In May 2016, the Centers for Medicare & Medicaid Services announced new additional documentation request (ADR) limits for Medicare Recovery Audit Contractors (RACs) that review claims to identify and recover improper payments. The new policy reduced the annual ADR limit so auditors can review just 0.5 percent of a provider’s total number of paid Medicare claims. 

However, after three 45-day billing periods, CMS would then review provider billing accuracy rates and adjust each provider’s ADR limit higher or lower based on their individual compliance with Medicare billing rules. Providers that demonstrate accurate billing will have their ADR limit decreased, but providers shown to have high levels of billing errors will begin to have increased scrutiny of their claims.

While this new sliding scale ADR policy – which will soon go into effect – is meant to reward providers who bill accurately with fewer audits and increase scrutiny of providers with high levels of billing errors, there’s a loophole in the paradigm that is allowing some providers to receive a “free pass” from auditing their claims for billing accuracy.

RACs currently can review 0.5% of a provider’s claims among a small set of approved billing issue areas. Any Medicare provider that submits fewer than 1599 particular claims to the program per year would consistently have 0 claims audited for billing accuracy. This means that low volume Medicare providers may not qualify to have even one claim reviewed.

The new ADR methodology has essentially eliminated a whole category of providers — including more than 1800 hospitals — from being audited. It’s unclear how those providers would even be categorized on the new sliding scale and it’s even more unclear how anyone could determine if they are billing Medicare accurately or not when their claims are falling through the auditing cracks.

Medicare has lost more than $200 billion over the past 5 years due to improper provider billing. Therefore, it’s vitally important that CMS take steps to recover as many misbilled dollars as possible and infuse them back into the struggling program. 

Recovery Auditors were mandated by Congress to essentially balance the program’s checkbook, by identifying Medicare improper payments and returning those taxpayer dollars back to the Medicare Trust Fund. To date they have returned more than $10 billion in overpayments back to the program and more than $800 million in underpayments to providers.

Despite the fiscal importance of this issue, the RAC program has been significantly watered down. The new ADR policy renders 99.5% of Medicare claims off limits for billing accuracy review, blocking the collection of improper payments within those claims. This is all taking place at a time when Medicare Trustees continue to warn that at current program spending rates, Medicare Part A will reduce coverage to 88% of what’s covered today by 2029 due to a lack of program funds.

The current implementation of Medicare’s sliding scale ADR limit policy is preventing the recovery of improper payments and has afforded a significant portion of providers with immunity from billing accuracy review due to the low volume of claims they submit. We urge CMS to either set a minimum number of claims to be audited each period by provider to close the low volume loophole or consider increasing the base ADR limit across the board for all provider types.

Kristin Walter is a spokeswoman for The Council for Medicare Integrity.