The Recovery Audit Contractor Program:
What Every Physical Therapist Needs to Know!
Physical therapists and providers of physical therapy services in California, Florida, and New York are targets of a 3 year demonstration project designed to ensure that Medicare funds are appropriately paid for medically necessary services, and if you are a physical therapist in these states (or any other state beginning 2008) and have not yet been
contacted by a government contractor asking for your documentation, chances are it may only be a matter of time! Additionally, given the significant increase in utilization of physical therapy services and governmental reports that have been issued over the past several years highlighting the excessive payment for services that are not deemed medically necessary, it is imperative that all physical therapists understand the current healthcare environment and ensure they are consistently following the rules and regulations related to the provision of outpatient physical therapy services.
Section 306 of the Medicare Prescription Drug, Improvement and Modernization Act of 2003 (MMA) requires the Secretary of Health and Human Services to conduct a
demonstration project to assess the effectiveness of using Recovery Audit Contractors (RACs) to identify overpayments and underpayments and to recoup overpayments under Part A and Part B of the Medicare Program. As the states with the largest Medicare expenditure amounts, California, Florida, and New York were selected for the pilot program that started in 2005 and will last for three years, through May of 2008.
However, what most health care providers don’t know is that the Tax Relief and Health Care Act of 2006 expanded the demonstration project to the entire country, making it a permanent audit activity. As a result, the RAC program is being expanded rapidly into four large geographic regions mirroring the current DME regions, and the number of RAC audits will be expanding rapidly as well. The following states will see RAC Audit Expansion by March of 2008: Arizona, Colorado, Maine, Massachusetts, Montana, New Hampshire, New Mexico, North Dakota, Rhode Island, South Dakota, Utah, and
2008. The remainder of the states will see their RAC audits begin in January 2009 or later (See Figure 1). Although all physicians, providers and suppliers under the Medicare program are part of the Recover Audit Contractor Initiative, there are compelling reasons that physical therapists and physical therapy providers are prime targets for these audits: the amount of fraud and abuse as well as utilization of physical medicine and
rehabilitation procedures has skyrocketed over the past 5 years. Unfortunately, physical therapists are often not aware that their coding and documentation practices may be their biggest exposure with regards to risk and/or liability in this area.
Figure 1: RAC Expansion Strategy (Source: CMS 2007)
improperly paid in that year alone, with physician services (which include physical therapy) being the third largest category after Home Health and Durable Medical
Equipment. That study cited that the most common errors were related to the inadequacy of documentation and inappropriate use of CPT codes in identifying and billing for services. The study concluded that fraud, waste, and mistakes amounted to approximately 8 cents for every dollar spent under the Medicare program. Unfortunately, over the past 6 years, these numbers have only continued to grow.
In order to combat the escalating costs under the Medicare program, which is scheduled to become insolvent in 2018, CMS has established two programs to monitor the accuracy of the Medicare Fee-for-Service (FFS) system: the Comprehensive Error Rate Testing (CERT) program calculates the error rates for Carriers, Durable Medical Equipment Regional Carriers (DMERCs), and Fiscal Intermediaries (FIs), while the Hospital
Payment Monitoring Program (HPMP), calculates the error rate for Quality Improvement Organizations (QIOs). The CERT program, which captures all services provided by those certified under the Medicare program as Physical Therapists in Private Practice (PTPPs), began publishing its data in 2004, and it quickly became evident that physical therapy was a key area in which there were significant payment errors.
