CMS Postpones April 1 Implementation of Medicaid RAC Programs

AAFP, Others Urge Improvement in Proposed Rule

February 23, 2011 04:25 pm News Staff

After hammering on CMS to improve its proposed Medicaid Recovery Audit Contractor, or RAC, program, the Academy and a number of other national physician organizations were pleased to learn that CMS is delaying implementation of the state-based RAC programs.

The Patient Protection and Affordable Care Act requires that state Medicaid programs contract with RACs to identify and recoup or resolve overpayment and underpayment of fees to physicians and other service providers. The program was scheduled to begin on April 1, but on Feb. 1, CMS issued an informational bulletin( announcing it would delay the implementation date.

"Out of consideration for state operational issues and to ensure states comply with the provisions of the final rule, we have determined that states will not be required to implement their RAC programs by the proposed implementation date of April 1, 2011," says the CMS bulletin.

Instead, the final rule on the Medicaid RAC program will be issued later in 2011, along with a new implementation deadline for the states.

CMS' action comes on the heels of a Jan. 10 letter(11 page PDF) sent to CMS Administrator Donald Berwick, M.D. The letter, which was signed by the AAFP and more than two dozen other national physician organizations and medical organizations representing all 50 states and the District of Columbia, was initiated by the AMA.

"We continue to have concerns about the perverse incentive structure and burdensome nature of the Medicare Recovery Audit Contractor (RAC) program and firmly believe that the best way to reduce improper coding is through education and outreach," says the letter.

The organizations urge CMS to look at improvements made in the Medicare RAC program during the rule-making process and consider similar changes for the Medicaid RAC program.

"We ask CMS to be mindful of the multitude of new challenges facing physicians as a result of health system reform, in addition to the implementation of health information technology and the transition to ICD-10-CM and ICD-10-PCS codes," say the organizations.

The letter urges CMS to issue Medicaid RAC program requirements "that are consistent with the Medicare RAC program requirements, thereby empowering states to avoid problems already encountered and addressed in the Medicare RAC program."

Specifically, the organizations ask CMS to

  • limit the "look-back period" to no more than three years and preclude Medicaid RACs from reviewing claims from the past 12 months;
  • impose the medical record limit established for the Medicare RAC record requests, and preferably, limit requests to no more than three medical records within a 45-day period;
  • issue a requirement that physician medical directors be present on Medicaid RAC staffs;
  • require Medicaid RACs to document good cause for claims review;
  • insist on the establishment of RAC websites and the posting of timely information;
  • press for the return of payment upon successful provider appeal at any level in the appeals process; and
  • order the use of certified coders to make coding determinations.

The organizations also urge CMS to "set forth clear appeals processes requirements using past lessons learned in the Medicare RAC program to aid states in administering Medicaid RAC appeals." The letter asks for protections to help guard against duplicative audits and urges CMS to focus on education and outreach to the physician community.

The letter also addresses "underpayment" in the RAC program and notes that, in the proposed rule, CMS confirms that its "experience with Medicare RAC contractors is that overpayment recoveries exceed underpayment identification by more than a nine-to-one ratio." The medical organizations strongly urge CMS to set forth Medicaid RAC underpayment fee structure requirements.

In closing, the organizations stress that they "support CMS' efforts to identify improper or fraudulent activity but caution that physicians have been unjustly and negatively affected by untested and uninformed program implementation."

In December, the AAFP drafted its own letter to Berwick(4 page PDF) detailing similar AAFP comments on the Medcaid RAC program proposed rule that was published in the Nov. 10 issue of the Federal Register(