Recovery audits require a new coding mindset

June 1, 2008

A new Medicare audit program set for national rollout will require you to learn the details of current rules, be aggressive in charging for all services according to the rules, and be prepared to pay back some money in the future for any overpayment.

Medicare insists on paying exactly the contracted amount for medically necessary, properly documented covered services. The Centers for Medicare & Medicaid Services has page after page of regulations detailing coverage issues and circumstances under which services are covered. These regulations change yearly.

When we refer to overpayment, we are not talking about intentional fraud. We are referring to overpayment due to a difference in interpretation of the rules, a mistake in payment by the payer, a wrong code for the service, etc.

Implementation of RAC

The program started as an experiment in California, New York, and Florida, in which RAC companies were hired to find payments made by the Medicare carrier that should not have been made. RAC payments are made based on percentage of identified and corrected payments. The payer makes final determinations of all corrections to payment. These companies collected $371.5 million from improper Medicare payments in 2007. Based on the success of the program, Congress voted to maintain the law, which allows expansion of the program to all 50 states by 2010.

The RAC is a program that hires what amounts to a "bounty hunter" to find any overpayments and underpayments that have been made on behalf of the Medicare program. These contractors are using benchmarking data to determine where there might be an overpayment or underpayment. All identified potential payment errors then must be evaluated by review of documentation. Once confirmed by review, the results are presented to the Medicare carrier, who is responsible for collecting or refunding the money identified by the RAC. Physicians are provided the opportunity to protest findings.

RACs are authorized to review payments for the previous 4 years. The software they use is more capable of picking up overpayments than it is underpayments. This discrepancy is borne out by a CMS report showing that 97% of improper payments in fiscal year 2006 were overpayments, and only 3% were underpayments. No money has been reported as having been returned to physicians because of underpayment.