2020 was an odd year for recovery audit contractor (“RAC”) and Medicare Administrative Contractors (“MAC”) audits. Well, it was an odd year for everyone. After trying five virtual trials, each one with up to 23 witnesses, it seems that, slowly but surely, we are getting back to normalcy. A tell-tale sign of fresh normalcy is an in-person defense of health care regulatory audits. I am defending a RAC audit of pediatric facility in Georgia in a couple weeks and the clerk of court said – “The hearing is in person.” Well, that’s new. Even when we specifically requested a virtual trial, we were denied with the explanation that GA is open now. The virtual trials are cheaper and more convenient; clients don’t have to pay for hotels and airlines.

In-person hearings are back – at least in most states. We have similar players and new restrictions.

On March 16, 2021, CMS announced that it will temporarily restrict audits to March 1, 2020, and before. Medicare audits are not yet dipping its metaphoric toes into the shark infested waters of auditing claims with dates of service (“DOS”) March 1 – today. This leaves a year and half time period untouched. Once the temporary hold is lifted, audits of 2020 DOS will be abound. March 26, 2021, CMS awarded Performant Recovery, Inc., the incumbent, the new RAC Region 1 contract.

RAC’s review claims on a post-payment and/or pre-payment basis. (FYI – You would rather a post payment review rather than a pre – I promise).

The RACs were created to detect fraud, waste, and abuse (“FWA”) by reviewing medical records. Any health care provider – not matter how big or small –  are subject to audits at the whim of the government. CMS, RACs, MCOs, MACs, TPEs, UPICs, and every other auditing company can implement actions that will prevent future improper payments, as well. As we all know, RACs are paid on a contingency basis. Approximately, 13%. When the RACs were first created, the RACs were compensated based on accusations of overpayments, not the amounts that were truly owed after an independent tribunal. As any human could surmise, the contingency payment creates an overzealousness that can only be demonstrated by my favorite case in my 21 years – in New Mexico against Public Consulting Group (“PCG”). A behavioral health care (“BH”) provider was accused of over $12 million overpayment. After we presented before the administrative law judge (“ALJ”) in NM Administrative Court, the ALJ determined that we owed $896.35. The 99.23% reduction was because of the following:

1. Faulty Extrapolation: NM HSD’s contractor PCG reviewed approximately 150 claims out of 15,000 claims between 2009 and 2013. Once the error rate was defined as high as 92%, the base error equaled $9,812.08; however the extrapolated amount equaled over $12 million. Our expert statistician rebutted the error rate being so high.  Once the extrapolation is thrown out, we are now dealing with much more reasonable amounts – only $9k

• Attack the Clinical Denials: The underlying, alleged overpayment of $9,812.08 was based on 150 claims. We walked through the 150 claims that PCG claimed were denials and proved PCG wrong. Examples of their errors include denials based on lack of staff credentialing, when in reality, the auditor could not read the signature. Other denials were erroneously denied based the application of the wrong policy year.

The upshot is that we convinced the judge that PCG was wrong in almost every denial PCG made. In the end, the Judge found we owed $896.35, not $12 million. Little bit of a difference! We appealed.