The CMS has awarded five new contracts for Medicare's controversial recovery audit contractor program.
The awardees are Performant Recovery and Cotiviti, which will both operate in two regions in the U.S., and HMS Federal Solutions. Veteran contractor CGI Group will not return.
“CGI opted not to bid on the most recent Recovery Audit procurements and instead focus on CMS opportunities more aligned with its business model," said Alison Hallett, CGI's vice president of U.S. communications. "We continue to provide recovery services to our clients and remain committed to helping government and private sector organizations around the world mitigate against fraud, waste and abuse.”
Recovery audit contractors comb through medical records at hospitals and doctors' offices and find instances of where Medicare is paying too much money. 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.
But the program has scored big for the federal government. RACs have recouped $8 billion in improper payments since the program started in 2009, according to the CMS.
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.
Under the previous 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 three years old. Now, claims can't be more than six months old.
In 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.