If a RAC comes hunting, could you withstand a 60 percent denial rate?

Date Published: April 09 2014

As Elmer Fudd would say “Be vewwy, vewwy quiet...I'm hunting wabbits!” The Centers for Medicare & Medicaid Services (CMS) may not be hunting rabbits, but they’re hunting the very elusive greenbacks.

On September 1, 2012, CMS implemented the Prior Authorization (PA) for Power Mobility Devices (PMDs) Demonstration in seven states: CA, FL, IL, MI, NC, NY and TX. CMS claims that spending per month on power mobility devices in the seven demonstration states has decreased after September 2012, as has spending per month on power mobility devices in the non-demonstration states. Looking at the statistics provided by CMS, it appears that roughly half (50-52 percent range)of requests during the first year of the PA demonstration were non-affirmed, with the basis for the denials that the beneficiaries do not qualify for the benefit based on the documentation submitted. On April 4, 2014, CMS requested approval to expand the PA Demonstration for PMDs to 12 additional states. Are you ready MD, NJ, PA, IN, KY, OH, GA, TN, LA, MO, WA and AZ?

In a stealthy scouting move during 2012, CMS also signed a five year contract with Strategic Health Solutions, LLC, a Supplemental Medical Review/Specialty Contractor (SMRC), to perform reviews aimed at lowering improper payment by determining whether Medicare claims were billed in compliance with coverage, coding, payment, and billing practices. In a move that should be lauded by the DME industry, Strategic is paid by CMS based on a flat fee arrangement; that is, unlike the Recovery Audit Contractors (RACs), SMRC is not paid a contingency fee for alleged overpayments. SMRC work is also not intended to overlap with that of RACs, but as seen below, their work has inevitably overlapped, causing inefficiencies.

CMS directed one of SMRC’s initial focuses to be post payment medical review of PMD claims from those states not included in the PA demonstration project. These post payment reviews were to determine whether the claims submitted were billed in compliance with the PMD policies. The post payment reviews were not to be limited to K0823; CMS directed SMRC to include all power mobility devices, including complex rehab. The project consisted of a random sampling of 1,200 claims, 300 claims per the four DMEMAC jurisdictions, not included in the PA demonstration project. SMRC was supposed to conduct their post payment review on claims that had not been audited by another contractor – yet 369 of the 1200 claims (31 percent) had previously been reviewed by another Medicare contractor. The 831 remaining claims from this initial sampling with dates of service July 1, 2011 - December 31, 2012 revealed an overall total error rate of 60 percent.

CMS posted a website update on February 18, 2014, explaining the wind-down of current outstanding claim reviews to finish out the current recovery auditor’s contracts.  The rational for this wind-down was time needed to prepare for the next round of RACs. It is important to note that on March 7, 2014, CMS posted a website update reminding providers the Recovery Audit Programs would continue to conduct automated reviews through June 1, 2014. Two RACs have filed “pre-award” protests with the Government Accountability Office (GAO), regarding some of the changes planned by CMS for the next round of the five-year RAC contracts. CGI Federal and HMS Holdings (which owns HealthDataInsights) object to CMS’s changes to the next RAC installment. CMS said it would, among other things, revise the number of medical records that RACs can request from providers, reducing them for providers with low claim denial rates, and not pay RAC contingency fees for overpayments until it was clear they would survive the second level of appeal.

If a RAC comes hunting at your company, could you withstand a 60 percent denial rate? Your company should take advantage of this wind-down time to gear up. CMS is attempting to make its hunting trips as profitable as possible, therefore high-risk providers will be targeted. In other words, failing an audit increases the chances of another audit in the near future. In order to pass audits it is important to ensure that all face-to-face documentation is compliant before delivering the equipment. Encouraging your referral sources to use an algorithmic face-to-face program, such as, ensures that medical necessity policies are followed and equipment that is vended will pass muster.

Be prepared for hunting season; don’t get caught out in the open like a sitting duck! Adjust billing practices today and make sure you are in compliance with CMS policies. Look to those who have positive experiences with the PA Demonstration. Perform self-audits on paperwork before the equipment is dispensed. Always have two or even three different people review paperwork. Use checklists and subscribe to Eliminate the unfavorable odds. If the hunting is good at your company a RAC will return looking for more wabbits.

- Jamie Loper, co-founder of

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