Medicare’s Recovery Audit Contractor (RAC) program was implemented nationwide for Medicare Parts A and B in January 2010 

RACs are paid based on amounts recovered and currently earn anywhere from nine to 12.5 percent of recouped overpayments on average.  Many providers view RACs as administrative burdens and argue that independence and fairness cannot be achieved in a system in which auditors have a financial incentive to find errors.  On the other hand, CMS contends that RACs help to ensure taxpayer money is being spent appropriately.

Medicare Advantage plans (sometimes referred to as Medicare Part C) are Medicare-approved private health insurance plans offering seniors an alternative to traditional Medicare.  In recent years they have signed up more than 17 million members, about one-third of those eligible for Medicare.  Medicare Advantage plans provide all Medicare Part A (hospital insurance) and Medicare Part B (medical insurance) coverage and generally offer additional benefits, such as vision, dental and hearing, and many include prescription drug coverage.

Pricing to enrollees varies by plan provider, based on the services and type of plan chosen.  Since 2004, the government has paid the health plans using a risk score it calculates for each patient based on diseases reported by the health plans. Medicare expects to pay higher rates for sicker people and less for those in good health.  But overspending tied to fast-rising risk scores has cost taxpayers billions of dollars in recent years, as the Center for Public Integrity reported in a series of articles published last year, leading to widespread suspicions that some risk scores are being purposefully inflated.  CMS relies on diagnosis information reported by Medicare Advantage organizations to determine the health conditions for each beneficiary.  CMS then uses the Hierarchical Condition Category risk adjustment model to calculate risk scores.

All diagnosis codes submitted to CMS for Medicare Advantage risk adjustment must meet a number of requirements.  They must:

• Be documented in the medical record
• Be documented as a result of a face-to-face visit
• Come from acceptable data sources (www.cms.gov/Regulations-and-Guidance/Guidance/Manuals/Downloads/mc86c07.pdf)
• Be submitted at least once during the risk adjustment data reporting period
• Be coded according to the ICD Clinical Modification Guidelines for Coding and Reporting

CMS currently conducts “comprehensive” Risk Adjustment Data Validation (RADV) audits to determine if diagnoses for risk scores submitted by Medicare Advantage plans are legitimate.  CMS reports that errors and omissions in the diagnosis data submitted by Medicare Advantage organizations account for the overall 9.5 percent rate of improper payments in Medicare Part C.  Up to now, CMS audits have not been “condition specific”; however, under the current proposal, in addition to the comprehensive audits, RACs would also conduct “condition-specific” RADV audits focusing on specific medical codes or health conditions, such as diabetes, that have high rates of payment errors.  The ultimate goal is to have all Medicare Advantage contracts subject to either a comprehensive or condition-specific audit for each payment year.

Comments on the Medicare Advantage RAC program must be received by 10:00 a.m. EST on February 1, 2016.  CMS said it will determine the next steps for procurement of a Part C RAC after reviewing all comments received by that date.

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Phil C. Solomon is the publisher of Revenue Cycle News, a healthcare business information blog and serves as the Vice President of Global Services for MiraMed, a global healthcare revenue cycle outsourcing company.  As an executive leader, he is responsible for creating and executing sales and marketing strategies which drive new business development and client engagement. Phil has over 25 years’ experience consulting on a broad range of healthcare initiatives for clinical and revenue cycle performance improvement.  He has worked with industry’s largest health systems developing executable strategies for revenue enhancement, expense reduction, and clinical transformation. He can be reached at [email protected]

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