The CMS is kicking off its search for new contractors for Medicare's controversial recovery audit program.
Recovery audit contractors audit Medicare payments to hospitals, doctors and other providers, and the CMS pays RACs a contingency fee every time they identify an overpayment. Providers say the program creates an unnecessary administrative burden and ties up payments for months or years because of a massive backlog of appeals.
RACs have recouped $8 billion in improper payments since 2009, the program's first year, according to data from the CMS.
The request for proposals from interested potential RACs was released Nov. 6. Applicants have until Dec. 11 to respond.
The current contracts now held by CGI Group, Performant Financial Corp., Cotiviti Corp. and HMS Holdings Corp., expire Dec. 31.
To ensure the CMS has enough time to review proposals and select new vendors, it's allowing each of the four existing recovery auditors to continue auditing activities through July 31, 2016.
Medicare's RAC program has been in flux since last year. Contracts with the current vendors were set to expire in February 2014 but were extended a few times due to various technical challenges. During these contract extensions, CGI filed suit over changes to how RACs are paid. RACs now receive payment only after a provider's challenge has passed the second level of a five-level appeal process, according to the CMS.
Under the current contracts, RACs receive payment in less than 45 days. Providers often appeal decisions against them and getting to the second level of the process can take anywhere from four months to more than a year.
As a result of the changes, potential RACs will likely submit proposals with contingency rates as high as 20% compared to the current rates of between 9.5% to 12%, said Emily Evans, a legislative analyst at Obsidian Research Group who tracks Medicare's RAC program.
Also under the new contracts, RACs must follow new audit timelines proposed by the CMS in May 2015. Previously RACs could review inpatient claims that are up to 3 years old. Now, claims can't be more than 6 months old.
In the recent release of the 2016 physician fee schedule, the CMS also said RACs would no longer be the first to review shorter patient claims. Instead, quality improvement organizations will be the first to investigate and then refer to the RACs for payment adjustment. RACs, meanwhile, would be directed to focus only on hospitals with unusually high rates of denied claims.
CGI declined to comment on if it intends to rebid. Requests for comment from the other current RAC auditors were not immediately returned.
