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p-spencerOn Jan. 1, 2012, the Centers for Medicare & Medicaid Services (CMS) shifted the responsibility of issuing Recovery Audit Contractor (RAC) demand letters from the RACs to the Medicare Administrative Carriers (MACs). Based on discovered differences between dollar amounts listed on demand letters and amounts eventually recouped prior to the date of the change, this seemed like a good idea at the time.

As the new process plays out, however, it appears that we perhaps should look for more pressing reasons as to why CMS made this change. In transferring this responsibility to the MACs, CMS appeared to forget one crucial detail. All correspondence sent from MACs to providers is based on address and contact information entered into the Healthcare Integrated General Ledger Accounting System (HIGLAS). Unfortunately, the HIGLAS system does not have the ability to hold more than one address per provider number.

The fallout from this change became apparent almost immediately. RAC coordinators at hospital systems of all sizes, some of whom had spent months ensuring that the RACs were forwarding all demand letters and related correspondence to one address, now find themselves back at square one. Mail that was being delivered to one address in late December is now going to multiple addresses based on provider numbers.

In addition, many preliminary RAC timelines for disputing results have been compromised. Given that a discussion period must commence within 40 days of the date of either the demand letter or the review results letter, larger facilities are being forced to forego this dispute method given that those same 40 days now are being spent chasing demand letters from multiple locations. Ironically, at a Jan. 19 provider outreach session conducted in Wisconsin by CGI, the Region B RAC, the contractor representative went out of her way to encourage providers to utilize the discussion period, as the current rate of use is low in that region. It’s hard to see how CGI now will get its wish, given the barriers encountered with the new demand letter process.

Recoupment based on RAC findings begins on the 41st day from the date of the demand letter. Based on the notion that correspondence possibly is being sent to several unique places, a situation more than likely to arise is that a recoupment  will occur without a demand letter finding a qualified recipient within a healthcare organization. As bad as it looks on the surface, there are two saving graces in this situation, however. First, an appeal can be filed within 120 days of the date on the demand letter, giving providers time to gather all related correspondence. Second, if such a late-filed appeal is won by provider, the MAC should return the amount recouped plus interest at a rate of 10.5 percent for every 30 days beyond the recoup date. Given the high rate of RAC appeals being found in favor of the providers, this can be seen as a ray of light in a dark situation.

Despite the administrative costs of handling RAC issues, most hospitals have shown increasing acumen in tackling the worst that RACs have to offer. With what was once seen as a small change causing a seismic shift in processes, the job of a RAC coordinator just became much more challenging.

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, Wis. Paul has more than 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.

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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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