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Knowledge Center Items Protecting the Health Care Industry from Regulatory Actions Arising from Audits

Protecting the Health Care Industry from Regulatory Actions Arising from Audits

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Regulatory Audit Contract (RAC) audits, which began in 2009, are part of the government’s program to reduce fraud, waste, and errors in health care insurance billing practices, particularly for Medicare and Medicaid. Auditors are assigned regions throughout the country and conduct audits on providers, typically as a result of irregularities and red-lag markers in billing and coding practices.

According to the Centers of Medicare & Medicaid Services (CMS), determining overpayment by the government is based on incorrect payment amounts; non-covered services; incorrectly coded services; and duplicate services. Almost any healthcare provider (including hospitals, doctors offices, home health care providers, nursing homes, or anyone else who submits bills to government programs such as Medicaid or Medicare) can be impacted by a RAC audit. Since the RAC program began, more than $10 billion has been returned to the Medicare Trust Funds.

Auditors work on a contingency fee basis and the five regional firms contracted by the government are paid 7% to 17% (new percentages were implemented in 2017) of all claims they successfully identify as invalid and which they collect. The RACs in Regions 1-4 perform post-payment review to identify and correct Medicare claims that contain improper payments (overpayments or underpayments) that were made under Part A and Part B, for all provider types other than Durable Medical Equipment, Prosthetics, Orthotics, and Supplies (DMEPOS) and Home Health/Hospice. Region 5 RAC is dedicated to the post-payment review of DMEPOS and Home Health/Hospice claims nationally.

Each RAC employs its own proprietary software, which helps to determine if there is a possibility that a claim may contain an error. A RAC will typically request medical records from the provider to determine whether overpayment(s) and/or underpayment(s) have occurred. When medical records are submitted, the process is called a Complex Review. In these cases, the RAC proprietary software has determined there is a high probability (but not a certainty) that the claim contains an overpayment.

Zone Program Integrity Contractors (ZIPCs), private sector companies that have been awarded contracts by the CMS, are also conducted to identify cases of suspected fraud, investigate them, and take action to ensure any inappropriate Medicare payments are recouped. Fraud may include things such as billing for services not furnished; billing that appears to be deliberate for duplicate payment; altering claims or medical records to obtain a higher payment amount; soliciting, offering, or receiving a kickback or rebate for patient referrals; and billing non-covered or non-chargeable services as covered.

Healthcare Regulatory Liability Coverage is available for health care organizations to help address the massive research cost and resource drain an audit creates. Coverage includes the costs of defending a healthcare provider such as legal fees, specialized consultants, secure document reproduction costs, and independent audit work in addition to the audit fines and penalties themselves.

RPS offers this Healthcare Regulatory Liability Coverage for defense costs and civil fines and penalty coverage for Medicare and Medicaid billing errors arising from Recovery Audit Contractor (RAC) and Zone Program Integrity Contractor (ZIPC) audits. To find out more about our product, simply give us a call.

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