured explanation of the Comprehensive Error Rate Testing (CERT) study to refute this, but the rhetoric wound up going nowhere. The part they left out: According to the American Hospital Association’s (AHA’s) latest RACTrac survey, two-thirds of all RAC documentation requests do not lead to a determination of an improper payment. Duck hunting in the dark might offer a better success rate.

Myth No. 2 – RACs have a contingency fee of between 30 and 50 percent. Anyone who had this perception clearly also had no familiarity with the RAC Statement of Work or day-to-day contact with the RAC program whatsoever. The genesis of this myth is completely foreign to me. The part they left out: While the RACs are paid on a contingency fee basis (up to 12.5 percent at the high end, for CGI), the rest of the integrity contractors (MICs, ZPICs, etc.) are paid flat fee contracts for a fixed time period – and their rate of success in identifying errors is actually worse than the RACs, if past Office of Inspector General (OIG) reports are to be believed.

Myth No. 3 – Every RAC denial is overturned on appeal. In an attempt to prove this false, CMS cites appeals data from the 2010 fiscal year – seemingly forgetting that we are currently in the 2013 fiscal year and that, according to the AHA, more than 71 percent of all appeals filed by RACTrac-participating hospitals have yet to be adjudicated. Of the ones that have, hospitals are winning about three-quarters of the time. CMS has responded to this success rate by attempting to minimize or eliminate the Administrative Law Judge (ALJ) level of appeal, where most of their losses are occurring. The part they left out: In light of the fact that more than 40 percent of all RAC determinations are appealed, CMS’s elucidation of this “myth” appears rather combative.

Myth No. 4 – RACs have non-clinicians conduct review of medical records. The addressing of this “myth” resembles a classic case of deflection. The memo states “Fact: Each RAC employs certified coders, nurses, therapists and a physician contractor medical director (CMD).” The last time I checked, however, clinical decisions are made by doctors, with nurses and therapists defined as “ancillary providers” and coders defined as “those people who tell me I’m billing something wrong.” Unless the lone CMD with each contractor has a hand in every RAC determination, then the fact that non-clinicians are conducting review of medical records is not, in fact, a myth. The part they left out: CMS goes on to state that a RAC organizational chart is submitted “as part of the proposal and identifies the number of key personnel and the organizational structure of the (RAC) effort.” These charts were not offered as an addendum to this memo, so in the absence of any indication of contractor employee makeup, the “myth” lingers, given that the employment specifics for each RAC remain a mystery to the provider community.

Myth No. 5 – RACs create their own policies and are not bound by CMS regulations, NCDs or LCDs. Again, it’s extremely unlikely that anyone dealing with the RAC process on a regular basis would ever make this claim. The claims that providers actually are making (particularly as it applies to the enormous number of denials for short stays) is that CMS regulations are poorly written and inadequately clarified. Additionally, the MACs, whenever they make an attempt at clarification, have clouded key issues to such a degree that they sometimes can’t answer provider inquiries regarding past guidance they themselves once gave. The problem has gotten so bad that NGS, an affected MAC, reportedly won’t allow any recording of their teleconferences, based on past embarrassments. The part they left out: The ALJs seem to have a good grasp of the issues involved, but because they rule in favor of providers more often than not, CMS’s game plan, as stated previously, has been to minimize their impact.

Myth No. 6 – RACs can review as many claims as they want from a provider. CMS goes on to state that the maximum number of requests per 45 days is 400. However, providers with more than $100 million in payments can have up to 600 charts requested every 45 days, based on the ADR limit update made effective on March 15, 2012. The part they left out: CMS conveniently omits any mention of semi-automated review in addressing this issue, as there is no limit to the number of claims that can be scrutinized under this form of review. So technically, RACs indeed can review as many claims as they want from a provider.

Myth No. 7 – RACs don’t have physicians on staff. If you exclude the one solitary CMD, however, the RACs don’t actually have physicians on staff conducting complex reviews. The part they left out: RACs primarily have been going after hospitals, but when Part B claims are reviewed, I would say that the odds of a specialist having his or her clinical documentation reviewed by a physician of the same specialty are practically nil, making appeals virtually automatic in many cases.

Myth No. 8 – RACs are focusing complex reviews on Critical Access Hospital claims. CMS states simply that “Recovery Auditors have not completed any complex reviews on Critical Access Hospital claims.” Yet automated reviews are being conducted, and it is quite possible that semi-automated reviews have been conducted as well. I would say that this “myth” perhaps is best described as a half-truth. The part they left out: Last fall I appeared on a broadcast of Monitor Monday in which the administrator from Pushmataha Hospital in Oklahoma related that he had voiced complaints to his congressperson, as Connolly was picking them apart financially. In addition, he now is being forced to go to his community and ask for tax levies because he can’t get funding to keep his doors open. When a rural population being served by a hospital is threatened by RAC activity, the CAH designation means nothing. This also means that care for an underserved population is being compromised just so someone can wave poorly estimated RAC dollar results around and pound their chests about how they are funding healthcare reform.


