On September 16, 2011, the Centers for Medicare and Medicaid Services (CMS) released its final rule on Medicaid RACs.¹ The revised regulations take effect January 1, 2012 and attempt to alleviate concerns expressed by medical professionals, administrators and leaders of medical group practices, that they unequipped and ill-prepared to handle the implementation of Medicaid RACs after the staggering success of the Medicare Recovery Contractor (RAC) demonstration project that  recovered $1.03 billion in improper Medicare Payments.² In part two of the CMS Auditing Series, this article examines the CMS final rule on Medicaid RAC audits and the industry’s response.

As part of the Patient Protection and Affordable Care Act (ACA), states were mandated to create and implement a Medicaid RAC program by December 31, 2010. The ACA instructed states to partner with another RAC to review submitted Medicaid claims and investigate instances of overpayment or underpayment.³  In a letter to CMS, the Medical Group Management Association (MGMA) addressed a number of concerns regarding the implementation of Medicaid RACs.⁴ Their concerns revolved heavily around the review process, the manner in which files were requested, and the professional demographic composition of the Medicaid RACs.

Many of the MGMA concerns revolved around the ability of Medicaid RACs to work effectively. Medicare RACs are required to employ a medical professional to assist in the review of claims. The MGMA argued Medicaid RACs should also be required to employ a physician medical director to aid in this process. The MGMA also took issue with the lack of governance in the record request process and the lack of regulation surrounding the frequency of medical record requests.⁵ Without record request limits, providers could be inundated with several unsubstantiated record request. The MGMA was also concerned with the “look back” period governing the extent of RACs ability to look back at past claims. Accordingly, the MGMA requested a rule prohibiting RACs from reviewing claims from the past twelve months.⁶

The revised CMS rule, issued September 16, 2011, addressed several of the MGMA concerns. The final rule requires each Medicaid RAC to hire at least one full time Medical Director that is either a licensed Doctor of Medicine or Doctor of Osteopathy.⁷ RACs are also required to hire a medical coder to assist with claim review, unless otherwise deemed unnecessary. While there is no twelve month claim buffer, the final rule does set a three year look-back limitation, prohibiting RACs from reviewing claims that are more than three years old. Each RAC must establish a limit on the number and frequency of requests made to any one provider. The final rule mandates that RACs include measures for customer service, such as providing a customer service number or website where providers and customers can obtain information about records in review.⁸ Additionally, RACs are required to educate participating providers and management groups on their policies and procedures.⁹

Ultimately, the CMS final rule for Medicaid RACs addressed the majority of concerns voiced by physician advocate group. The MGMA requested that CMS revise the Medicaid RAC program regulations to more closely align with the Medicare RAC guidelines, as providers are more accustomed to following the already established guidelines. While CMS did not accommodate the MGMA request in its entirety, the final rule awards states the flexibility to customize their RAC programs in four areas: (1) medical necessity reviews; (2) extrapolation of audit findings; (3) external validation of accuracy of RAC findings, and; (4) types of claims audited.¹⁰ This flexibility should encourage states to work with local providers to finalize a program that meets the expectations of the Federal Government, while also addressing local provider concerns. In the next article of the CMS Auditing Series, HC Topics will examine the next phase in fraud and abuse enforcement, the identification of high-risk billers.