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RACs Are Auditing Your Claims — What Should Physicians and other Medicare Providers Know about Appeals and Recoupment?

July 2, 2010 by  
Filed under Featured, Medicare Audits

(July 2, 2010):  CMS’ Recovery Audit Contractor (RAC) program is now permanent and nationwide.  As we discussed in Part I of this series, while small providers were largely ignored during the demonstration program, physicians, home health, hospice, and durable medical equipment (DME) suppliers should be on the lookout for increased attention.  In Part II, we discussed some ways providers can prepare for and respond to an audit request.

In this Part III, we will discuss a provider’s appeal options in the event that a RAC identifies an alleged overpayment as a result of its audit.  It is important to remember that RACs are paid on a contingency fee basis and so are highly incentivized to seek out overpayment errors.

CMS’ enthusiastic trumpeting of the RAC demonstration program results seems to ignore the RACs’ reputation for overly aggressive auditing.  Indeed, a June 2010 CMS program update reveals that, when providers chose to appeal a RAC determination, providers won 64.4% of the time.  CMS has since implemented a requirement that the RAC remit its contingency fee if its audit determination is overturned at any level of appeal, not just the first level.  Whether this will improve RACs dismal win rate on appeal remains to be seen.

I.          What Are the Options to Appeal a RAC Determination of Overpayment?

First, providers that want to challenge the determination should be aware they have a  very limited period of time to file for redetermination appeal if they wish to avoid recoupment.  While a provider has 120 days to file for redetermination appeal, if they wait past day 30, the Medicare contractor (not the RAC) will initiate recoupment.  Additional information regarding recoupment is discussed below.

Appealing a RAC claims denial follows the uniform Medicare Part A and Part B appeals process.    The following deadlines are strictly adhered to.

Medicare Appeal Deadlines

 Level  Stage   Reviewing Entity  Filing Deadline
 1st Redetermination Medicare Administrative Contractor (MAC)

120 days of receiving notice of initial determination


2nd Reconsideration Qualified Independent Contract (QIC)

180 days of receiving notice of redetermination decision


3rd Hearing Administrative Law Judge (ALJ)

60 days of receipt of the QIC’s decision


4th Administrative Review (HHS) Medicare Appeals Council (MAC)

60 days of receipt of the ALJ’s decision


5th Judicial Review Federal District Court

60 days of receipt of the MAC’s decision


Our experience has shown that ALJs are honest brokers who are the most willing to hear arguments from providers.  While they will follow the law and applicable coverage provisions, they tend to be much more thorough and consider the provider’s arguments in support of payment.  In many cases, this has been the first level that a fair and reasonable consideration of the evidence has occurred.

II.         What about Recoupment Issues? Are They Applicable in Connection with a RAC Audit?

Notably, the deadlines above are filing deadlines only.  Medicare begins recouping funds well before the time frame for appeal has lapsed at each stage.  Medicare begins recouping funds only 30 days after the RAC’s initial determination and only 60 days after its redetermination decision.  This puts significant pressure on providers to file for first and second level appeals more rapidly than they otherwise might.  In later stages, recoupment cannot be stayed by filing the appeal.


Recoupment Timeframes


Day One – Initial Demand of a RAC Overpayment Determination First Level Appeal — Redetermination (Handled by a Medicare Administrative Contractor) Second Level Appeal — Reconsideration (Handled by a Qualified Independent Contractor)  Appeals to Administrative Law Judge
The process begins when a Demand Letter, with appeal rights, is sent to the Provider by the Medicare Administrative Contractor. Don’t confuse this with the overpayment results letter sent by the RAC.If there is no appeal and the provider does not remit the demanded amount, offset begins on day 41. To avoid recoupment starting on day 41, the Provider must request the 1st level appeal within 30 days from the date of the Demand Letter.  If a redetermination appeal request is received after day 30, recoupment will still on day 41 must will stop when the appeal letter is processed.  The recoupment process will stop until the redetermination appeal decision is issued — at that point, the clock starts again and recoupment will start up unless a reconsideration appeal is filed within 60 days of the date of the redetermination appeal decision letter. To avoid recoupment beginning or resuming after a redetermination decision letter is received, the provider must submit the 2nd level appeal request to the QIC within 60 days from the date of the   redetermination decision letter. If an appeal request is received after day 60, the recoupment process will stop on the remaining balance after the reconsideration appeal is received and logged in by the QIC. Limitations on recoupment end after the 2nd level appeal decision is issued.  Recoupment shall begin 30 days from the QIC appeal decision and will continue until the debt is satisfied, whether or not the provider appeals to the ALJ or subsequent levels.

Separate from and prior to the appeals process, a provider may “rebut” any proposed recoupment action within 15 days of the notice of impending recoupment.  A provider may issue a statement to the claims processing contractor providing evidence as to why the overpayment action should not take place.  This process does NOT provide an opportunity to review the medical documentation or the audit determination itself.

robert_w_lile-150x1501Should you have any questions regarding these issues, don’t hesitate to contact us.  For a complementary consultation, you may call Robert W. Liles or one of our other attorneys at 1 (800) 475-1906.

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