The New Reality: Post-COVID RAC Audits

In-person hearings are back – at least in most states.

2020 was an odd year for Recovery Audit Contractors (RACs) and Medicare Administrative Contractors (MACs). Well, it was an odd year for everyone, too.

But after handling five virtual trials, each with up to 23 witnesses, it seems that, slowly but surely, we are getting back to normalcy. A telltale sign of fresh normalcy is an in-person defense of healthcare regulatory audits. I am defending a RAC audit of pediatric facility in Georgia in a couple weeks, and the clerk of the court said that “the hearing is in person.” Well, that’s new. Even when we specifically requested a virtual trial, we were denied, with the explanation that Georgia is open now. The virtual trials are cheaper and more convenient; clients don’t have to pay for hotels and airlines.

In-person hearings are back – at least in most states. We have similar players and new restrictions.

On March 16, the Centers for Medicare & Medicaid Services (CMS) announced that it will temporarily restrict audits to March 1, 2020 and before. Medicare auditors are not yet dipping their metaphoric toes into the shark-infested waters of auditing claims with dates of service after that date. This leaves a year and a half untouched. Once the temporary hold is lifted, audits of 2020 dates of service will abound. On March 26, CMS awarded Performant Recovery, Inc., the incumbent, the new RAC Region 1 contract.

RACs review claims on a post-payment and/or pre-payment basis. (FYI, you would rather a post-payment review than a pre-payment, I promise).

The RACs were created to detect fraud, waste, and abuse by reviewing medical records. Any healthcare provider – no matter how big or small – are subject to audits at the whim of the government. CMS, RACs, Managed Care Organizations (MCOs), MACs, Targeted Probe-and-Educators (TPEs), Unified Program Integrity Contractors (UPICs), and every other type of auditing entity can implement actions that will prevent future improper payments, as well.

As we all know, RACs are paid on a contingency basis: approximately 13 percent. When the RACs were first created, they were compensated based on accusations of overpayments, not the amounts that were truly owed after an independent review. As anyone could surmise, the contingency payment created an overzealousness that can be properly demonstrated by my favorite case in my 21 years – against Public Consulting Group (PCG) in New Mexico. A behavioral healthcare provider was accused of over $12 million in overpayments. After we presented before the administrative law judge (ALJ) in court, the ALJ determined that we actually owed $896.35. The 99.23-percent reduction was because of the following:

1. Faulty extrapolation: PCG reviewed approximately 150 out of 15,000 claims between 2009 and 2013. Once the error rate was defined as high as 92 percent, the base error equaled $9,812.08; however, the extrapolated amount equaled over $12 million. Our expert statistician rebutted the error rate being so high. Once the extrapolation was thrown out, we were dealing with much more reasonable amounts.

• Attack the clinical denials: The underlying alleged overpayment of was based on 150 claims. We walked through the 150 claims that PCG claimed were denials, and proved them wrong. Examples of their errors included denials based on lack of staff credentialing, when in reality, the auditor could not read the signatures. Other denials were erroneously made based the application of the wrong policy year.

The upshot is that we convinced the judge that PCG was wrong in almost every denial made.

Included in this report is information concerning the current RAC auditors and their respective jurisdictions.

Programming Note: Listen to Knicole Emanuel and her live RAC report every Monday on Monitor Mondays at 10 Eastern.