Policy & Regulation News

CMS releases FY2013 RAC report to Congress

By Elizabeth Snell

- The Center for Medicare & Medicaid Services (CMS) released its Medicare fee-for-service Recovery Audit Program’s report to Congress for fiscal year 2013. The report found that Recovery Audit Contractors (RACs) identified and corrected $3.75 billion in improper payments. Moreover, there were $3.65 billion collected in overpayments and $102.4 million in identified underpayments paid back to providers.

CMS also found that in FY 2013, providers initially appealed 500,629 claims, which constituted 30.7 percent of all claims with overpayment determinations. Providers appealed 836,849 claims throughout all levels of appeal, but of the total claims appealed, 18.1 percent of claims were overturned with decisions in the provider’s favor. Just 9.3 percent of all RAC determinations were challenged and later overturned on appeal in FY 2013, according to CMS.

“The mission of the Recovery Audit Program is to identify and correct Medicare and Medicaid improper payments through the efficient detection and collection of overpayments made on claims for health care services provided to Medicare and Medicaid beneficiaries, and the identification of underpayments to providers so that the Centers for Medicare & Medicaid Services (CMS) and States can implement actions that will prevent future improper payments,” CMS explained in its report.

An independent validation contractor found that RACs had an average accuracy rate of 96.4 percent.

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  • Over 94 percent of these overpayments are from inpatient hospital claims, according to CMS. Moreover, many of the top overpayment determinations in FY 2013 were from short-stay inpatient hospital admissions. Those same admissions also represent a significant portion of Medicare’s FFS error rate, but CMS said it has implemented several policy clarifications and modifications to help reduce these types of errors.

    This report consistently shows the success and importance of the RAC program, Kristin Walter, spokesperson for The American Coalition for Healthcare Claims Integrity (ACHCI), said in a statement.

    “At 10.1%, the Medicare fee-for-service error rate is the highest of all federal programs,” Walter said. “Our coalition urges lawmakers to support the RAC program and the important role it plays in maintaining a stronger, more efficient Medicare program for the millions of retirees and disabled individuals who rely on these critical benefits each day.”

    The report also explained that CMS spent $454.1 million to operate the Medicare FFS Recovery Audit Program. Of those funds, $301.7 million were contingency fees paid to Recovery Auditors. CMS stated that certain administrative costs – processing appeals, adjusting claims, support contractors, and oversight of the program – accounted for the additional $152.4 million.

    Contingency fees and the costs to process the additional claims and appeals increased because the amount of improper payments that were identified in FY 2013 increased significantly over the previous year, CMS explained.

    “Compared to overall FFS expenditures, the amount collected by Recovery Auditors is relatively small,” CMS stated. “Recovery Auditors collected less than 1 percent of the over $481 billion that Medicare pays in Part A and B benefits in FY 2013.”