Trouble apparently now comes in threes!

First, just as providers were getting Medicare Recovery Audit Contractors (RACs, or now RAs) under control, Medicare Administrative Contractors (MACs) got thrown into the mix, snarling communication between RAs, MACs and providers. Second, the new Medicare Statement of Work (SOW) for Medicare RACs came out on Sept. 12, 2011, pushing RAs for claims review quotas. And third, we now have the final rule on Medicaid RACs that came out Sept. 16, 2011 and fully became effective on Jan. 1, 2012.

The Medicaid RAC final rule implements section 6411 of the Patient Protection and Affordable Care Act. One stated CMS objective is that Medicare RACs generally should serve as a model for the Medicaid RAC program, although it was not stipulated that their structures should be identical. For instance, both are paid on contingency fees, with Medicaid contingency fees capped at the Medicare maximum of 12.5 percent. If a state pays above that rate, CMS will not participate in payment, making the state responsible.

Another two similarities are the Medicaid lookback period of three years and a provision calling for coordination of recovery audit efforts with other entities. CMS specifically pointed out that RAs are not intended to replace any state-run integrity audit initiatives.

From recent provider experience, we’ve seen Medicare demand letters issued beyond the three-year window and noticed overlap in audits. Therefore, providers should keep track of dates and demand letters to challenge and appeal to the RAC program if a request does not fall within specified rules and guidelines. Yet we should keep in mind that a state may grant an approval for review of cases older than three years. We also should keep in mind that Medicaid managed care claims may be excluded from Medicaid RAC review.

Because the Medicaid final rule is not as detailed as the Medicare final rule, this may set the stage for more confusion in the first year of implementation than existed in the initial year of the Medicare RAC Demonstration Project. Since Medicaid RACs will affect almost every inpatient and outpatient provider, quick education on your state’s rules will be essential. Currently, only territories have been given exceptions – every state must comply.

Although there are many similarities between programs, there is still significant uncertainty due to statutory rule differences. As you will note throughout this article, many of the rules modeled on the Medicare program have provisions to seek exceptions by a state.

Like Medicare RACs, Medicaid RACs must hire trained medical professionals, including one full-time medical director and certified coders. However, states can apply for an exception to the full-time medical director provision and opt out of employing certified coders if the states determine that certified coders are not required for effective review of Medicaid claims. This could prove to be either detrimental or helpful for providers.

States must ensure that there is an adequate appeals process for providers, including due process, but states can use an existing process or create a new process. This may be problematic, especially for organizations that serve multiple states, in that each state determines the process and timelines for appeals and responses. However, the final rule does have a provision requiring all states to respond to providers within 60 days. For providers serving multiple states, the tracking alone will be a nightmare. We know that the appeals process has been the most difficult area for providers in the Medicare program, and we expect the same for Medicaid.