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CMS Seeks to End Remittance Advice Confusion

James Carroll, for HealthLeaders Media, April 20, 2010

In a recently released transmittal, CMS has addressed an issue that has been a thorn in the side for providers since the RAC demonstration project.

Transmittal 659 addresses the issue of reporting of recoupment for overpayment on the remittance advice (RA). A remittance advice is a notice of payments and adjustments sent to providers, billers, and suppliers. After a claim has been received and processed, a Medicare contractor produces the RA, which may serve as a companion to a claim payment (or payments) or as an explanation when there is no payment.

The issue and confusion surrounding remittance advice involved the inability to track RAC recoupments back to prior claims electronically, according to Kimberly Anderwood Hoy, JD, CPC, director of Medicare and compliance for HCPro, Inc.

"When RACs had made a denial and were entitled to recoup money, they would recoup it off of a future payment, but this amount was not tied back into a particular claim," says Hoy. "So it was difficult for providers to take that amount and offset it against a prior claim to keep their records correct."

This system, or lack thereof, would result in incorrect records. A RAC could be recouping against "Mrs. Smith's" claim, but the provider couldn't track it back, and a year down the road you'd be unable to look at "Mrs. Smith's" claim and know that the RAC actually recouped some part of that money, according to Hoy.

"It was a problem for people who received recoupments in the demonstration," says Hoy. "And now that RAC audits and denials are in full swing, providers have likely been asking for a fix from CMS."

Now, when a recoupment demand is made, the system will initially assign a control number at the claim level for the claim being recouped. This control number is later used on the RA when the money is actually offset from the provider's payment. This will presumably allow electronic posting of recoupments to individual claims through the use of the control number.

"If somebody takes money away from you, you have to track back to the original account it was applied to, and now you can do that much easier" says Hoy. "This is definitely something designed to benefit providers."


James Carroll is associate editor for the HCPro Revenue Cycle Institute.

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