Wading Through The Medicare Alphabet Soup

The Medicare and Medicaid programs provide health insurance for tens of millions of people. According to Centers for Medicare and Medicaid Services (CMS), the Medicare program alone has 47.5 million beneficiaries and, in 2010, had total expenditures of $523 billion. It is not surprising, therefore, that such large programs invite scrutiny from government auditors and their contractors seeking to safeguard the Medicare Trustfund. Below is a brief description of some of the auditing contractors:

Recovery Audit Contractor (RACs)/Recovery Auditors

Focus: overpayment.

The RACs (also known as Recovery Auditors) audit fee-for-service providers for past Medicare overpayments and underpayments. The RACs were initially part of a three-year demonstration project, implemented pursuant to the Medicare Modernization Act, Section 306 in 2003. The first three states to have the RAC programs were New York, California and Florida (2005-2008). The program was expanded in 2007, to include South Carolina, Arizona and Massachusetts.

The RACs became permanent nationwide pursuant to the Tax Relief and Healthcare Act of 2006, Section 302 and now operate in all 50 states. Additionally, the Patient Protection and Affordable Care Act of 2010, moved RACs beyond auditing and recoupment of Medicare Part A and B to include Medicare Part C and D as well as State Medicaid Programs.

The RACs are paid by CMS on a contingency basis with fees ranging from 9% to 12.5% of the collections. This payment structure has earned RACs the infamous title of “bounty hunters.”

Medicare Administrative Contractor (MACs)

Focus: administration and education.

Pursuant to Medicare Prescription Drug, Improvement and Modernization Act of 2003 (MMA), CMS replaced its claims payment contractors – fiscal intermediaries and carriers – with new contract entities called Medicare Administrative Contractors (MACs). Unlike RACs, MACs play more of an administrative role by performing the following services, as specified in 42 U.S.C. 1395kk-1(a)(4):

  1. Payment determination
  2. Making payments
  3. Part A & B Beneficiary education and assistance
  4. Provider consultative services
  5. Communicating with providers regarding information or instructions provided by the Secretary of Health and Human Services, and facilitating communication between such providers and suppliers and the Secretary
  6. Providing education and technical assistance to providers

MACs are also the first level of appeals for providers seeking redetermination of a payment decision.  As of January 3, 2012, MACs, not RACs, will be issuing overpayment letters to provider that were determined by RACs.

Zone Program Integrity Contractors (ZPICs)

Focus: fraud.

The primary goal of ZPICs is preventing, detecting, and deterring Medicare fraud, which is achieved through the following methods:

  1. Prevent fraud by identifying program vulnerabilities
  2. Identify potential fraud that exist within ZPIC’s service area and take appropriate action
  3. Investigate allegations of fraud made by beneficiaries, providers, CMS, Office of Inspector General (OIG), and other sources
  4. Explore all available sources of fraud leads in its jurisdiction, including the Medicaid Fraud Control Unit (MFCU) and its corporate anti-fraud unit
  5. Initiate appropriate administrative actions to deny or to suspend payments that should not be made to providers where there is reliable evidence of fraud
  6. Refer cases to the OIG for consideration of civil and criminal prosecution and/or application of administrative sanctions
  7. Refer any necessary provider and beneficiary outreach to the Provider Outreach and Education staff at the AC (previously RAC) or MAC

The main differences between RACs and ZPICs are their respective focus areas and the way CMS compensates the contractors. RACs focus on overpayments whereas ZPICs focus on fraud. Also, unlike RACs, ZPICs are not paid on a contingency basis by CMS. Some experts, however, believe that this payment model makes ZPICs more aggressive in their recovery efforts as it is believed that the contractor needs to justify the large contracts awarded by CMS.

ZPICs are organized into zones by location. New York and New Jersey are in Zone 6 ZPIC.

Medicaid Integrity Contractor (MICs)

Focus: fraud in State Medicaid programs.

MICs, part of the Medicaid Integrity Program established by the Deficit Reduction Act of 2005 (Section 6034), identify potential provider fraud, waste or abuse in State Medicaid programs. There are three types of MICs’: Review MICs, Audit MICs and Education MICs which function as follows:

  1. Review MICs:Analyze provider claims and provide leads to the Audit MICs.
  2. Audit MICs: Conduct post-payment audit of providers to identify overpayments (combination of field and desk audits). It should be noted that while Audit MICs will identify overpayments, it is the State that will collect overpayments and adjudicate provider appeals.
  3. Education MICs: Educate providers, managed care entities, beneficiaries and others based on findings from Review and Audit MICs.

MICs also provide technical assistance to States. They do not replace but rather support State run anti-fraud programs.

Unlike RACs, MICs are not paid on a contingency basis and leave the collection of overpayments to State agencies. Appeals for MIC determinations are not channeled through the Medicare five-level appeal process but instead go through the established appeal processes of the particular state agency.

As mentioned above, recently the RAC program was expanded to now include State Medicaid audits. Like the Medicare RACs, the Medicaid RACs are contingency based programs which seek to identify and recover overpayments to the State, and if found, underpayment to providers. New York’s RAC program, for example, will be overseen by the New York Office of the Medicaid Inspector General (OMIG).

CMS has indicated that it intends for the Audit MICs and Medicaid RACs to be parallel programs.

To make matters more confusing for providers an audit can also come from CMS’s CERT program, whose primary focus is on measuring improper payments.

As providers face increasing pressure from the auditors, one way they can help themselves is to have an effective compliance program. Another way is to create detailed records demonstrating medical necessity for services rendered or goods ordered. Documentation is king and auditors take the position that if an event was not recorded in the patient’s medical record, it did not exist.

Our office consults medical practices on compliance matters, including assisting providers with drafting compliance plans and training. We also represent providers in Medicare and Medicaid audits. For more information, please contact us here.