Are the RACs “Sandbagging” Denials?

RACs officially rescinded some reviews recently, even after having completed complex reviews, including the issuance of denial letters to the providers for the claims reviewed. This has occurred in at least two of the four RAC Regions. Some providers now fear that this may be the beginning of a trend whereby the RACs request records, citing “good cause” for a CMS approved issue; subsequently find no evidence of that approved issue; but while reviewing the records, find evidence of a different, not yet approved issue. The fear is that the RAC is “sandbagging” the record, in order to wait for a more “lucrative” cause for denial. While this may seem improper, the guidelines outlined in the RAC Statement of Work (SOW) appear to actually require the RAC to withhold a review results letter if a subsequent review is performed on the same claim.

Denials without Demands

Anyone familiar with the RAC Program knows that once a RAC sends a request to a provider for medical records, the provider has just 45 days to deliver said records to the RAC. (Failure to deliver the records is cause for a complete denial of the claim and subsequent recoupment of the entire reimbursement.) If the provider delivers the records, the RAC then has 60 days to complete their review of the claim and submit a letter to the provider listing their review findings, including a detailed description of the Medicare policy or rule that was violated and a statement as to whether the violation resulted in an improper payment. In the case of an overpayment, the RAC next notifies the appropriate Fiscal Intermediary/Medicare Administrative Contractor (FI/MAC), and the process of recoupment begins.

Medicare uses recoupment to recover the majority of provider overpayments. It is a well-defined process, reducing present and/or future Medicare provider payments, then applying those amounts toward the debt. Providers are notified via a demand letter, indicating the amount that is owed.

In the cases I refer to above, however, no demand letters were sent to the providers. Instead, they received notices that the RAC was “rescinding” either or both the records request and the record review. According to those providers, no further explanations were provided by the RAC or the MAC.

Two Questions

When I was first told of this, I did wonder two things: first, is the RAC allowed to do this; and second, why would the RAC do this? To answer both questions, I decided to review the RAC Statement of Work.

Question #1: Is This Allowed?

The first thing to answer is really about whether the RAC can do multiple reviews on the same claim. If the RAC is not allowed to do so, then this would provide a good answer to the second question.

 If the RAC is only allowed to file a single denial for a claim, but is able to document more than one reason for denial, then the RAC would be smart to use whichever denial would produce the largest fee for the RAC.

However, there is no limitation in the SOW on how many times the RAC may review any claim. In fact, the SOW even provides guidance for what the RAC should do in the case of multiple reviews for a single claim.

In the SOW, under Section F, Activities Following Review, paragraph 3, Communications with Providers about Improper Payment Cases, the RAC is instructed that they may send the provider only one review results per claim. However, later in the same paragraph, there is conflicting instruction. Here is the paragraph, with the conflicting statements in bold:

“The RAC may send the provider only one review results per claim.  For example, a RAC may NOT send the provider a letter on January 10 containing the results of a medical necessity review and send a separate letter on January 20 containing the results of the correct coding review for the same claim.  Instead, the RAC must wait until January 20 to inform the provider of the results of both reviews in the same letter.  It is acceptable to send one notification letter that contains a list of all the claims denied for the same reason (i.e. all claims denied because the wrong number of units were billed for a particular drug).  In situations in which the RAC identifies two different reasons for a denial, a letter should be sent for each reason identified.  For example, if the RAC identified a problem with the coding of respiratory failure and denied several claim(s) because the wrong procedure code and wrong diagnosis codes were billed, the RAC should send two separate letters.  The first letter should list all claims in which an improper payment was identified that contained the wrong procedure code and the second letter should identify those denied because the wrong diagnosis code was billed.”   RAC SOW pp 21, f.

The language is difficult, and we have asked for some clarification from CMS.

Meanwhile, despite the contradictory statements, there are two things we can know for sure.

1. The RAC is certainly allowed to perform multiple reviews per claim.
2. If the RAC reviews a claim more than once, the results of reviews for that claim should be sent out at the same time, even if it means delaying the delivery of the earlier review.

Based on these two facts, then, there would seem to be no reason for a RAC to “sandbag” a review, waiting for a later, more profitable denial. If the RAC has two reasons for denial, it is simply instructed to deliver the results at the same time. Therefore, there would be no need to “rescind” a review results letter (according to my interpretation of the above instructions).

So, why rescind?

Question Two: Why would the RAC rescind a Review?

