CMS Announces Risk-Based Adjusted Additional Documentation Request Limits for Institutional Providers

On May 3, 2016, CMS announced the availability of a revised method to calculate additional documentation request (ADR) limits for Institutional Providers in the Recovery Audit Contractor (RAC) Program.  Under the new method, which may be used by RACs in lieu of the baseline ADR limit, a provider’s “Adjusted ADR Limit” would vary based on the provider’s denial rate, permitting RACs to request more documentation from providers with high denial rates. The Adjusted ADR Limit would be recalculated every three 45-day cycles, and the denial rate for the previous three cycles would determine the Adjusted ADR Limit for the following three cycles. Depending on a given provider’s denial rate, its Adjusted ADR Limit can range from no reviews to a review of up to five percent of total paid claims for the following three 45-day cycles.

Under the revised ADR limits methodology, RACs may choose to conduct reviews of a provider based on either the provider’s baseline annual ADR limit or the Adjusted ADR Limit. The baseline annual ADR limit, which was introduced in November 2015, will remain at 0.5 percent. Thus, if a RAC uses the baseline annual ADR limit, the RAC may review no more than 0.5 percent of the provider’s total number of paid Medicare claims from a previous 12-month period.

If, however, the RAC uses the Adjusted ADR Limit instead, the ADR limit for each three 45-day cycle period would vary based on a provider’s denial rate in the preceding three 45-day cycles. The Adjusted ADR Limit rates and the corresponding denial rates are as follows:

The denial rate represents the number of claims containing improper payments (less any determinations that are fully overturned on appeal) divided by the total number of reviewed claims.

CMS’s announcement of the new ADR methodology is available here.

Reporter, Igor Gorlach, Houston, +1 713 276 7326, igorlach@kslaw.com.