In the short time since the Medicaid Recovery Audit Contractor (RAC) program began in January, many questions about it have arisen. The program’s statement of work (SOW) is less detailed than that of Medicare Recovery Auditors (RAs), and under the program states have far more latitude in areas such as chart limits, appeals processes and payments. That being said, the U.S. Department of Health and Human Services (HHS) stated that Medicaid RACs are estimated to save the government more than $2 billion during the next five years.

In December 2011, CMS released a frequently asked questions (FAQs) document regarding the Medicaid RAC program. The document was divided into eight sections. The first section, “Operational Guidance,” provides states with information on setting up their Medicaid RAC programs, preparing for audits and other program regulations specific to each state – such as the length of the lookback periods. The second section, “Procurements and Conflicts of Interest,” explains payment structures for Medicaid RACs and provides guidance as to what type of entity can serve as a state’s Medicaid RAC. For example, the document states that there is a potential conflict of interest if a Payment Error Rate Measurement (PERM) contractor also were to serve as a Medicaid RAC. The third section, “Medicaid RAC Appeals Process,” is very short, featuring only two questions referring to the states’ and RACs’ responsibilities during the appeals process. In this matter CMS defaults to the state and the structure it has in place.

The next four sections – “State Reporting of Improper Payments Identified by Medicaid RACs,” “Audit Coordination,” “Program Exceptions” and “Contingency Fees” – are more extensive and relatively straightforward.

The final section, “Medicaid RAC Program Stakeholder Inquiries and General Information,” contains the most FAQs and provides a strong background to help healthcare facilities understand this new program. There has been quite a bit of confusion regarding how these new Medicaid RACs differ from other program integrity contractors and how they all now fit together into the larger CMS auditing picture. Will roles change? Will some contractors be eliminated altogether? What about the Medicaid RACs is similar to aspects of other contractors, and what is different? All of these questions are answered in the final section of the document.

An important matter addressed in the FAQs is the difference between the Medicaid RAC and Medicare RA programs. The major difference, as explained by CMS, is that “Medicaid RACs are private contractors, working directly for the states,” whereas Medicare RAs are “private contractors working directly for CMS.” This is important to note because while the RAs are all working for one “boss,” the RACs all work for the state – so processes, procedures and areas of focus could vary depending on where the RAC is located.

Another FAQ within the “Program Stakeholder Inquiries and General Information” section offers another comparison – this time between Medicaid RACs and PERM contractors. The major difference between these two contractors that’s relevant to providers is their respective areas of focus. While the Medicaid RACs’ goal is similar to that of the Medicare RAs, in that their purpose is to “identify underpayments and identify and recoup overpayments,” PERMs “do not focus on areas suspected or known to be at risk for improper payments.” PERMS evaluate the program as a whole.

Another contracting group, the Medicaid Integrity Contractors (MICs), also is addressed in this document. Many providers are curious as to whether the MICs will be replaced by the new Medicaid RAC program, as the existence of both would seem to represent a duplication of efforts. CMS is careful to point out that there is no intention of replacing the MIC program due to the demographics these contractors study. Because the Medicaid RACs are state-specific, “regional and national trends and vulnerabilities would likely go undetected by an individual Medicaid RAC.” MICs are far more qualified to make these observations because regulations are set by CMS on the national level and are consistent for all MICs.

As the Medicaid RAC program continues to develop, it is vital that providers understand their individual states’ programs’ definitions and characteristics, as well as the differences between all program integrity contractors. Many states already have RAC-like entities or functional processes in place that can be used as best-practice models. As is the case with the Medicare RAs, it is likely that the Medicaid RACs will focus on similar issues, depending on their level of success.

The entire December 2011 FAQs about Section 6411 (a) of the Patient Protection and Affordable Care Act can be found here. States and providers should familiarize themselves with this helpful information provided by CMS.

About the Author

Ralph Wuebker, MD, MBA, currently serves as Vice President of Executive Health Resources’ (EHR) ACE (Audit, Compliance and Education) Team. This group of physicians conducts audits and regular visits to EHR’s client hospitals to provide ongoing education on a variety of topics including Medicare and Medicaid compliance and regulations, medical necessity, Recovery Audit Contractors, utilization review, denials management and length of stay.

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