What's Next...Medicaid RAC Audits?

Yes! That’s exactly what’s next. On September 14, 2011, CMS (Centers for Medicare &Medicaid Services) released their final rule detailing the implementation of the Medicaid Recovery Audit Contractor program.  Similar to Medicare RACs, states will contract with RACs who will search paid claims for fraud, waste and abuse. The auditors will be compensated based on a percentage of the funds that are recovered. The auditors will also be searching for underpayments that must be paid out.

Physicians and hospital organization are concerned about the amount of administrative burden from yet another regulatory agency placed on doctors and facilities.  They have asked for an explanation of the types of claims or billing situations that would attract Medicaid RAC review so as to avoid errors that could trigger unnecessary audits. The AMA remains concerned about the incentive-based payment structure in place for Medicaid Recovery Audit Contractors. Their belief is that the best way to reduce improper coding is through education and outreach.

There are several rules that differ from the current Medicare RAC rules. Some of the key differences are listed below.  

·         Prohibiting audits of Medicaid claims more than three years old.

·         Requiring each auditor to hire a licensed physician as medical director.

·         Requiring states to coordinate their Medicaid RAC activities with those of other auditors. Claims that are being investigated by another company may not be included in a RAC review.

·         Calling on states to set limits on the number of medical records a RAC can review and the frequency with which they can request records.

·         Requiring RACs to return their fee if an overpayment determination is reversed at any level of appeal.

The Medicaid RAC program follows in the footsteps of the Medicare RAC implemented in 2010. From January to June 2011, Medicare RACs have recovered $451 million in overpayments and $78.5 million in underpayments according to CMS. As lucrative as this may sound, CMS has not reported how much of the recovered overpayments have been ‘refunded’ back to the physicians due to reversal of the audit on appeal.

As an afterthought… if state budgets are already maxed or at deficit levels, how can they possibly afford to hire an auditor? Will they be doing so with dollar signs in their sights? It is well-known that state Medicaid programs are in need of an overhaul in claims processing.  Keep your ears open for more to come on this program implementation.