GAO: CMS improperly planned for RAC program
The Centers for Medicare & Medicaid Services (CMS) did not establish an adequate process or planning procedure for a project that examined the use of recovery audit contractors (RACs) to identify improper Medicare payments and recoup overpayments, according to a March report issued by the U.S. Government Accountability Office (GAO).

The mandated, three-year project--held from March 2005 to March 2008--was designed to obtain information that led to improper payments, such as paying duplicate claims for the same service. In addition, CMS implemented a mandated national RAC program, which began in March 2009. The GAO found that CMS has yet to implement corrective actions for 60 percent of the most significant RAC-identified vulnerabilities that led to improper payments, leaving 35 of the 58 vulnerabilities unaddressed.

“The agency did not develop a plan to take corrective action or implement sufficient monitoring, oversight and control activities to ensure these significant vulnerabilities were addressed,” said the GAO.

The report stated that the RAC-identified improper payments for medical services totaled more than $1 million, in addition to $500,000 that were related to durable medical equipment. Moreover, Medicare overpayments totaled $231 million during the course of the three-year project.

While the CMS developed a course of action to collect the monies and recommend measures to prevent this from happening in the future, the office determined: “This corrective action process lacks certain essential procedures and staff with the authority to ensure that these vulnerabilities are resolved promptly and adequately to prevent further improper payments.”

Despite these marked weaknesses in the demonstration project, the GAO commended the efforts made by the CMS to resolve coordination issues between the RACs and Medicare claims administration contractors in the national project.

Among the noted issues were:
  • The data warehouse used to store claims information for the RACs needed more capacity and utility;
  • Manual claims adjustment by claims administration contractors to recoup improper payments was burdensome; and
  • Sharing paper copies of medical records between RACs and claims administration contractors when claims denials were appealed was difficult to manage.

The report also noted that regular communication between the claims administration contractors and the RACs on improper payment vulnerabilities was critical, and the CMS took the necessary steps in the national program to remedy these concerns, including the enhancement of the existing data warehouse and automating the claims-adjustment process.

In addition, the GAO noted that the CMS took the necessary steps towards the improvement of the quality of their service to providers in the national program and oversight in the accuracy of RACs’ claims reviews, including the added prerequisite that each RAC must have at least one physician on staff as a medical director to provide clinical expertise, judgment and understanding of Medicare policy.

Additionally, each month, 100 randomly selected claims that had been reviewed by each RAC will be brought under further review by the CMS to ensure that the claim was “clear and accurate.”

“CMS added processes to review the accuracy of RAC determinations, including independent reviews by another CMS contractor,” said the report. “CMS also established requirements to address provider concerns about service, such as having the RACs establish Web sites that will allow providers to track the status of a claim being reviewed. In addition, CMS established performance metrics that the agency will use to monitor RAC accuracy and service to providers.”

The report concluded that the CMS should work towards the improvement of its corrective action process “by designating responsible personnel with authority to evaluate and promptly address RAC-identified vulnerabilities to reduce improper payments,” and suggested that “assessing the effectiveness of the corrective actions taken is an important step for reducing future improper payments.” The CMS has reportedly agreed with the GAO recommendations.