Myth No. 9 – RACs do not tell anyone what they are reviewing. Anyone connected with the RAC program knows that there are approved issues lists on the RAC websites. This is yet another example of a myth that no one has elucidated. The part they left out: Medicaid RACs are not required to provide approved issues listings for the audits they are conducting, so when it comes to Medicaid, it is indeed true that the RACs do not tell anyone what they are reviewing.

Myth No. 10 – RACs do not issues (sic) detailed results letters. With regard to this myth, the results letters I have been made aware of do not go into dramatic detail, but rather contain canned language from a template outlining a general reason for a claim denial based on an approved issue being applied. The part they left out: If you are ever able to have a conversation with an actual reviewer of your documentation who retroactively denied your claim, consider yourself lucky.

Myth No. 11 – RACs do not issue timely denial letters. This is actually not a myth. The MACs took over the process of issuing demand letters back in January 2012, and the timely issuance of letters has been an ongoing issue ever since. The part they left out: Again, CMS lists this issue as a myth, but in the ensuing paragraphs they do not refute it, but rather use twisted language about the importance of timely issuance based on appeal timelines. There are some RAC claims that have been bogged down in the appeals process for more than two years and still only have reached level three out of five, so I think maybe it would be best if CMS would not descend into pontification about the importance of appeal timelines.

Myth No. 12 – RACs outsource all the medical review to staff in India and the Philippines. Again, this is the first that I have heard this, so maybe this is actually a myth. The part they left out: PRGX is a RAC subcontractor here in Region B. It has subcontractor status because the quality of their work during the demonstration project was subpar. Region B still has the highest appeal overturn percentage, and I am sure that a number of those issues can be traced to this subcontractor, rather than CGI. Maybe outsourcing overseas would provide a better result than that yielded by an entrenched government contractor who fought the permanent RAC awards?

Myth No. 13 – RACs deny Inpatient Rehab Facility claims because the care could have been given in a less intensive setting. CMS does not refute this in subsequent paragraphs; it only explains the rationale for such denials. The part they left out: Whenever I hear the word “rehab,” I immediately think of my colleague Nancy Beckley, an expert on the subject. In a brief phone call related to this memo, she reminded me of the widespread denials of claims filed by IRFs that occurred during the RAC Demonstration Project – specifically for claims related to joint replacements being “not medically necessary” for stays. Every one of these denials was reversed on appeal, and the contractor that issued them, PRG Schultz (now known as PRGX; see above) was “penalized” into subcontractor status. Not surprisingly, the issue of joint replacements being not medically necessary is rearing its head yet again, so expect this “myth” to soon start proving true.

Myth No. 14 – RACs target providers who are part of CMS demonstrations. CMS explains that any hospital can be targeted, but I have heard anecdotal evidence strongly suggesting that hospitals that entered into demonstration projects and then exited (more than likely because they wanted their appeals rights back after they were negated by participation in the demonstration) suddenly and mysteriously see a jump in ADR requests. The part they left out: RACs are ripping the daylights out of hospitals, but physicians and DME suppliers are more or less getting a free pass, based on current issues lists. We are now three full years into the permanent RAC program, and it certainly appears to me that the RACs continue to focus on the claims with the highest dollar amounts rather than the claims with the highest error rates. This certainly seems to be something you could charitably call “targeting.”

The American Taxpayer Relief Act of 2012 that was just signed contains a change allowing CMS to go back five years to review all claims paid. Since the ink on the bill is barely dry, it is hard to predict if the work of the RACs will be included in this plan. But CMS appears to be entering new territory in terms of lack of concern for the provider community, and one should expect that this particular change will not be the last of its kind.

About the Author

J. Paul Spencer is the Compliance Officer for Fi-Med Management, Inc., a national physician practice financial management company based in Wauwatosa, WI. Paul has over 20 years of experience across all facets of healthcare billing, including six years spent with insurance carriers. In his current role with Fi-Med, he acts as a physician educator on issues related to E/M level of service and documentation audits by CMS and other outside entities. Paul has carried the CPC and CPC-H credentials from the American Academy of Professional Coders since 1998

Contact the Author


To comment on this article please go to editor@racmonitor.com



Monitor Monday broadcast: August 27, 2012


J. Paul Spencer, CPC, COC

J. Paul Spencer is a senior healthcare consultant for DoctorsManagement. Is the national correspondent for Monitor Mondays, the live Internet radio broadcast produced by RACmonitor.

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