RAC Integration for Medicare Advantage Audits

cmslogo1Section 6411(b) of the Patient Protection and Affordable Care Act of 2010 (PPACA) requires the expansion of the Recovery Audit Contractor (RAC) program to Medicare Part C. While we may refer to either MA as Medicare Advantage (or a more accurate acronym, MAO, for Medicare Advantage Organizations), the simple fact is that the RACs (or now, Recovery Auditors) will become increasingly involved with MAOs. The intent is to identify and correct possible overpayments and underpayments associated with diagnosis data submitted by MAOs.

One thing to note is how the current activity relative to healthcare reform and the possible repeal of the PPACA will or will not affect the expanded RAC auditing of MAOs; so far this is not known.

The key audit issue is that of RADV, or risk adjustment data validation. Three levels of RAC activity would be integrated into RADV:
• Select MA enrollees for review;
• Identify underpayments and overpayments associated with diagnosis data; and
• Calculate the final overpayment and/or underpayment amount.

The ultimate goal is to have all MA contracts subject to some level of audit each year, whether a comprehensive audit or condition-specific audit. This is new territory for the RACs, and the way in which it will be accomplished should be followed carefully. One of the tools that the RACs will almost be forced to use is statistical extrapolation. Note that diagnosis data is being analyzed, and therefore, complex reviews will be necessary.

Risk-Adjusted Payment – An Overview

The basic idea of risk adjustment is that MAOs are paid a capitated sum per enrollee, per month, based upon the enrollees’ health status. In order to address sicker enrollees (that is, not concentrate only on healthy enrollees), the MAO is paid a higher capitated payment for that population. This determination of health status is performed through what are known as Hierarchical Condition Categories (HCCs), which group diagnoses and conditions. Based upon the HCCs, a risk score is developed that is then used to determine the risk adjustment. The more diagnoses and conditions reported, the higher the payment. The RADV audits verify through medical record review the accuracy of the diagnoses and conditions being reported. This is a complex review process that is highly dependent upon the quality and quantity of documentation.

RAC Involvement

The main task that the RACs will undertake is performing the comprehensive audits and condition-specific audits. For the comprehensive audits, CMS will select a statistically valid sample of plan enrollees for complex review. For MAOs, the selection of a statistically valid sample is crucial, and must be carefully studied relative to the overall design of the statistical extrapolation process.

For instance, the size of the universe of cases for a given MAO may vary greatly. Also, in order to develop a statistically valid sample size, there must be some estimation of an error rate. This is often accomplished by performing some sort of probe audit. There is also the selection of the cases for complex review. Statistical extrapolation is not a straightforward process, and MAOs will need to carefully analyze the specific design that is being used in their case.

The condition-specific reviews will be made for those MAOs that are not subject to comprehensive audits in the same year. The condition-specific audits will focus on health conditions, as identified through the HCCs that have high rates of payment errors. The identification of these is left to the RACs themselves, based upon past experiences. CMS must approve the selection of them.

An ongoing issue with the RACs, and other auditing entities as well, is that of auditing guidelines and then the associated issue of auditor competence. Because diagnoses and various medical conditions are under review, the audit guidelines and competency requirements will need to be well-defined. Audit guidelines should be developed so that there is consistency in the audit results regardless of who is conducting the review.

Interest in MAOs and associated overpayments is high. According to a 2013 Government Accountability Office (GAO) report, there were $14.1 billion in improper payments that year. While this includes underpayments as well as overpayments, as with other auditing activity, the preponderance of focus is on overpayments. CMS does face some significant challenges, one of which is actually recouping the overpayments. Recoupment for audits from 2007 and 2011 are still ongoing. Also, there is a separate appeals process for which time frames are either not well-established or are otherwise not being met. See 42 CFR §422.311 to study the audit dispute and appeals process.

MAOs should carefully review their compliance programs, particularly for audits that are conducted on behalf of the MAO, both internally and by external consultants. If there are problems with the documentation substantiating the diagnosis coding, then these can be identified and corrected. While documentation improvement is common for many healthcare providers, MAOs are payors, and thus the degree of control over the adequacy of documentation from the providers is problematic. At least MAOs can be assured that the diagnosis codes are supported by the existing documentation.

The bottom line is that MAOs should carefully follow the actions taken by CMS in this area. Integration of the RACs was supposed to occur by the end of 2010. Obviously, this has not happened.

As discussed above, the integration of the RACs into the RADV process for MAOs is not at all straightforward, and there are challenges both for CMS as well as for the MAOs.

DME Billing Service
Provider of Professional
DME Billing Services

Retrieved From: