The beginning of a new year always offers hope. We spend the first day of the year resolving to change past behaviors. Subsequently, we spend the second week of the year eating a pint of Ben & Jerry’s, wondering how it all went wrong.  

Those of us affected by the gravitational pull of government audits are entering the new year with two challenges right out of the starting blocks.

One important change that occurred was widely known prior to implementation, but fell apart in execution. Beginning on January 1, Medicare Administrative Carriers (MACs) took over the process of issuing demand letters for Medicare RAC overpayments. Given the fact that the RACs exist because the MACs make claims adjudication mistakes, it was perhaps inevitable that this seemingly simple task would become a problem.

The demand letters, as issued by the RACs, would include multiple claims issues for one provider on one demand letter. The MACs, demonstrating the administrative acumen that launched 1,000 fraud investigations, have been issuing a demand letter for every identified RAC overpayment. This was followed by urgent e-mails from each MAC stating that they were “working with the system maintainer to ensure transactions are aggregated at the provider level on a daily basis”. This is legalese meaning that for the short term, demand letters will pile up in provider mail rooms like vacation junk mail.

The second challenge facing providers has yet to truly reveal itself to the provider community. The Medicaid RAC program has officially reached its implementation date as of January 1, 2012. Because there was very little guidance on the provider level leading up to this date, most providers find themselves in the dark with regard to the Medicaid RAC program, save for what appeared in the Final Rule released back in September.

To fill in the blanks, CMS released an 18-page Frequently Asked Questions (FAQ) document addressing the Medicaid RAC program and what can be expected. In all, there are 53 questions and answers within the pages. As is my custom, I did some reading so you can go do something else. I’ll go in semi-numerical order covering the high points, as some of the questions have information that is duplicative as compared to the Final Rule.

FAQ 5 asks what a state can do to prepare providers for Medicaid RAC audits, and whether physicians will need to implement new compliance procedures due to the program. The answer was that states should be “as informative as possible” about implementation, with the minimum information being the name of the RAC contractor with contact information, when the RAC will begin to identify improper payments and “a general description of the scope of its RAC program”. From what I’ve seen, while more than 50% of the states have an identified Medicaid RAC contractor, information on the contractors emanating from the Medicaid programs themselves is virtually absent.

The second part of FAQ 5 was answered with what I found to be curious wording; “We do not expect that providers will have to undertake any major activities to prepare for Medicaid RACs”. We have all seen the glaring weaknesses of the Medicare RAC program, and if current appeal trends continue apace, we are in for about 5 solid years of endless paper shuffling. For CMS to once again soft-peddle the effect of expanding the process on providers to Medicaid borders on irresponsible.

FAQ 10 was the next to catch my eye. Already, there are auditing entities that have gained more than one state RAC contract. This particular FAQ focused on the need for a unique Contractor Medical Director that is licensed in the state covered by the contractual agreement. To illustrate, let’s say Company A has contracted with states B and C to do the Medicaid RAC work. Because these are two separate contracts, Company A would have to hire two full-time Medical Directors, with one being licensed to practice medicine in State B and the other being licensed in State C. However, the FAQ does make one distinction. If States E, F, and G wish to be bundled into one contractual arrangement with a contractor, more than one Medical Director may not be necessary. CMS indicates that the volume of claims in this particular arrangement could be a determining factor in deciding how many medical directors are needed.

FAQ 13 is the “Who’s The Watcher?” Question, asking how CMS will monitor and evaluate Medicaid RAC programs. Apparently, CMS will conduct program integrity reviews, collect a State Program Integrity Assessment and review overpayments collected, with states being required to “comply with reporting requirements as specified by CMS”. Note the big divergence from Medicare in this case. There is no single Validation Contractor to judge the work product of the Medicaid RACs, as is employed for the Medicare side. I’ve spoken about the comic nature of the RAC Accuracy scores in the last Report to Congress on RAC activities in the past, so I am on the fence as to whether this is either a good or bad thing at the present time.

This issue dovetails nicely into FAQ 17, which asks whether states are required to perform quality assurance of the RAC work product. States ”should” determine how it will validate the accuracy of overpayment determinations and include it in the Statement of Work in their RAC contract. Given that there are 50 states and 5 territories, all with different ways of measuring effectiveness, we should not expect one overarching accuracy score for the Medicaid RAC program as a whole, but rather dozens of bits of individualized data. 

FAQ 19 is the Duplication Question, asking how CMS will enforce multiple integrity efforts in addition to the Medicaid RAC, and how duplication of efforts can be avoided. With whitewash brush in hand, CMS states that they “intend to make every effort to incorporate and consolidate questions related to program integrity into scheduled reviews so as not to overburden states”. To be clear, there is nothing in that statement that gives any indication at all as to how CMS will avoid duplicate integrity reviews, thereby reducing provider burden. It is a new standard by which to measure a non-answer.

There were several FAQs about potential conflicts of interest, notably in cases when the RAC contractor already performs an integrity function in that state. CMS warns states to be cognizant of conflicts that may reveal themselves, but does not specifically ban one entity from performing multiple integrity functions for a single state.

I’ll wrap up the review with FAQ 28, which is of particular interest. What happens if a State does not receive any responses to its RAC Request for Proposal? CMS presents the options of either requesting an exception to the program, or “consider partnering with other states in order to attract a RAC” (I call this “The Wingman Option”). There are a few states who have requested exceptions to the RAC program, according to the Medicaid RACs At-A-Glance website created by CMS, but it is unclear whether these states have done so based on their inability to find a RAC contractor.

I recommend downloading the FAQ document, reviewing what I have omitted and keeping it safely on file, until such time as certain states catch up to the implementation date, now 10 days in the past. We need not hit the ice cream just yet, for all is not (quite) lost.

Paul Spencer will be appearing at the Fi-Med RAC Summit on April 16 and 17th in Milwaukee, WI. Information on this unique learning opportunity can be found here.