A report by the Centers for Medicare & Medicaid Services has revealed that the recovery audit contractors (RAC) pilot program is successfully identifying improper payments - so much so that $693.6 million has been returned to the Medicare Trust Funds between 2005 and March 2008.
Funds returned to the Medicare Trust Funds are based on money repaid to healthcare providers, charges overturned on appeal and the costs of operating the RAC demonstration program. It is reported that, of the overpayments, 85 percent were collected from inpatient hospital providers, 6 percent from inpatient rehabilitation facilities and 4 percent from outpatient hospital providers.
Officials say the findings will help improve the program as it is expanded nationwide within two years. The program began in California, Florida and New York in 2005 and expanded to Arizona, Massachusetts and South Carolina in July 2007.
"Because of the success of the recovery audit contractor pilot, Congress has made the program permanent and required its expansion throughout the country," Acting CMS Administrator Kerry Weems said. "The RAC pilot helped us refine and plan the implementation of the future, permanent national program."
CMS officials have initiated a competition for four permanent RACs after the pilot program ended in March 2008. A strategy has also been developed to ensure that the RAC program does not interfere with the transition from the existing Medicare claims processing contractors to the new claims processors, called Medicare Administrative Contractors (MACs). This will allow the new MACs to focus on claims processing activities before working with the RACs, according to the report.
"We need to ensure accurate payments for services to Medicare beneficiaries," Weems said. "With a permanent recovery audit contractor program, people with Medicare can be assured they are being charged correctly for their share of their healthcare services."
The RACs have reportedly corrected more than $1 billion in improper Medicare payments from 2005 through March 27, 2008. Roughly 96 percent ($992.7 million) were overpayments collected from providers, while the remaining 4 percent ($37.8 million) were underpayments repaid to providers.
According to officials, the program costs 20 cents per every dollar collected and has had a limited financial impact on most providers. It is reported that more than 84 percent of hospitals in California, Florida and South Carolina had their Medicare revenues impacted by less than 2.5 percent, while in New York and Massachusetts more than 94 percent of hospitals had their Medicare revenues impacted by less than 2.5 percent.
Medicare processes more than 1.2 billion Medicare claims annually, submitted by more than one million healthcare providers, including hospitals, skilled nursing facilities, physicians and medical equipment suppliers. Errors in claims submitted by these healthcare providers for services provided to Medicare beneficiaries can account for billions of dollars in improper payments each year.
Most of the improper payments that the RACs identified occurred when healthcare providers submitted claims that did not comply with Medicare's coverage or coding rules. The types of inadvertent errors leading to improper payments found by the RACs include billing for a procedure multiple times, incorrectly coded procedures and submission of duplicate claims resulting in two payments to a provider.
"A key part of the future recovery audit contractor program will be to contract with a RAC validation contractor to conduct independent third-party reviews of RAC claim determinations," Weems said. "Other changes will include limiting the claim review look-back period to three years, requiring each RAC to hire a medical director and conducting significant outreach to providers. These and other program improvements are a direct result of lessons learned from the pilot program."
The RAC program was created by the Medicare Prescription Drug, Improvement and Modernization Act of 2003 to find and correct improper Medicare payments paid to healthcare providers participating in fee-for-service Medicare. It was required by Congress to be a permanent part of Medicare in the Tax Relief and Healthcare Act of 2006 and now must be implemented by Jan. 1, 2010.