The Louisiana Department of Health and Hospitals (“DHH”) adopted provisions to establish the Recovery Audit Contractor (“RAC”) Program, effective November 20, 2014, as required by the Affordable Care Act. The new RAC program provides yet another mechanism by which DHH, through its contractors, can conduct post-payment audits of claims submitted by providers enrolled in Medicaid. For purposes of the rule, a provider is defined to be any healthcare entity enrolled with DHH as a provider in the Medicaid program. The provisions apply only to Medicaid RACs that begin on or after November 20, 2014, regardless of the dates of the claims reviewed. The provisions do not prohibit or restrict other audit functions that DHH or its contractors may perform.

The RAC program’s scope of review excludes: 1) claims processed or paid within 30 days of implementation of any Medicaid managed care program that relates to the claims; 2) claims processed and paid through a capitated Medicaid managed care program (but does not exclude audits of per member per month payments from DHH to any capitated Medicaid managed care plan utilizing such claims); and 3) medical necessity reviews in with the provider obtained prior authorization for the service.

The RAC may request records from providers but must limit records requests to not more than 1% of the number of claims filed by the provider for the specific service being reviewed in the previous state fiscal year during a 90 day period, but in any event, the request is limited to not more than 200 records. Each specific service identified for review within the requested time period is considered to be a separate and distinct audit. The RAC will review claims within three years of date of the initial payment, with the three year look back period commencing from the beginning date of the audit.

The provider has 45 calendar days from the date of receipt of a records request to comply with a records request, unless there is a mutually agreed extension of time allowed. If the RAC requires the provider to produce records in a non-electronic format, the RAC must make reasonable efforts to reimburse the provider for the reasonable cost of reproducing the records, based on the current federal rate for reproduction costs, but not more than the rate applicable under Louisiana law for public records requests. The cost for records reproduction may be applied by the RAC as a credit against any overpayment.

If the RAC identifies a significant provider error rate in the audit (defined to be 25%), the RAC may request DHH to initiate an additional records request relative to the issue being reviewed. Upon receipt of a request for additional records, the provider may submit written objections to the Secretary of DHH (or designee), but the decision by the Secretary (or designee) is final and not subject to appeal and will not constitute an adverse determination. The RAC must refer claims suspected to be fraudulent to DHH for investigation.

The RAC must send a determination letter to the provider within 60 days of the receipt of all requested materials from the provider. The RAC must provide a detailed written explanation to the provider of any adverse determination (defined to be a decision by the RAC that results in a payment to a provider for a claim or service being reduced either partially or completely.)

A provider has a right to an informal and formal appeal process of any adverse determination made by the RAC, if a written request is made within the deadlines set forth in the rule. The rule also sets forth the timelines in which an informal hearing must be held and the results of the informal hearing must be provided, as well as the deadline to request a formal appeal with the Division of Administrative Law. In conjunction with the appeal process, the provider may present information orally and/or in writing and may present documents. The provider may be represented by counsel for the informal and formal appeals process.

Neither DHH nor the RAC may recoup any overpayments until all informal and formal appeals processes have been completed. A final decision by the Division of Administrative Law marks the conclusion of the formal appeals process. The provider may seek judicial review of the final decision by the Division of Administrative Law.

The rule includes certain penalty provisions that should disincentive the RAC from denying claims without adequate support to do so. For example, if DHH or the Division of Administrative Law hearing officer finds that the RAC determination was unreasonable, frivolous or without merit, the RAC must reimburse the provider for its reasonable costs associated with the appeals process, including attorney’s fees and expenses incurred to appeal the RAC decision. Additionally, if DHH determines that the RAC inappropriately denied a claim, DHH may impose a penalty or sanction against the RAC. DHH considers the claim was inappropriately denied if the RAC’s adverse determination is not substantiated by applicable DHH policy or guidance, the RAC fails to utilize guidance provided by DHH, or the RAC fails to follow programmatic or statutory rules. If more than 25% of the RAC’s adverse determinations are overturned on informal or formal appeal, DHH may impose a monetary penalty of up to 10% of the cost of the claims to be awarded to the providers of the claims inappropriately determined, or a monetary penalty of up to 5% of the RAC’s total collections to DHH.

The RAC program provides DHH with another tool in its arsenal to review claims and potentially recoup monies paid to providers. Providers can expect to begin receiving notices of audits by the RACs in the near future.