Understanding the RACs and FCAs

Let me open by saying I am so happy to be here. For those of you who watched the live version of last week’s Monitor Mondays, I suffered a seizure during my segment.

I am so thankful to Dr. (Ronald) Hirsch for recognizing the signs and calling my administrative assistant, who normally would never interrupt my presentation, but did for his call. She, in turn, called 911. Help came, and I am here.

As we all know, Recovery Audit Contractors (RACs) are private contractors hired by the Centers for Medicare & Medicaid Services (CMS) to detect and correct improper payments within the Medicare and Medicaid programs. Their primary responsibility is to identify overpayments, underpayments, and incorrect coding.

“Overpayments” refer to any payment made by Medicare or Medicaid that exceeds the amount that should have been paid, based on the services provided. RACs do this by reviewing billing records and comparing them to guidelines outlined by CMS and other relevant authorities.

The question I present today is this: how is an alleged overpayment distinct from an alleged violation of the False Claims Act (FCA), which invokes higher, triple penalties? When you think about it, any alleged overpayment is also an alleged violation of the FCA. But a RAC cannot adjudicate FCA accusations. The variance lies within the the individual entity that is conducting, and the provider’s intent.

RACs conduct audits through a variety of mechanisms, including automated reviews (for clear errors such as incorrect coding or unbundling) and complex reviews (for more nuanced issues such as medical necessity). Once RACs identify overpayments, they request that healthcare providers return the excess funds. However, their findings are limited to overpayment recovery – they do not issue findings related to violations of the False Claims Act.

Juxtapose this with the FCA, which is a federal law that imposes liability on entities or individuals who knowingly submit false claims for payment or approval to the government. In the context of Medicare and Medicaid, this can involve submitting claims for services that were never provided, services that were medically unnecessary, or services that were incorrectly coded. When RACs identify an overpayment, they may flag the issue for further investigation, but they do not have the authority to pursue allegations of fraud or violations of the FCA.

While a RAC audit typically focuses on recovering overpayments, these overpayments could trigger FCA violations, under certain circumstances. If the overpayment resulted from a provider submitting claims for services that were not performed or were not medically necessary, this could be seen as a false claim under the FCA. The key factor that differentiates a RAC’s audit from an FCA violation is the intent behind the overpayment. Overpayments identified by RACs could be due to honest mistakes, coding errors, or misunderstandings, but if a provider knowingly submitted false information to secure reimbursement, it could result in an FCA violation.

For example, if a provider intentionally bills for services that were not rendered or submits a claim for a higher level of service than what was actually provided (upcoding), these actions could trigger both an overpayment assessment by a RAC and a potential FCA violation. The distinction lies in whether the action was knowingly fraudulent.

Agencies That Can Assert FCA Allegations

While RACs can flag overpayments, they cannot directly assert violations of the False Claims Act. This is typically the responsibility of law-enforcement agencies, including the U.S. Department of Justice (DOJ) and the Office of Inspector General (OIG) for the U.S. Department of Health and Human Services (HHS). These agencies are tasked with investigating potential FCA violations and pursuing legal action, if necessary. Additionally, private individuals known as “whistleblowers” can also file qui tam lawsuits under the FCA, reporting fraudulent activities and seeking a share of any recovery. Your “spidey senses” should always be heightened when an investigation is conducted by DOJ, OIG, or HHS, rather than a RAC.

Certain Current Procedural Terminology (CPT®) codes are frequently targeted by RACs due to their potential for improper billing, which could lead to overpayments. We’ve talked about many of them in the past on RACmonitor. Some of these codes include:

• CPT Code 99214: This is commonly used for office visits and is frequently flagged due to concerns over upcoding – billing for a higher level of service than was actually provided;
• CPT Code 99233: This code refers to inpatient visits and is often scrutinized due to the potential for excessive billing, especially when a provider claims a high level of service without sufficient documentation to support the claim;
• CPT Code 20610: Used for joint injections, this code is flagged when there are concerns that the procedures billed were not properly documented or performed;
• CPT Code 15734: This code relates to wound care, and it can be targeted if the documentation does not support the extent of care being billed; and
• CPT Code 87804: This is for rapid influenza testing. It can attract RAC scrutiny if there is a lack of supporting evidence that the test was medically necessary or performed according to established guidelines.

RAC audits are not limited to these codes, but they are among those that commonly face additional scrutiny due to the potential for errors, overuse, or misapplication.

Conclusion

While RACs play a critical role in identifying overpayments in Medicare and Medicaid programs, their responsibilities are distinct from those related to violations of the FCA. RACs are tasked with recovering improper payments, but they do not have the authority to make FCA allegations. If overpayments are the result of fraudulent billing practices, such as upcoding or billing for services not rendered, these could potentially trigger FCA violations, and it is the responsibility of agencies like the DOJ and OIG to investigate and prosecute such violations. Providers must be mindful of their billing practices and ensure compliance with coding and documentation requirements to avoid both overpayments and potential FCA exposure.