Payment errors under the CERT program are categorized into four primary areas: No documentation, Insufficient Documentation, Medically Unnecessary services, and
Incorrect coding. The most common service provided by physical therapists in outpatient settings and billed to the Medicare program under the Part B benefit is therapeutic exercise (CPT code 97110). The initial CERT data identified that over $100 million was improperly paid for therapeutic exercise alone in fiscal year 2004, due to either
It is important for physical therapists to understand the impact that the CERT program has had on carrier behavior, particularly those contractors who are in the top range in the country in payment errors either based on the percentage of errors or dollars that those errors represent. Table 1 represents those Medicare contractors with the highest error rate based on the percentage of claims processed, while Table 2 represents those Medicare contractors with the highest error rates based on dollars paid in error:
Table 1: Top 8 Contractor Error Rates by Percent of Total Claims Processed Carrier State Paid Claims* Provider Compliance*
Triple S, Inc PR/VI 15.7% 24.6% First Coast FL 11.9 20.0 GHI NY 10.6 26.4 Empire NY 9.7 20.4 BCBS AR RI 8.4 22.7 BCBS AR/NM/OK/MO/LA 7.2 20.1 BCBS UT 7.1 21.8 CIGNA TN 6.8 17.1
Table 2: Top 8 Contractor Error Rates by Dollars Paid in Error
Carrier State Improper Payments* Error Rate*
First Coast FL $831,028,166 11.9% WPS WI/IL/MI/MN $369,199,174 5.1% Empire NY $343,119,055 9,7% NHIC CA $339,261,900 5.4% BCBS AR/NM/OK/MO/LA $264,618,233 7.2% Trailblazer TX $212,745,519 4.4% Palmetto GBA OH/WV $205,505,628 6.7%
The data published in CERT reports, which are akin to a contractor “report card”, are important because in order to remain viable contractors for the Medicare program as the program reduces its current 85 contractors into the planned 15 large Medicare
Administrative Contractors (MACs), carriers and intermediaries must reduce their error rate and demonstrate that they can process claims correctly and efficiently. Therefore, contractors are relying on the CERT program data and RAC program data (in the demonstration states) to help focus their administrative efforts at more efficient and correct payment procedures as well as increasing their efforts in the area of provider education. What physical therapists should be aware of is that these payers are increasing their own internal auditing activities and are more critically examining physical therapy and other specialty claims to identify services that are not medically necessary or represent potentially fraudulent or abusive practices.
As part of a Corrective Action Plan to combat the startling error rates identified by the CERT program, CMS began the Recovery Audit Contractor initiative in 2005. There are five contractors that have been selected to perform claims reviews for providers who submit bills to carriers in the demonstration states: Diversified Collection Services, Inc., Public Consulting Group, Inc., HealthData Insights, Connolly Consulting, and Prg-Shultz International, Inc. In order to understand the potential impact on physical therapist
practice, it is important for physical therapists to understand some key points about the RAC Initiative.
is at risk for a RAC audit. An additional key point is that the RAC has an incentive to identify overpayments - payment to the RAC contractors is on a contingency fee basis determined by the amount of overpayments collected during the demonstration project. In other words, the more overpayments that are identified and collected from providers, the more the RAC contractors get paid!
If you or your practice receives a request for medical records from any of the RAC contractors, or from any agency or carrier/intermediary, it is important that you comply with the records request completely and in a timely manner. You should include enough documentation with the response (evaluations, reevaluations, progress notes, etc.) to ensure those services that have been billed can be supported. If you do not comply with the request for records within 45 days, the claims in question will be considered an overpayment and a demand letter will be sent requesting a refund. The RAC program is retrospective, in that the contractors are reviewing claims submitted during the past three years. So, mistakes or errors that may have been made in the past are those that are being reviewed during the current demonstration.
intermediaries are cracking down on issues of medical necessity as the new frontier in the attempt to reduce the amount of fraud, waste, and abuse in the Medicare program.
Although none of us went to physical therapy school because we enjoy documenting what we do, and too many of our profession have not taken the time to develop proficiency in this area, documentation is no longer a task that can be left to the last minute or performed quickly so that we can get to the next patient or get home at the end of the day. There is just too much at stake. Documentation is a skill that must be learned and perfected and is an essential component of physical therapist practice.
Documentation is as critical to the justification of our profession as an essential
component of the healthcare delivery system as are the clinical skills and expertise of the physical therapist who desires to be the autonomous practitioner of choice in the
management of musculoskeletal dysfunction. Remember the old adage: If it is not documented it is not done. Equally as important, if services are not adequately documented, there may be more at stake then simply a denial of payment or the
requirement for providers to pay back money that has already been received. Survival in physical therapist practice in any setting, but particularly in private practice, requires that we find efficient ways to document our care so that we can defend our interventions. But more importantly, regardless of the methodology we may choose to implement this component of practice, it is essential that we learn what must be included in our
documentation in order to justify payment for physical therapy services in the outpatient setting and to minimize the risk of knowingly or unknowingly committing fraud or abuse. This is not only a matter of professional responsibility; it is a matter of survival.
Author Contact Information: Stephen M. Levine, PT, DPT, MSHA
Rehabilitation Consulting & Resource Institute, Inc. 7520 NW 12th Street
Plantation, FL 33313 954-321-1008
