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CMS Delays RAC Permanent Program

Dominic Nicastro, for The RAC Report, November 5, 2008

CMS has announced it has delayed the Medicare Recovery Audit Contractor (RAC) permanent program and put a moratorium on all RAC-relayed informational sessions across the country. CMS has yet to release further details but told the American Hospital Association the action was necessary due to "a RAC protest and a stay of performance."

However, the California Hospital Association (CHA), in a memorandum obtained by HCPro., Inc, says that PRG Schultz (PRG), a contractor that submitted a bid for work in the permanent program but wasn't selected as one of the four permanent contractors, was considering a challenge to the contract award process.

Despite the delay in the process, Joseph Zebrowitz, MD, executive vice president of Executive Health Resources in Newtown Square, PA, warns facilities not to change anything in terms of preparing for a RAC visit. The permanent program will not change, he says.

"Basically, this is infighting amongst CMS potential contractors who are upset that they were not awarded the RAC contract," Zebrowitz says. "I think it is important that this delay is not because of any question of whether the RACs are fair, or good, or legal. The RAC program is unchanged, and there is nothing out there to say that anything is going to be different. [CMS] just can not start when the contractors are in doubt. Once they resolve these complaints, they will start up."

Zebrowitz guessed the delay would take 30 to 60 days.

PRG Schultz, which had the lowest percentage of appeals overturned in the demonstration project (2.1%), boasted last month of netting one of the highest technical scores in the demonstration project. It said CMS denied its contract because of its high contigency fee bid.

Monday, CMS ordered a blanket shutdown of all RAC activity, including its informative sessions (one in New Hampshire was stopped mid-session yesterday, CHA says). The Healthcare Association of New York (HANYS) said a RAC videoconference briefing scheduled for Wednesday through the state was canceled.

CMS had announced the new RACs for its permanent nationwide program Monday, October 6. The four contractors and their selected regions are:

  • Diversified Collection Services, Inc. of Livermore, CA: Region A, initially working in Maine, New Hampshire, Vermont, Massachusetts, Rhode Island and New York.
  • CGI Technologies and Solutions, Inc. of Fairfax, VA: Region B, initially working in Michigan, Indiana and Minnesota.
  • Connolly Consulting Associates, Inc. of Wilton, CT: Region C, initially working in South Carolina, Florida, Colorado and New Mexico.
  • HealthDataInsights (HDI), Inc. of Las Vegas, NV: Region D, initially working in Montana, Wyoming, North Dakota, South Dakota, Utah and Arizona.

CMS said it chose the contractors and their regions based on three values:

  • A "best value determination" that includes a strong technical approach and "exceptional" customer service
  • Conflict of interest reviews
  • Lowest contingency fee

CMS also announced last month how much money RACs will make from provider overpayments. The RACs get paid "contingency fees" based on the amount of the improper payments they correct for both overpayments and underpayments.

"Each RAC's contingency fee is established during contract negotiations with CMS and, as such, the contingency fee varies for each RAC," CMS said.

The contingency fees breakdown as follows:

  • Region A: 12.45%
  • Region B: 12.50%
  • Region C: 9%
  • Region D: 9.49%

This story first appeared as a breaking news item from the editors of The RAC Report, a biweekly e-newsletter from HCPro, Inc.

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