The Audit Increase HMEs Can Expect in Coming Months
Two key developments within Medicare's audit programs are aligning in such a way that HME providers should begin to prepare.
- By Wayne van Halem
- Jun 01, 2022
The Recovery Audit Contractor (RAC)
program wreaked havoc in the DMEPOS industry from 2011 until
about 2015, when they were essentially given free rein to audit DMEPOS
claims. While there were limits as to how many claims they could
audit from a unique provider, there was no limit on how many providers
could get audited. And for a while, it seemed no one was immune.
What they did not plan for was the impact it would have on the
administrative appeal process. As the RAC increased its audit activity,
the appeal system became strained. Despite federal regulations that
required hearing decisions within 90 days, a significant backlog began
to grow. Not staffed or funded to handle the number of appeals they
were receiving, the Office of Medicare Hearings and Appeals (OMHA)
allowed the backlog to reach over 700,000 appeals at one point. With
that volume, it was taking providers up to five years in some instances
to get a hearing.
Eventually, CMS made some changes to the RAC program and significantly
limited the number of claims the RAC could review. Previously,
once an issue was approved by CMS, the RAC was free to audit as many
claims as they could handle. CMS changed the program and once an issue
was approved, the RAC was limited to only looking at between 500
and 2,000 claims.
Once that preliminary review was done, CMS then analyzed the
impact it had on the appeal process. For example, were the denials
being appealed and were they getting overturned? Essentially, CMS
wanted to limit the number of new appeals entering an already overburdened
backlogged system. If it resulted in appeals being filed, then
CMS would not authorize the RAC to continue reviewing those types of
claims. As a result, the volume of RAC audits dropped significantly.
It wasn’t until a 2018 federal court ruling in favor of the American
Hospital Association and its member hospital plaintiffs, which
established annual deadline-based targets for reducing the backlog
of Medicare appeals at the Administrative Law Judge (ALJ) level, that
Health and Human Services (HHS) was forced to act on the backlog.
With a significantly increased budget, OMHA opened seven new offices
throughout the country and hired about 70 new judges to assist in
meeting the court-ordered deadline to hearing cases within the 90-day
timeframe required by the Code of Federal Regulations.
More ALJ Bandwidth at OMHA
In its most recent status report to the court, HHS stated, “By the end
of the first quarter of 2022, a total of 52,641 appeals remain pending
at OMHA, which is a reduction of almost 88 percent from the starting
number of appeals identified in the Court’s order.”
With the new offices and judges, the most recent OMHA data shows
they have decided well over 115,000 appeals each year for the last three
years. It is likely they can handle even more once the backlog of old
large “big-box” cases has been resolved.
However, with the reduction of audit activity during the pandemic
and the restrictions on the RAC, they are receiving nowhere near that
volume. I asked if their intent was to reduce their staffing once caught
up and it was clear that they had no intention of doing that.
Connecting the Dots
In the recent report to the court, OMHA reported that they only
received 10,447 appeals so far in the fiscal year 2022, with only 476
of those being RAC-related receipts. It doesn’t take a genius to figure
out that they will need to start receiving a lot more appeals in order to
maintain the increased budget and staffing that they currently have, and
there is one very easy way to accomplish that.
CMS recently increased the number of claims the RAC could review
during the preliminary stage. I’m afraid it is a sign of what is to come.
Once the backlog is resolved, I believe the limitations put forth on the
RACs will become less restrictive and allow for more audits to occur.
I am hopeful it will not be at the level that we saw back when the
program began, but I do anticipate a significant increase in RAC audit
activity in 2022 compared to what we have been used to for the last
How to Prepare
I understand that this news doesn’t sit well with providers, but awareness
of what the audit landscape may look like is important. It’s a
good opportunity to take a look at the RAC’s list of approved issues for
Region 5 (DME, home health and hospice) and if you see products and
services that you provide, then conduct a review of a sample of claims
to make sure documentation is accurate and supportive of the claims
Being proactive and prepared is the key to assuring that RAC auditors
can’t come in and recoup money from your business. If they audit you
and don’t find anything, they will likely move on and audit elsewhere,
as they only make money when they find incorrect payments. If you
want an independent review, contact The van Halem Group for more information.
This article originally appeared in the May/Jun 2022 issue of HME Business.
About the Author
Wayne van Halem is the founder and President of audit consulting firm The van Halem Group (www.vanhalemgroup.com). Established in in 2006, the Atlanta-based firm merged with VGM Group in 2014. The van Halem Group helps providers navigate complex issues related to audits, appeals, enrollment, coding, education and compliance. Since its foundation, van Halem's company has saved clients over $100 million in over-payments and denial recoveries.