Evidence record
Evaluation Of The Colorado Recovery Audit Contractor Program
- Jurisdiction
- Colorado
- Publishing agency
- Colorado Office of the State Auditor
- Publication date
- May 24, 2024
- Source record
- Original document linked
Findings
7
Recommendations
3
Overall conclusion
HCPF’s Medicaid Recovery Audit Contractor program generally adheres to federal and state requirements but requires stronger contract oversight and program management to ensure efficient operation, reduce overpayments, and improve provider billing and education.
Scope
This performance evaluation examined the Colorado Department of Health Care Policy & Financing’s Medicaid Recovery Audit Contractor (RAC) program, administered by HMS, to determine compliance with federal (CMS 42 CFR Part 455) and Colorado state requirements (Section 25.5-4-301, C.R.S.) and to assess program effectiveness, efficiency, and governance. The scope includes: review of the RAC process from planning to reporting for 31 approved audit scenarios (25 automated and 6 complex) and the related provider outreach/education activities; in-depth analysis of three scenarios (Radiology Duplicates, Level of Care, Initial Inpatient Visits) with case review and data supporting their finding letters; evaluation of oversight roles among HCPF divisions, the RAC vendor, and CMS communications; analysis of lookback periods (up to seven years per SPA, with a three-year federal limit), the contingency-fee structure (up to 18%), and contract transmittal practices; examination of lookback policy changes and the handling of appeals, informal reconsiderations, and settlements; the data range for claims audited (January 2018 – June 2023) and recoveries (FY 2019–2023) as reported by HCPF; engagement included interviews with HCPF staff, HMS staff, provider associations, provider surveys (115 responses), reviews of 11,000+ documents, and comparisons with eight to seventeen other states.
Findings (7)
Each finding has a stable link.
- F-623
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Our high-level review of 31 RAC audit scenarios revealed that 3 in-depth audits contained inconsistent, unclear, or outdated policies leading to inaccurate findings and rescissions; Radiology Duplicates (2015–2020 lookback with policy change in 2018) resulted in $13.5 million in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.
- F-624
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%.
- F-625
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.
- F-626
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.
- F-627
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.
- F-628
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.
- F-629
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.
Recommendations (3)
- R-560
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.
Related finding F-623 - R-561
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.
Related finding F-624 - R-562
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.
Related finding F-625