Are You Ready for RACs?

The RACs are coming! Are you ready? CMS has recently begun to initiate what it calls “aggressive new steps” to prevent fraud and abuse in the Medicare program. These steps include a new program focused on reclaiming alleged overpayments made to Medicare providers and suppliers, including HME companies.

These programs utilize four recovery audit contractors to cover the country. The RACs will be responsible for conducting post-payment reviews of Part A and Part B claims, seeking to identify both overpayments and under-payments.

RACs will be paid on a contingency fee basis for everything they find. According to CMS, a recent three-year demonstration project in six states collected over $900 million in overpayments and $38 million in underpayments. The program will be phased in geographically over the course of this year.

While the RAC program is being touted as a tool to combat fraud and abuse, in reality the vast majority of overpayments captured by the RACs will be the result of mistake. The RACs have a strong incentive to seek all possible overpayments, and to interpret any questionable claims in a manner that maximizes their revenue.

CMS apparently disagrees with me, and suggests that the RACs have a disincentive to seek payments overaggressively. But I think this is largely smoke and mirrors. In point of fact, the only penalty the RACs face if they are overzealous is that they do not get paid. Their contingent payments do not get distributed to them until they have won at least two levels of appeals (if pursued by the provider or supplier).

I guess there is some possibility that a RAC will not be aggressive because it has a better chance of cashing in a lower contingent fee without appeal rather than having to wait for a larger contingent fee, which it will only receive if it wins through the appeals process.

But my strong guess is that the RACs are going to go for the biggest paycheck, being as aggressive as they can, and simply accept the fact that they may sometimes lose on appeal. The nature of the appeals process is such that most of the RAC’s preparation cost will have been expended prior to the appeal, while most of the appellant’s costs will be incurred during the appeals process.

Besides, most of the time an aggressive RAC will simply go after more claims. The obvious, less aggressive overpayment allegations will still be included in the demand letter from the RAC to the provider/supplier. Thus, the more likely scenario is that a RAC may lose part of the appeal, and win the remainder of the appeal. So, I really don’t see much of a reason for the RACs to be conservative.

I think HME companies must anticipate that the RACs will pursue alleged overpayments quite aggressively (and underpayments; RACs still get a contingent fee when an underpayment is identified).

Smart HME companies will anticipate RAC activity by conducting a thorough internal assessment — as soon as possible — to verify that their billing personnel, their records-keeping personnel and their compliance personnel all understand the rules. Sometimes it will make sense to bring in an outside consultant to conduct or assist with this assessment, similar to the approach often taken when preparing for a compliance program or an accreditation survey.

This comparison is not frivolous.

The RACs are instructed to work closely with the Office of Inspector General and the new program integrity contractors to identify when a provider’s or supplier’s billing and collection inaccuracies suggest fraud.

A finding of fraud does not always reflect an intent to deceive. Rather, a continued pattern of mistakes that allegedly shows a “reckless disregard” for the accuracy of the submissions will constitute civil fraud under the federal False Claims Act.

Believe me, it is far better to identify this sort of deficiency on your own, prior to a government audit, than it is to learn of the problem because you are in the middle of a fraud investigation.

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Neil Caesar is president of the Health Law Center (Neil B. Caesar Law Associates, PA), a national health law practice in Greenville, S.C. He also is a principal with Caesar Cohen Ltd., which offers compliance training, outsourcing and consulting and the author of the Home Care Compliance Answer Book. You can reach him at 864/676-9075 or [email protected].