That figure takes into account the dollars repaid to healthcare providers, the money overturned on appeal and the costs of operating the RAC demonstration program. Further, Since CMS began the program, the error rate in submitted claims has dropped from 14.2 percent in 1996 to 3.9 percent in 2007.
Most of the improper payments that the RACs identified occurred when healthcare providers submitted claims that did not comply with Medicare’s coverage or coding rules. The types of inadvertent errors leading to improper payments, found by the RACs include billing for a procedure multiple times (for example, when a healthcare provider charged Medicare for conducting three colonoscopies on the same patient on the same day), incorrectly coded procedures, and submission of duplicate claims resulting in two payments to a provider.
The RACs corrected over $1 billion of Medicare improper payments from 2005 through March 27. Roughly 96 percent of the improper payments ($992.7 million) were overpayments collected from providers, while the remaining 4 percent ($37.8 million) were underpayments repaid to providers. Of the $1 billion in improper payment determinations by the RACs, providers chose to appeal only 14 percent of the RAC decisions. Of all the RAC overpayment determinations, only 4.6 percent were overturned on appeal. Throughout the demonstration, the RAC program has cost only 20 cents for each dollar collected.
Of the overpayments, 85 percent were collected from inpatient hospital providers, and the other principal collections were 6 percent from inpatient rehabilitation facilities and 4 percent from outpatient hospital providers. Interestingly, the evaluation report found that the RAC program has had a limited financial impact on most providers. For example, in fiscal years 2006 to 2008, over 84 percent of hospitals in California, Florida and South Carolina had their Medicare revenues impacted by less than 2.5 percent, while in New York and Massachusetts over 94 percent of hospitals had their Medicare revenues impacted by less than 2.5 percent.
The program, designed to protect the Medicare Trust Funds and beneficiaries from improper payments, began in California, Florida and New York in 2005, and in July 2007 expanded to Arizona, Massachusetts and South Carolina. CMS has begun a further expansion by initiating a competition for four permanent RACs after the pilot program ended in March 2008. CMS also has developed a strategy to ensure that the RAC program does not interfere with the transition from the existing Medicare claims processing contractors to the new claims processors, called Medicare Administrative Contractors (MACs). This will let the new MACs focus on claims-processing activities before working with the RACs. When a new RAC begins to issue its first overpayment notification letters, it will be limited to ?black-and-white? billing issues, such as duplicate claims and wrong fee schedule amounts.
?A key part of the future recovery audit contractor program will be to contract with a RAC validation contractor to conduct independent third-party reviews of RAC claim determinations,” says Acting CMS Administrator Kerry Weems. ?Other changes will include limiting the claim review look-back period to three years, requiring each RAC to hire a medical director, and conducting significant outreach to providers. These and other program improvements are a direct result of lessons learned from the pilot program.?
The RAC demonstration, authorized in the Medicare Modernization Act, was required by Congress to be a permanent part of Medicare in the Tax Relief and Healthcare Act of 2006. The law states the national program must be implemented by Jan. 1, 2010. Get more information on the RAC program or download the evaluation report.
Read a list of the services that received the most in overpayments. Read a review of claim facts and corrective actions for an overpayment of excisional debridement.
