RAC Review Reveals Glaring Shortcomings

With little fanfare, CMS posted data for 2019 RAC activity – and the results weren’t pretty.

Let me start today with a thanks to all who submitted comments to the Centers for Medicare & Medicaid Services (CMS) on the rule to rein in Medicare Advantage (MA) behavior. If any of you listened to the CMS Hospital Open Door Forum last week, I once again asked to clarify that since CMS was simply codifying current rules, does that not mean that the rules are in place right now, and MA plans should be abiding by the Two-Midnight Rule today?

The response was that there was no one from CMS on the call who could provide an answer, but they would get back to me. I am going to continue to pester them all year until they give an answer. There is no reason we should have to wait until next January.

One thing we have not talked about in a while is the Recovery Audit Contractors (RACs). Remember them? I know they have been busy auditing for commercial and MA payors, digging up paid claims from years gone by, running their proprietary algorithms, and somehow finding claims that should not have been paid (in their opinion) and earning their fee, likely a contingency fee, forcing providers to now fight for their payments. But the RACs have been continuing to audit Medicare claims.

With no fanfare, and found by me only by accident, CMS posted some data from 2019 RAC activity. Remember 2019? Before COVID? Oh, such fond memories. In that year, the RACs performed 168,000 reviews and denied 35,000, for a 20.8-percent denial rate. Of those denials, almost 20,000 were appealed at level 1, to the Medicare Administrative Contractor (MAC), with 56 percent ruled partially or fully in favor of the provider. I am going to call out Performant, because over 91 percent of their home health and hospice denials were overturned at the MAC level, and Cotiviti, because over 70 percent of their Part B denials for Jurisdiction L were overturned. Not much that can be said about overturn rates like that, especially that which can be printed.

At the second level, the Qualified Independent Contractor (QIC), the RACs did not do very well either. A total of 33 percent of denials taken to the QIC were overturned in favor of the provider, with Performant doing the worst, losing 43 percent of their cases. In 2019, 18,000 cases were appealed to the ALJs (administrative law judges), with 27 percent of cases dismissed with no explanation provided, 0.3 percent of cases remanded back, and 37 percent of cases decided in favor of the provider. And finally, 525 cases went to the Departmental Appeals Board (DAB), with only two decisions in favor of the provider and most of the rest dismissed or withdrawn.

Interestingly, 32 percent of providers still send their records via paper, and 20 percent via fax. I guess we are still not yet in the digital age.

Now, the statistic I do not understand is that the RACs also report their accuracy rates, and they range from 94.6 to 99.6 percent. You may not know that their accuracy rate also determines their contingency fee rate, with every percentage point over 95 percent leading to a 0.2 percent increase in their fee. But how do they have an accuracy rate that high, but yet 56 percent of their denials are reversed at level 1? That sure sounds like a 44-percent accuracy rate.

The worst-performing RAC was HMS, and I recently heard some rumors about HMS and the outrageous way they perform Medicaid RAC audits in one large southern state. Sure enough, there is a seven-page instruction manual on how to submit an appeal properly. If you appeal a denial and you say “your denial,” it will be rejected, because the initial denial was from a different department. If the records are in the wrong order, it will be rejected. And I have heard that HMS has an onerous form that must accompany appeals, and if even one space is left blank, even if it is not applicable, the appeal is rejected without any review.

I know I am preaching to the choir, but it sure seems that the RAC program remains fatally flawed, with contractors lacking not only accuracy, but apparently, also ethics.

Programming note: Listen when Dr. Ronald Hirsch makes his Monday Rounds live on Monitor Mondays with Chuck Buck, 10 Eastern, and sponsored by R1-RCM.