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Wracked by RACs?

December 1, 2014
by David Schweighoefer, Esq.
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David Schweighoefer, Esq.

Recovery audit contractors (RACs) recovered $3.75 billion in improper payments in fiscal year 2013. From that, more than $2 million was recovered from skilled nursing facilities (SNFs).

For many SNFs, it’s a matter of when, not if, the facility will be subject to an audit and subsequent recoupment activity. Owners and administrators have five things to consider:

1. Why were we chosen for an audit?

The RACs use a variety of data sources to determine audit targets, usually as a result of sophisticated data mining. Unusual patterns in claims using specific Current Procedural Terminology (CPT) codes, excessive claim submission for certain residents, excessive claims from certain providers and other sources of data all be may used to identify targets.

2. Why are claims denied?

Understanding the reasons for denials will drive the strategy for an appeal. For example:

  • If you have claims denied based on the Medicare improvement standard, which had been used frequently to deny physical therapy claims, be aware that a recent district court settlement required Medicare to clarify its policy on maintenance coverage and pay those claims. Time is of the essence here as well, because the Centers for Medicare & Medicaid Services has issued a special form to be used in appealing those denials and has established strict time frames for when a review of those claim denials must be postmarked.
  • If you have claims denied based in part on statistical sampling (which often is the case), this methodology has been upheld in the court system. Our experience, however, has been that this method often misidentifies legitimate claims and denies them. You must review each resident record against the stated reason for denial.
  • Has a local coverage determination or national coverage determination been issued prohibiting coverage for a particular CPT code, procedure or provider type?

3. So what’s the hurry?

Time is of the essence in the appeals process. The appeals process has five levels, and each level has its own time bar. The first appeal (a request for a “redetermination”) must be done within 120 days of the notice of denial. The second level, appealing an unfavorable decision at the first level (a request for “reconsideration”), must be done no later than 180 days after the first level decision. The third step, a request for a hearing with an administrative law judge, must follow within 60 days of the “reconsideration” decision, and so on.

4. Will they keep my money?

No…and yes. Recoupment efforts are suspended at the first two appeal levels. At the third level, recoupment of claimed overpayments may be initiated, but strategies are available to delay that process.

5. Is it worth the time and expense to appeal?

If you believe your resident records support the claim, most certainly. If you don’t appeal, then you have no chance of winning. In 2013, providers appealed 500,269 claims, or 30.7 percent of the total claims with overpayment determinations. Of these, 151,645, or about 30 percent, were overturned in the provider’s favor. And, this process could discover an underpayment to you. In 2013, the RAC program also identified and corrected $102.4 million in underpayments to providers.

David E. Schweighoefer is a partner in the Health Care Practice Group of Brouse McDowell, Akron, Ohio, and a member of the American Health Lawyers Association. He specializes in regulatory and corporate compliance program development, patient rights, informed consent policies and procedure development. He may be reached at 330-535-5711.