Dealing with RAC Audits and Denials: How Healthcare Providers Can Manage Medicare Recovery Efforts

by Womble Bond Dickinson

Executive Summary: Medicare RAC (Recovery Audit Contractor) audits are becoming increasingly aggressive, creating delays in payment for healthcare providers. Certain strategies can help mitigate delays caused by RAC audits and denials.
Medicare Recovery Audit Contractors ("RACs") are charged with identifying, on a retrospective basis, overpayments made by Medicare to healthcare providers. Because a substantial percentage of all Medicare payments are made to hospitals, they are often the targets of RAC audits. Increasingly, overpayment determinations made by RACs involve issues relating to the medical necessity of inpatient services previously provided by hospitals, as ordered by attending physicians.
"Medical necessity" is often a far more complex matter than auditors recognize, and providers must often expend considerable time and effort to ensure that RACs do not inappropriately recover funds from them. Providers who have in good faith provided needed care to patients should consider appealing adverse determinations. This is particularly important in reviewing denials, as RACs may issue denials for inpatient admission status, not the medical necessity (and therefore Medicare coverage) of services. Administrative Law Judges ("ALJs") have concluded that in cases where inpatient admissions may not have been documented, the hospital providers should be reimbursed under Part B for all services, including procedures and observation care. In response to these ALJ decisions, in July 2012, CMS issued a directive to contractors to permit rebilling so that providers could be reimbursed for procedures, services and care under Part B, not merely for ancillary services.
Recently ALJs have remanded cases back to contractors involved at lower levels of the appeals process (i.e., to a Qualified Independent Contractor ("QIC") or to the Medicare Administrative Contractor ("MAC"). In their remand orders, ALJs direct that the QIC or MAC calculate an appropriate Part B payment to hospitals for needed outpatient treatments. Importantly, these remands occur before an ALJ has convened a hearing in the appeal and must be decided before a hearing can be set.
Informally, ALJ staff members have indicated that remands are not decisions that claims are not reimbursable under Medicare Part A. Rather, ALJs are simply trying to make sure that "all issues have been addressed" before the case reaches them. Although we understand that ALJs are remanding cases to ensure providers have the opportunity to review re-calculated Part B payments earlier in the appeals process, there are no "deadlines" for remands to be re-reviewed. Ultimately, therefore, providers experience delays in having cases heard, resolved and payments received.
With the increase in RAC and other government audits, it is clear that the Medicare appeals staff have had to manage a significantly larger volume of cases than anticipated. Increasingly, we have prepared alternative strategies to address the impact of delays by presenting affidavits and other evidence "on the record" to secure fully favorable decisions for providers. In addition, filing appeals within the timeframes to stay recoupment of funds could help address cash-flow for providers, at least until a case has to be presented to an ALJ.
Ultimately, it is clear that the RAC and other government contractors continue to audit hospitals and providers aggressively, with more providers appropriately appealing cases. Recently, and likely as a result of the November 2012 OIG report on the ALJ appeals process, we have noted an increasing number of cases where RAC representatives appear at hearings as "non-party" participants, attempting to testify and defend decisions made. Although some ALJs do not permit these non-party participants to present new testimony, others have allowed RAC experts to "counter" expert testimony by providers. Legally, there are several concerns to be addressed, including the inherent bias a RAC-employed expert has in the outcome of an appeal. Although having independent experts involved in cases could be more costly to providers in the short-term, it may be appropriate for certain cases, particularly with significant reimbursement consequences.
If you have any questions about the issues raised in this alert, please contact Womble Carlyle Healthcare Industry Team attorneys Tracy Field, Tom Stukes and Deonys de Cárdenas.
The Womble Carlyle Healthcare Industry Team includes attorneys, medical professionals and certified professional coders, who are able to fully evaluate the medical issues involved in each case, as well as all legal issues involved. Dr. Charles Whigham, who serves as a physician consultant in Womble Carlyle's Atlanta office, has extensive experience dealing with healthcare audit-related issues, having previously served as a Medicare Carrier Medical Director, and as a Medical Director with a Medicare Quality Improvement Organization. He has also previously worked as a Medical Director with a Medicaid Integrity Contractor.
The Healthcare Industry Team is assisted by Womble Carlyle's FirmLogic. FirmLogic is a medical and scientific service of Womble Carlyle that collects medical records and physical evidence, performs medical research and analysis, retrieves medical and scientific literature, vets medical experts, reviews and codes medical documents, serves as a neutral settlement administrator, and offers a secure litigation support management system.


DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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