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RACs are here to stay


In December 2014, Centers for Medicare & Medicaid Services (CMS) announced the award of the first of the five new Recovery Audit Contracts (RAC) as well as the extension of the existing RAC contracts.  Region 5 will be contracted with Connolly, LLC to identify and correct improper payments for The Durable Medical Equipment, Prosthetics, Orthotics, and Supplies (DMEPOS), and home health/hospice (HH/H) claims.

As the first of the new RAC contracts, this marks the beginning of implementation for many improvements promised by CMS, and listed at Recovery Audit Program Improvements. To date, there are no documents publicly available that define or explain these changes.

None of the other regional contracts have been awarded as yet. This is due to objections filed by CGI Federal, the current RAC for Region B, who sued CMS and its parent, the Department of Health and Human Services (HHS), objecting to a revised payment methodology for RAC collections. CMS intends to delay paying RACs their fees for any disputed claims until they have reached (and survived) the second level of appeals, a process that can often take more than a year. The Court of Federal Claims rejected CGI’s complaint, but agreed to stay the awarding of new contracts while the company appealed the court’s ruling.

While the improvements that CMS is offering may have some benefits to providers, it will be some time before they take and/or have any effect on providers’ experience. Since the changes being offered only apply to the new contracts, and none of the others have been awarded, the changes only affect the work being started by Connolly for DMEPOS and HH/H claims. While some of the changes may indeed offer some relief to hospitals, it remains to be seen how much they will indeed limit pursuit of contingency fees by the RACs. In my opinion the changes made by CMS were made due to the large dollar medical necessity denials of inpatient claims.

Current recovery auditors will conduct a limited number of complex reviews on certain claims including, but not limited to: spinal fusions, outpatient therapy services, durable medical equipment, prosthetics, orthotics and supplies, and cosmetic procedures.

In conclusion, there is one big certainty and one big uncertainty. The big certainty is that one new contract has been awarded to Connolly, LLC, and new audits are forthcoming, nationwide, for DMEPOS, home health and hospice claims. The big uncertainty is that while the existing Part A and Part B RACs have had their expired contracts reinstated and extended through calendar year 2015, no one can say with certainty exactly what they will be auditing, nor can anyone say with certainty if their activities will be limited, as they were under previous extensions.

Feel free to contact Comprehensive Healthcare for any Revenue Cycle Management questions.

Arnie Klaus