Observation Deck

The Audit Increase HMEs Can Expect in Coming Months

Two key developments within Medicare's audit programs are aligning in such a way that HME providers should begin to prepare.

• By Wayne van Halem
• Jun 01, 2022

The Recovery Audit Contractor (RAC) program wreaked havoc in the DMEPOS industry from 2011 until about 2015, when they were essentially given free rein to audit DMEPOS claims. While there were limits as to how many claims they could audit from a unique provider, there was no limit on how many providers could get audited. And for a while, it seemed no one was immune.

What they did not plan for was the impact it would have on the administrative appeal process. As the RAC increased its audit activity, the appeal system became strained. Despite federal regulations that required hearing decisions within 90 days, a significant backlog began to grow. Not staffed or funded to handle the number of appeals they were receiving, the Office of Medicare Hearings and Appeals (OMHA) allowed the backlog to reach over 700,000 appeals at one point. With that volume, it was taking providers up to five years in some instances to get a hearing.

Some Changes

Eventually, CMS made some changes to the RAC program and significantly limited the number of claims the RAC could review. Previously, once an issue was approved by CMS, the RAC was free to audit as many claims as they could handle. CMS changed the program and once an issue was approved, the RAC was limited to only looking at between 500 and 2,000 claims.

Once that preliminary review was done, CMS then analyzed the impact it had on the appeal process. For example, were the denials being appealed and were they getting overturned? Essentially, CMS wanted to limit the number of new appeals entering an already overburdened backlogged system. If it resulted in appeals being filed, then CMS would not authorize the RAC to continue reviewing those types of claims. As a result, the volume of RAC audits dropped significantly.

It wasn’t until a 2018 federal court ruling in favor of the American Hospital Association and its member hospital plaintiffs, which established annual deadline-based targets for reducing the backlog of Medicare appeals at the Administrative Law Judge (ALJ) level, that Health and Human Services (HHS) was forced to act on the backlog. With a significantly increased budget, OMHA opened seven new offices throughout the country and hired about 70 new judges to assist in meeting the court-ordered deadline to hearing cases within the 90-day timeframe required by the Code of Federal Regulations.

More ALJ Bandwidth at OMHA

In its most recent status report to the court, HHS stated, “By the end of the first quarter of 2022, a total of 52,641 appeals remain pending at OMHA, which is a reduction of almost 88 percent from the starting number of appeals identified in the Court’s order.”

With the new offices and judges, the most recent OMHA data shows they have decided well over 115,000 appeals each year for the last three years. It is likely they can handle even more once the backlog of old large “big-box” cases has been resolved.

However, with the reduction of audit activity during the pandemic and the restrictions on the RAC, they are receiving nowhere near that volume. I asked if their intent was to reduce their staffing once caught up and it was clear that they had no intention of doing that.

Connecting the Dots

In the recent report to the court, OMHA reported that they only received 10,447 appeals so far in the fiscal year 2022, with only 476 of those being RAC-related receipts. It doesn’t take a genius to figure out that they will need to start receiving a lot more appeals in order to maintain the increased budget and staffing that they currently have, and there is one very easy way to accomplish that.

CMS recently increased the number of claims the RAC could review during the preliminary stage. I’m afraid it is a sign of what is to come. Once the backlog is resolved, I believe the limitations put forth on the RACs will become less restrictive and allow for more audits to occur.

I am hopeful it will not be at the level that we saw back when the program began, but I do anticipate a significant increase in RAC audit activity in 2022 compared to what we have been used to for the last several years.

How to Prepare

I understand that this news doesn’t sit well with providers, but awareness of what the audit landscape may look like is important. It’s a good opportunity to take a look at the RAC’s list of approved issues for Region 5 (DME, home health and hospice) and if you see products and services that you provide, then conduct a review of a sample of claims to make sure documentation is accurate and supportive of the claims you submit.

Being proactive and prepared is the key to assuring that RAC auditors can’t come in and recoup money from your business. If they audit you and don’t find anything, they will likely move on and audit elsewhere, as they only make money when they find incorrect payments. If you want an independent review, contact The van Halem Group for more information.

This article originally appeared in the May/Jun 2022 issue of HME Business.