spencerCDo you know how to review your Medicare remittance advice, or RA, for Recovery Audit Contractor (RAC) activity and accurate financial data?


And, perhaps more importantly, do you actually do it? It’s a task that physicians, providers, and suppliers submitting claims to Medicare need to perform, according to the Centers for Medicare & Medicaid Services (CMS), which is implementing a new policy for RACs to use when identifying and recouping overpayments. (In fact, so important is the topic of recoupment that CMS hosted a national call on the issue on May 26. Note, however, that it was not specifically RAC-related, according to CMS.)


The New Policy

In Transmittal R659OTN (March 19), CMS explained that it realized that fiscal intermediaries haven’t been providing sufficient detail on remittance advice when recouping overpayments identified by RACs, allowing providers to track and update their financial records to reconcile Medicare payments. This transmittal instructs Medicare system administrators how to report information on the RA when there is a time difference between the creation and the collection of the recoupment (i.e. when funds are not recouped immediately) and a manual reporting (demand letter) also is issued.


Under the provisions of Section 935 of the Medicare Prescription Drug, Improvement, and Modernization Act (MMA) of 2003, recoupment can begin no earlier than the 41st day, and can happen only if a valid request for a redetermination has not been received within that time period. Under this scenario, the RAC has to report the actual recoupment in two steps:


  • Step 1: Report the new payment and negate the original payment (also referred to as “reversal and correction”). Actual recoupment of money does not happen here. The Medicare contractor also sends a demand letter to the provider when the accounts receivable is created. This letter contains a control number (ICN or DCN) for tracking purposes that also is reported on the RA.
  • Step 2: Report the actual recoupment. Recovered amounts reduce the total payment and are reported clearly in the RA to providers.


RA Guidance from CMS

As providers know, the RA is how Medicare communicates with providers about claim processing decisions such as payments, adjustments and denials. RA notices are very important to a provider’s business, and CMS says that it “wants to make sure that every provider that receives RAs from Medicare sufficiently understands how to read and interpret these notices.” To ensure this happens, CMS encourages providers to download and use Understanding the Remittance Advice: A Guide for Medicare Providers, Physicians, Suppliers, and Billers. (For the manual, go to http://www.cms.gov/MLNProducts/downloads/RA_Guide_Full_03-22-06.pdf.)


CMS explains that this publication, which is intended as a self-help resource, provides information on topics such as the types and purpose of RAs as well as the types of codes that appear on the forms. Among the many benefits of the guide that CMS touts, here are a few:


  • Increased ability to understand and interpret the reasons for denials and adjustments;
  • Reduction in the resubmission of claims;
  • Rapid follow-up action, resulting in quicker payment; and
  • A useful tool for training new staff or a refresher for experienced staff.


The official instruction that CMS issued to Medicare payers regarding the above change may be viewed at http://www.cms.gov/Transmittals/downloads/R659OTN.pdf. For the related provider information memo, go to http://www.cms.gov/MLNMattersArticles/downloads/MM6870.pdf.


About the Author

Carol Spencer, RHIA, CCS, CHDA is a senior healthcare consultant with Medical Learning, Inc. (MedLearn®) in St. Paul, Minn. MedLearn is a nationally recognized expert in healthcare compliance and reimbursement. Founded in 1991, MedLearn delivers actionable answers that equip healthcare organizations with coding, chargemaster, reimbursement management and RAC solutions.

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