My first thought about why a RAC would rescind a review concerned something I remembered from earlier readings of the SOW – the RAC would not be allowed to review a claim already under review.

In an effort to “minimize the impact on the provider community”, CMS included in the RAC program a system to prevent “overlap” – the RAC Data Warehouse, which holds all the data made available to the RACs by CMS, includes a list of all claims being reviewed by any other government entity (a Medicare contractor, a MAC or law enforcement).

Exclusion: Claims that are Off-Limits for RACs

Claims being reviewed by another entity are considered “excluded” claims, and include those originally denied and later paid on appeal. Exclusions are permanent, but only refer to claims, not providers. Once a claim is excluded, it will never again be available for a RAC to review.  (See SOW, pp. 9, f.)

This would seem, therefore, to be a good reason to rescind a review: the RAC may be adding another review result for the same claim.

If a claim has an MSDRG that has been approved for both DRG Validation and Medical Necessity review, then perhaps this makes sense. However, if a claim’s MSDRG is only approved for DRG Validation, then this may not apply. In such a case, where only one issue is approved for review for that MSDRG, then there may be a more ominous reason for the RAC to rescind the review.

Suppression: Claims and Providers Off-Limits for RACs

Both claims and providers may be under investigation by law enforcement for potential fraud. Any provider and/or claim that is part of an ongoing investigation can be added to the lists in the RAC Data Warehouse, by the appropriate contractor, law enforcement agency or the OIG, thereby marking them as off-limits for RAC review. Unlike exclusions, however, suppressions are temporary. Once removed from the list, they are again fair game for the RAC. (See SOW, pp. 10, f.)

It is conceivable, therefore, that during the process of review, a RAC could be informed that certain claims and/or providers have been “suppressed” and made off-limits. Hence, the RAC might be asked to rescind their reviews for claims from that provider, pending the outcome of any investigation.

Are those the only likely reasons to rescind a review? Not hardly. I heard of at least three other good reasons why RACs would rescind reviews, and none as ominous as the ones above.

Other Reasons to Rescind

We could group these three reasons together and just call them “Mistakes or Misinterpretations” by the RAC. Everyone makes mistakes, and government contractors are certainly no exception to the rule.

CERT Reviews

For example, during the RAC Demonstration Project, the pilot program for the permanent RAC program, there were reviews conducted by the RACs on claims that were also being reviewed by the CERT program. CERT reviews were not being reliably entered into the RAC Data Warehouse, and as a result, there were claims being reviewed by both entities, simultaneously. The process appears to still be “buggy” according to some providers I spoke to this week. CERT reviews are still not being entered correctly into the RAC database.

Critical Access Hospitals

To date, CMS has not determined a final methodology to appropriately calculate recoupment from Critical Access Hospitals (CAHs), due to the complex and different manner in which they are paid, compared to the way that other facilities are paid, under the inpatient prospective payment system (IPPS). So, while reviews can be conducted for CAHs, there can be no review results letters or demand letters, and therefore no recoupment can be done — yet. Nevertheless, there have been some CAHs that were mistakenly receiving review results and demand letters. In those situations, the RAC was required by CMS to rescind the reviews.

The 3-Day Payment Window

Finally, there have been cases where the RAC was required by CMS to rescind their reviews as a result of a newly clarified definition of “other services related to [an] admission” provided to a Medicare beneficiary by a hospital on the date of the inpatient admission, or, during the 3 days immediately preceding the date of admission. The new definition was a result of the “Preservation of Access to Care for Medicare Beneficiaries and Pension Relief Act of 2010,” which was signed into law by President Obama on June 25, 2010. CMS issued a memorandum about it and also adopted regulations using the new definition in the IPPS final rule, as of July 30. Since that time, CMS has required the RAC to rescind reviews which did not conform to the new definition. (A complete explanation is available on the CMS website.)

Conclusion

Providers should remain vigilant and always check the work of the RAC. There is no guarantee that what they send to a provider is ultimately correct and conforms to all of CMS’s guidance and regulations.

Rescinding reviews will likely not be a very common occurrence. Nevetheless, as we saw above, there are several good reasons for the RAC to rescind some reviews. I’m sure the ones I’ve listed above are only a few of many.

The good news is that while it might appear at first glance that the RAC is up to something to be fearful about, there really doesn’t seem to be any reason to be anxious. (No more than you already are!)