Recovery Audit Program

The Affordable Care Act (ACA) has a provision that may cause great anxiety for dentists participating in Medicare or Medicaid programs, as well as other federally funded healthcare programs. This anxiety producer is a RAC audit. RAC audits are performed by recovery audit contractors, thus the name RAC. However, these auditors are now simply referred to as Recovery Auditors (RA). RAC audits are performed to identify the overutilization of services or services that are not medically necessary. While this may seem like a sensible, necessary program, it has great potential to negatively impact state Medicaid programs and their providers.

Consider the story of a pediatric dentist who was audited because children’s prophylaxes were provided more frequently than once every six months. This audit was triggered even though, under that particular state’s Medicaid program, this frequency is permissible, as children at higher caries risk may receive more frequent cleanings.

Furthermore, the end result of a RAC audit can be significant demands for refunds from the dentist, plus fines on top of that. For example, a non-profit clinic in a northeastern state reported that an auditor identified a $186 overpayment (later determined a simple error) and subsequently fined the practice $23,856. (ADA News Release, July 9, 2014). That is quite the penalty for such a small error!

Nonetheless, RAC auditing introduces an area of potential concern for every dentist that accepts Medicare, Medicaid, and other federally funded healthcare plans. Therefore, it is important to understand what a RAC audit is, how the program is set up, and the potential consequences of an audit.

What is the RAC Program?

The RAC program was originally created through the Medicare Modernization Act of 2003 (MMA) to identify and recover improper Medicare payments paid to healthcare providers under fee-for-service (FFS) Medicare plans. The RAC program was later expanded to include Medicaid payments in some states. Under the Affordable Care Act (ACA), Medicare and Medicaid agencies are required to contract with Recovery Audit Contractors (RACs) to identify and recover overpayments and to identify any underpayments. States must also develop processes for providers to appeal RAC determinations and coordinate RAC efforts with other federal and state law enforcement agencies.

RAC audits are designed to identify and recover overpayments and deter fraud and abuse of federally funded healthcare reimbursement programs. The three specific areas of audit are searches for improper coding, a lack of medical necessity, and inadequate documentation. The most extreme and obvious type of fraudulent activity is the submission, and subsequent reimbursement, of procedures that are not actually performed.

How is the RAC Program Established?

The Centers for Medicare and Medicaid Services (CMS) establishes its own audit programs for federally funded plans. CMS has contracted with RAs for each region of the United States. For these purposes, the country has been divided into four regions.

Each state is responsible for establishing its own RAC audit program for Medicaid audits. Inside each program, the RACs have the ability to hire a medical director and certified coders to provide educational and outreach programs. Furthermore, both CMS and the states establish their own, individual audit procedures, audit criteria, and audit programs, and determine the number and frequency of RAC audits that occur.

As previously noted, states must also develop processes for appealing RAC determinations. Some states have strengthened this appeals process by shifting the burden of proof from the auditors to the providers. This “guilty until proven innocent” stance has further enhanced concerns with the RAC program because it reduces a provider’s likelihood of winning an appeal.

Note: Most states have developed comprehensive Medicaid RAC programs to meet the ACA requirements. To see the status of the RAC system in your state, visit here.

Who Performs the Audits?

As a result of the need to develop these programs, many states have turned to HMS, a cost containment company for healthcare payers in America who uses innovative technology as well as powerful data services and analytics to cover the entire payment continuum. Because of this expertise, HMS has, in essence, been tapped as the entity responsible for the establishment and implementation of the RAC audit system. Visit HMS’s website, for information on their RAC auditing programs. A portion of the website contains the following statement:

“One provision of the Affordable Care Act requires state Medicaid agencies to contract with a Recovery Audit Contractor (RAC) to identify and recover Medicaid overpayments and underpayments. While these audits may be necessary, they shouldn’t interfere with your primary goal of caring for your patients.

HMS has been working with Medicaid providers since 1985. As an experienced vendor in Medicaid overpayment recovery, we understand the potential burden these audits can cause for providers. Our emphasis is on making the process easy for you, so you can stay in compliance while focusing on your real job.”

However, one of the biggest concerns with the RAC process is the auditor compensation structure offered by the system. Unlike an audit by a state Medicaid administrator or a commercial third-party payer where an overpayment refund is returned to the payer, RAs are paid on a contingency basis. This means that the RAs engaged to conduct the audits are often paid based on the amount of overpayments they identify. In fact, CMS states, “Generally, the Medicaid RAC contracts must be contingency fee based for the identification and collection of overpayments, and States have discretion to determine the fee structure for the identification of underpayments.”

Thus, RAs are to be paid based on the overpayments identified. Therefore, they are incentivized to identify larger amounts of excess payments since the more overpayments they identify the more money they make. This is a dangerous system that can encourage the auditor to be overly aggressive in searching for any possible overpayments.

Dealing with an Audit

Now you may be asking yourself, can I be audited? The short answer is: If you submit claims to a federally funded program, then, yes, you can be audited!

Preparation for an audit includes developing a billing compliance plan in your practice and staying up-to-date on CMS notices and guideline changes. It is a good idea to review denied claims and identify any miscoding patterns that may be occurring, then implement a corrective action plan to make sure those issues do not continue. Additionally, it is important to remember that dental treatments should be provided based on a sound diagnosis using approved materials, techniques, and treatments. Detailed chart notes must be maintained in order to support the procedures performed and submitted for reimbursement.

While proper recordkeeping is key to maintaining a record of care, dental records also serve as a legal document that can protect both the doctor and the patient by confirming the details of all dental services rendered. All applicable laws must be followed regarding the contents of a patient’s dental record. It is important to understand the laws applicable to your practice, since federal laws and the various state laws differ.

What are the auditors looking for?

The purpose of RAC audits is to identify improper coding, a lack of medical necessity, or inadequate documentation. However, this realm consists of a lot of ambiguity and many policies contain unclear language on what establishes these shortfalls. Unfortunately, the audit letters also tend to be very broad and absolutely should not be ignored. Receiving a “shot across the bow” letter from a commercial insurance company stating that your practice is providing or billing certain procedures more frequently than your peers is often initially ignored by a doctor. However, ignoring a RA letter can potentially result in very serious consequences.

Practices must be diligent in providing the documentation requested by RAC auditors, and responses to audit letters are time sensitive. Co-writer of this article, Wayne Silverman, DDS, was assisting a practice two years ago through this process. The issues questioned in this audit related to treatments provided for developmentally challenged patients who were treated in a hospital. He contacted the RAC company and requested an extension of two weeks. He was met with the response, “Read the directions in the letter and follow them, there are no extensions of time.” Following this response, the appeal and a binder of documentation explaining the treatments in question were overnighted to the auditors to ensure compliance. Now, two years later, there has still been no response.

Final Thoughts

Do your practice and yourself a service. Review your internal systems and assign a staff person to oversee the Medicaid and Medicare billings in particular, as well as all other billings. Perform your own chart audits, or bring in an outside consultant to perform them. Implement a quality assurance program. When speaking with dentists, we have learned that very few have heard of RAC audits. We expect this will change as more practices are audited. The anxiety, time involved, and cost of this process can be enormous. Every dental practice is encouraged to learn about RAC audits; being forewarned is being forearmed.

For more information on RAC audits, review the CMS dental/medical complianceresource guide, found at here.