Evaluation Of The Colorado Recovery Audit Contractor Program

Evaluate compliance with CMS requirements for Medicaid RAC programs, state law, and coding practice standards.

Examine the effectiveness and level of the payment model used for HCPF’s RAC, including the level of payments sufficient to maintain a contract, the scope of the contract and deliverables, and impacts on providers related to a contingency fee-based system significantly above the federal standard.

Examine the methods and effectiveness of HCPF’s approach to address provider concerns regarding the Medicaid RAC program.

Examine the requirements imposed by other states regarding overall RAC contractor staffing and qualifications for reviewers to help ensure alignment of specialty and subspecialty expertise for conducting initial audits and final determinations. Consider how Colorado can optimize staffing to balance potential overpayment claims and medical necessity reviews.

Examine other states’ lookback periods and their relative financing mechanisms. Consider the impacts on providers and Medicaid beneficiaries of a lookback period in Colorado that exceeds federal standards for Medicaid RAC programs.

Examine other states’ best practices, or best practices recommended by providers, to help improve billing practices and compliance and to provide support throughout the RAC audit process.

Examine the feasibility of incentives for underpayment identification, including models from other states.

Assess the implications for providers and the State’s General Fund of adjusting the lookback period used for RAC audits.

Examine, compare to other states, and, to the extent feasible, disaggregate by service date, audit finding date, and provider type: a. The number, proportion, and value of claims reviewed relative to total potential claims subject to the RAC program. b. The number and proportion of providers impacted by claims reviews and contested payments. c. The number, proportion, value of contested payments, including underpayments, overpayments, and recoupments. d. The number, proportion, value, and result of contested payments by disposition status, including resolution through Informal Reconsideration and appeal.

Examine provider administrative burdens associated with the RAC program.

Examine the impact of audits on provider participation and access to care, and opportunities to increase meaningful provider participation access to care.

Assess the duplication of utilization management reviews and approvals, such as prior authorization, with post-payment and audit reviews.

Assess federal flexibilities that Colorado can use to improve the RAC program, including provider education, training, and error rates, and the timing and procedure when a potential overpayment is “identified” or “determined.”

Consider how the State could evaluate the cost benefit of the RAC program to determine whether it is striking the right balance between accountability and access to care.

Finding 1 – Audit Scenario Investigation: Our high-level review of 31 RAC audit scenarios revealed that 3 in-depth audits contained inconsistent, unclear, or outdated policies leading to inaccurate findings and rescissions; Radiology Duplicates (2015–2020 lookback with policy change in 2018) resulted in $13.5 million in overpayments to 17,000 providers; Level of Care audits failed to account for a February 2019 policy change for ESRD; Initial Inpatient Visits audits caused confusion due to guidance on CPT codes, with about 58.5% of findings appealed and 59.6% reconsidered as of February 2024.

Finding 2 – Application of Contingency Fee: HCPF pays the RAC contingency fee based on identified overpayments, even if not recovered, contrary to federal/state requirements and potentially incentivizing aggressive audits; contract allows up to 18% vs CMS 12.5%.

Finding 3 – Use of Contract Transmittals: Transmittals are used for official direction, but issues include one transmittal increasing compensation without a contract amendment; six of nine transmittals predate the 2021 contract; some guidance given outside transmittal; recommendation to define purpose and update processes.

Finding 4 – Monitoring of HMS Staff Credentials: HCPF did not directly verify credentials for many RAC staff (31 of 61 lacked required licenses/certifications); reliance on RAC’s accreditation; need for stronger credential verification.

Finding 5 – Mitigation of the Appearance of a Conflict of Interest: When HMS acquired the RAC in 2021, required disclosures were not obtained; HCPF has not clearly communicated conflicts to Medicaid providers.

Finding 6 – Claims Limits on RAC Audits: HCPF lacks clear guidance on limits on number/frequency of claims reviewed; limited evidence of provider outreach/education as contract requires; potential reduction in program effectiveness.

Finding 7 – Provider Support, Outreach, and Education: Inconsistent provider outreach and education as required by the contract; possible impacts on provider understanding and billing practices.

Recommendation No. 1: The Department of Health Care Policy & Financing should improve controls to ensure RAC audit scenarios are complete and accurate, including defining review roles, information needs, and accountability; implement policies to ensure policies/standards are complete and up-to-date; Implementation Date: 12/2024.

Recommendation No. 2: The Department of Health Care Policy & Financing should amend the RAC contract to eliminate paying contingency fees based on unrecovered overpayments and base fees solely on recovered amounts; Implementation Date: 08/2024.

Recommendation No. 3: The Department of Health Care Policy & Financing should promote consistent use of contract transmittals by implementing policies that specify their purpose, when other communications are appropriate, and require updating references when contracts expire; Implementation Date: 08/2024.