Armed with the Recovery Audit Contract (RAC) Program, the Federal government has been very successful in recouping Medicare overpayments from health care providers in recent years. During a RAC audit, program contractors review claims to identify those that received improper Medicare payment. The claims processing contractor adjusts the payment to reflect proper payment amounts and will send a demand letter requiring providers to pay back any overpayments. RAC contractors are paid for their work through contingency fees, which are directly related to the amount of overpayments recovered from providers. As a result, the RAC Program is structured to encourage auditors to cast a wide net and retroactively deny as many Medicare claims as possible.
Those providers subject to RAC audits undoubtedly recognize just how aggressive and persistent RAC contractors can be. Fortunately, providers are not defenseless and can successfully block or overturn a RAC's recoupment by appealing RAC denials. Polsinelli's health care group has developed a system for RAC appeals that helps providers fight recoupment for denied claims through appeals just as aggressively and persistently as RAC contractors initiated those denials.
Providers begin the RAC appeal process by appealing Medicare denials to the RAC contractor itself. However, this is typically only the first step to the potential five levels of appeal a provider can go through. If the appeal is denied at one level, providers can move on to the next level. The second level involves an appeal to a Qualified Independent Contractor. An Administrative Law Judge hears the appeal in the third level and the Department of Health & Human Services' Appeals Council reviews the appeal in the fourth level. If a provider remains unsuccessful in its appeal after this, it can move on to the final level and appeal the denial to a federal district court. Providers typically persist through to the third level of appeal before an administrative law judge, as the first two levels are overwhelmingly decided in favor of the RAC contractors.
Although appeal success grows as providers travel through the different levels of appeal, this means more time and expense may be required to overturn a RAC denial. Therefore, a successful appeal can quickly turn unsuccessful for providers if the expense of victory outweighs the Medicare payment at issue.