Providers Prep for Medicaid RAC Proposed Rule

The Centers for Medicare & Medicaid Services released the long-anticipated proposed rule for Medicaid recovery audit contractors (RACs) Friday, setting the stage for the targeted April 2011 implementation date.

The use of Medicaid RACs is another initiative put forth by CMS as part of the Affordable Care Act—implemented earlier this year—designed to identify waste, fraud and abuse in the healthcare system by reducing improper payments. According to the rule, states must establish Medicaid RAC programs by submitting state plan amendments to CMS by December 31, 2010 and fully implement their programs by April 1, 2011.

Providers now need to tighten up their processes for accurate coding and medical necessity as it relates to Medicaid as the latest RAC program begins to take shape.

"Hospitals need to be clear that the Medicaid RAC program does not replace current Medicaid auditing and program integrity efforts," says Joe Zebrowitz, MD, executive vice president for Executive Health Resources. "The additional Medicaid program oversight only makes more clear the need to have robust and compliant real-time processes on both the medical necessity and coding fronts, as well as a structured and scaled approach to defending oneself against inappropriate intermediary denials."

In addition to distinguishing the overall Medicaid RAC program from the Medicare RAC program, providers should take note that the appeals process will be vastly different as well. In the case of Medicare, the appeals process is laid out very clearly no matter what state you are in and you have the opportunity to present the case to an arbiter.

With the Medicaid RAC program, the states manage the appeals process, therefore, there will likely be greater variance between appeals processes, state-to-state, as compared to Medicare, according to Zebrowitz.

"Providers need to prepare to manage the process and be intimately familiar with the many regulations, guidance, and interpretations pertaining to admission review," he says. "With any of the healthcare auditing entities, it's not enough to simply reach the correct medical necessity answer, but that answer must be reached through the implementation of a daily compliant review process. You want to have a process that is so ironclad that auditors—particularly contingency auditors—have nothing to find."

Sara Kay Wheeler, partner at King & Spaulding LLP in Atlanta, concurs it's crucial for providers to know the differences when it comes to Medicaid.

"The partnership between the states and CMS in administering the Medicaid program makes the program so different that while there may be some general lessons to be learned from the Medicare RAC program, the influence of state law and the intricacies of each state's Medicaid program will make these Medicaid RACs function very differently," she says. "When you think about how the country is carved up by the Medicare RACs, there are only four RAC contractors covering the entire nation; but with Medicaid RACs, states can contract with one or more entities, and there may be reason for states to engage companies that are the most knowledgeable with the way the state's reimbursement rules actually work."

So, what is the next step for providers when it comes to preparation for Medicaid RACs? According to Zebrowitz, the answer is two-fold:

1. Create a rigorous Medicaid admission review process. "Recognize that the rules may be different compared to Medicare and familiarize yourself with the specific differences," he says. "Next, you've got to come up with a way to manage the process concurrently and to ensure you are arriving at a compliant admission status up front, and manage retrospectively to ensure your protection of rights within the potentially lengthy appeals process."

2. Be aware of updates from CMS and the eventual Medicaid RAC contractors, Wheeler adds. "There is likely going to be much more legwork on the Medicaid RAC side if there are multiple contractors that the providers will need to monitor, similar to how providers currently monitor the four RAC sites to stay current on developing issues," she says.

And as always, providers will need to ensure that they have their process in check on the front end, according to Zebrowitz:

"If our experience in the world of Medicare erroneous payment auditing is any indicator, the best defense against inappropriate payment audit denials is having a process to achieve an upfront compliant admission status certification."

View the proposed rule here.