The three-year RAC demonstration project (March 2005 through March 2008) succeeded in correcting more than $1 billion in improper Medicare payments. About 96 percent of these were overpayments, a fraction of which was used to pay for the demonstration and the rest returned to the Medicare Trust Funds.


Now it’s been a year since implementation of the mandated national RAC program, and members of Congress wanted to know whether CMS had installed the necessary safeguards to address the potential “vulnerabilities” uncovered during the RAC demonstration project.


GAO: Focus on Root Causes


According to the March 2010 GAO report, the RAC demonstration project did lead to the successful recoupment and refunding of past improper payments. However, CMS did not, during the project, focus enough attention on the root causes of the vulnerabilities that caused the improper payments.


“The ultimate success of the government-wide effort to reduce improper payments hinges on each federal agency’s diligence and commitment to identify, estimate, determine the causes of, take corrective actions on, and measure progress in reducing improper payments,” the GAO stated. “To this end, CMS must establish effective accountability measures, and incentives to ensure the RAC program meets the agency’s stated objectives.”


Accountability measures include adequate monitoring and control activities. CMS’s primary goal, says the GAO, must be to ensure that corrective actions are in place so that improper payments can be reduced. One example of a weak link is the fact that national RAC staff has no organizational authority within CMS and cannot implement the corrective actions needed. Someone with authority inside the agency must be made accountable for that.


In addition, the GAO recommended that CMS develop and implement policies and procedures to ensure that the agency promptly takes certain steps, which are provided below. CMS agreed, in general, with the recommendations, and also provided some insights into what it is doing and the dilemmas it faces.


Evaluate RAC audit findings. After claims have gone through the appeals process, a CMS corrective action team reviews the vulnerabilities and determines whether a referral to policy or coverage staff should occur. Also, an independent contractor looks for data trends in the RAC Data Warehouse and sends quarterly reports to CMS on its findings. CMS says it then sends these to the provider community.


Determine the appropriate response and a time frame for taking action. “Complex reviews” accounted for approximately 30 percent of the improper payments identified, according to CMS. These claims needed additional review by a clinician prior to a determination of payment accuracy. Lack of documentation was a prevailing cause of the denials of these cases, and CMS says it uses education, policy clarifications and system edits to increase physician awareness of the need to adequately document cases.


Correct vulnerabilities identified. Although CMS agreed this is important, it also repeated the above reality of complex cases. It also noted that it does not consider a RAC finding to be validated until the majority of claims for a particular issue have completed the Medicare appeals process. Only then does it see the RACs’ identifications of improper payments to be accurate and appropriate.


About the Author

Barbara Vandergrift, RN, BSN, MA, is a senior healthcare consultant with Medical Learning, Inc. (MedLearn®), St. Paul, MN. MedLearn is a nationally recognized expert in healthcare compliance and reimbursement. Founded in 1991, MedLearn delivers actionable answers that will equip healthcare organizations with their coding, chargemaster, reimbursement management and RAC solutions.


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U.S. General Accountability Office: Medicare Recovery Audit Contracting: Weaknesses Remain in Addressing Vulnerabilities to Improper Payments, Although Improvements Made to Contractor Oversight (GAO-10-143), March 2010.


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