The four private companies that run Medicare's recovery audit program will have their contracts extended through 2015. But it's unclear what types of medical reviews or claims are going to be eligible for auditing.
CGI Federal, Connolly, HealthDataInsights and Performant Recovery will be able to actively audit hospitals, doctors and other providers for improper Medicare payments through Dec. 31, 2015, the CMS said in a contract award notice posted Dec. 24. Additionally, the recovery audit contractors, or RACs, will be allowed to perform administrative and transitional activities through April 30, 2017. That year-and-a-half period allows them to review any last-minute claims and manage the appeals process.
The stock of HMS Holdings Corp., the parent of HealthDataInsights, began creeping upward once the CMS first signed off on the measure, since the RAC contract represents a large chunk of HMS' business. The news has sent HMS stock up almost 9.5% since Dec. 22 to $21.57 as of Wednesday morning. CGI's stock rose a more modest 1.3%. Connolly and Performant are privately held.
Medicare's RAC program has been in flux since earlier this year. Contracts with the current vendors were set to expire this past February but were extended to June. The CMS then allowed RACs in August to conduct a limited number of automated reviews and some complex reviews related to spinal fusions, durable medical equipment and other non-inpatient procedures. During that time, CGI protested the government's new RAC contract terms and filed suit in federal court, which has created delays.
RACs are still barred by law from auditing short-stay inpatient stays until March 31, 2015. Legislation passed in March delayed the implementation of those audits under the so-called two-midnight rule, which aims to classify more inpatient admissions as observation or outpatient stays.
Even though the four incumbent RACs have gained auditing privileges through next year, there are still several unknowns, said Emily Evans, a legislative analyst at Obsidian Research Group, who has followed the RAC program closely.
It's unclear what types of reviews the RACs can conduct and what types of procedures can be audited, for example. Additionally, the federal court is not expected to rule on CGI's protest until at least next summer, which means the CMS likely won't award new four-year RAC contracts until late 2015 at the earliest. The CMS said in a statement that “most reviews will be done on an automated basis, but a limited number will be complex reviews of topics selected by CMS.”
“We are a long way from a settled RAC program,” Evans said.
Resuming inpatient status claims is of utmost importance for the RACs' business. They are paid contingency fees based on the overpayments they find. Short inpatient stays represent the bulk of RAC reviews.
The standstill has hammered the finances of at least one RAC. HMS said in November that its third-quarter revenue and profits were both down considerably because the CMS had not made headway on new RAC contracts.
Providers view the RAC program as a nuisance with myriad structural inconsistencies. “It is a minefield of unexpected consequences,” Evans said. “Ninety-five percent of anger is surprise, and that's where the hospitals are getting so agitated—the constant changing of the program.”
Hospitals also have argued that RAC audits are an administrative burden and increase their costs because they have to fight appeals in a highly backlogged legal process.
The CMS Tuesday awarded a separate RAC contract to Connolly. The company is now the sole RAC in charge of finding improper Medicare payments for durable medical equipment, prosthetics, orthotics and supplies, and home health and hospice claims.
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