RAC Comment

October 29, 2007

Craig Gillespie
Centers for Medicare & Medicaid Services
Hubert H. Humphrey Building
200 Independence Avenue, S.W., Room 445-G
Washington, DC 20201

Sent via e-mail: Craig.Gillespie@CMS.HHS.gov

RE: Recovery Audit Contractor (RAC) Request for Proposal (RFP) RFP-CMS-2007-0022

Dear Mr. Gillespie:

The Texas Hospital Association, which represents more than 500 Texas hospitals, offers the following comments regarding the Centers for Medicare & Medicaid Services’ (CMS) proposed Statement of Work in the Request for Proposal on CMS’ national implementation of recovery audit contractor (RAC) program.

BACKGROUND
The Medicare Modernization Act of 2003 (MMA) established the RAC program as a demonstration program to identify improper Medicare payments – both overpayments and underpayments. The Tax Relief and Health Care Act of 2006 made the RAC program permanent and authorized CMS to expand the program to all 50 states by 2010. RAC review has already expanded to Arizona, Massachusetts and South Carolina. As delineated in the Statement of Work, CMS plans to expand RAC review to all states by March 2008.

The mission of the RAC program is to “reduce Medicare improper payments through the efficient detection and collection of overpayments, the identification of underpayments and the implementation of actions that will prevent future improper payments”.

While the RAC review has not been expanded to Texas, THA has assessed the challenges encountered in the RAC demonstration program and has identified some issues of concern. Comments are categorized by issue and recommendation.

MEDICAL NECESSITY
In the past, when Congress empowered private contractors to conduct medical necessity review, it granted that authority in a very explicit manner. For example, the provisions addressing Peer Review Organizations, now known as QIOs, expressly provide that one of the functions of such an organization is to review the activities of practitioners and providers for the purpose of determining whether the services they render under Medicare “are or were reasonable and medically necessary…” Further, the provisions concerning QIOs contain various safeguards to ensure reviews are fair and equitable, such as requiring the QIOs to engage specialists in the areas they are reviewing “to the maximum extent possible.”

Recommendation: THA recommends that CMS delay medical necessity reviews until implementation of the 9th QIO Statement of Work under which it has been proposed that those reviews currently performed by the QIOs be transferred to the RACs. At the time the medical necessity reviews are transferred to the RACs, THA recommends that CMS include safeguards to ensure fair and equitable reviews, such as requiring that RAC contractors utilize personnel with relevant clinical qualifications and experience to conduct medical necessity determinations, including physicians with experience in the specialty involved in the disputed case.

TIME FRAME FOR CLAIM REVIEWS
The RAC Statement of Work no longer includes a provision from the demonstration Statement of Work (section B.4. Claims Paid in the Prior 12 Month Period) that would have precluded the RAC from reviewing claims during the current fiscal year. In contrast, on page 7, the current Statement of Work makes the following declaration: “The RAC shall not attempt to identify any overpayment or underpayment more than 3 years past the date of the initial determination made on the claim.”

Recommendation: Shortening the time frame for claim reviews from four years to three years is a step in the right direction; however, THA recommends that the look-back period for RAC reviews be limited to a 12-month window, rather than the proposed three-year window.

Additionally, THA recommends that CMS delay review of any claims that are less than 12 months from their original payment determination until implementation of the 9th QIO Statement of Work under which it has been proposed that those reviews currently performed by the QIOs be transferred to the RACs. Until that time, it is not appropriate for the RACs to be reviewing claims that are less than 12 months from their original payment determination. Review of claims in the 12 month time frame will cause overlap between the RAC review of claims and review that is currently the responsibility of other contractors, such as the FIs, carriers, MACs and QIOs.

COMMUNICATION AND CORRESPONDENCE WITH PROVIDERS
Currently, all communication from RACs to providers is paper correspondence sent through the mail. Paper correspondence, which easily can be lost, is an inefficient way of communicating in a timely manner. It is our understanding that, under the current demonstration project, if a provider’s appeal is successfully settled at the FI level, there is no formal communication from the FI to the provider – the provider only becomes aware of the outcome when it receives a remittance check.

It is important that there be clear communication closing the loop for each claim being appealed so that providers may track the status of the claims in dispute. Because both the RAC and FI are involved in the appeals process, there must be a mechanism for communication between them and the hospital regarding the status of any claim in the appeals process.

Recommendation: THA recommends that CMS establish an electronic platform to allow providers to actively track the status of claims being processed for review, as well as medical record requests. This would allow for quick, efficient and timely communication between the RAC and the institution. Electronic mail correspondence alerting the hospital to updates within that platform would effectively ensure that all parties are kept informed of the status of claims under review. The absence of an electronic tracking tool for providers has been a hurdle for hospitals that has created tremendous inefficiencies and additional costs.

Additionally, THA recommends that CMS establish a process for establishing a designated contact or security administrator at each facility to serve as the primary point of contact for electronic communications and to facilitate registration for other facility users of the electronic platform. An approach similar to that used with QNet Exchange is recommended.

CONTINGENCY FEE POLICY
THA supports the change in contingency fee policy that is reflected in the most recent RAC Statement of Work requiring that contractors repay their contingency fees if a provider files an appeal and that appeal is adjudicated in the provider’s favor at any appeal level. THA also supports the change that requires that all RAC recovery efforts be ceased once the RAC is notified of the appeal request.

Recommendation: As a further disincentive for RACS to seek recoupment without appropriate cause, THA recommends that they be required to repay these amounts with interest. THA recommends that CMS consider creating penalties against RACs for poor performance if they have a high percentage of their determinations overturned upon provider appeal (at any level). This will provide a disincentive for abusive behavior in which the RAC makes requests for medical records in circumstances in which there is inadequate evidence to support an overpayment.

CMS OVERSIGHT OF RAC BEHAVIOR
The Statement of Work includes increased reporting requirements for RACs.

Recommendation: THA supports the increased oversight and recommends that these reports be available to the provider community. THA recommends that CMS implement procedures to ensure that RACs, FIs, QIOs, PSCs, Carriers and MACs only use the rules, policies and practices that were in place at the time the original service was rendered to the beneficiary.

PROVIDER EDUCATION
The implementation time frames CMS has laid out are aggressive and without sufficient provider education will likely lead to major confusion and processing problems for hospitals.

Recommendation: THA recommends that CMS adopt a more deliberative implementation and education timeline that allows RACs and providers to adequately prepare for RAC implementation. It is recommended that CMS clarify which of its contractors is responsible to proactively conduct provider education and ensure that such education and FI, carrier, MAC, QIO and RAC practices are consistent with the interpretations of Medicare regulations that are contained in contractor educational materials.

CONCLUSION
THA recommends that CMS re-evaluate its RAC implementation plan and pursue a more thoughtful approach. It is critical that problems with the demonstration be addressed and that contractor performance and provider experience with the RACs be considered in shaping the final Statement of Work, rollout timelines and selected firms for RAC contracts. CMS is asked to consider the reduced resources available to rural hospitals that will be required to shift limited resources to address the new audit requirements and the impact on cash flow due to funds taken through the audit repayment process.

Thank you for the opportunity to share our concerns. THA is committed to working with CMS on implementing the RAC program.

Sincerely,

Dan Stultz, M.D., FACP, FACHE
President/CEO

Copy: Kerry Weems, Acting Administrator (kerry.weems@cms.hhs.gov)