Sec. 3. Improvement of recovery auditor operations
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Section 1893(h) of the Social Security Act (42 U.S.C. 1395ddd(h)) is amended by adding at the end the following new paragraph: In addition to such other terms and conditions as the Secretary may require under contracts with recovery audit contractors under this subsection with respect to a hospital, including a psychiatric hospital (as defined in section 1861(f)), the Secretary shall ensure each of the following requirements are included under such contracts: Each such contract shall provide for the imposition of financial penalties by the Secretary under such contract in the case of any recovery audit contractor with respect to which the Secretary determines there is a pattern of failure by such contractor to meet any program requirement described in clause (ii).
The Secretary shall establish the amount of financial penalties and the periodicity under which such penalties shall be imposed under this subparagraph, in no case less often than annually. For purposes of this subparagraph, each of the following requirements under the statement of work for a recovery audit contractor constitutes a program requirement with respect to which failure to meet such requirement shall result in the imposition of a financial penalty under clause (i):
Completing a determination with respect to each audit of a hospital the recovery audit contractor conducts within the timeframes applicable under guidelines of the Secretary. In the case of a denial of a claim of a hospital, furnishing the hospital the required notice of the pending denial in a timely fashion consistent with claims and appeals timeframes specified in guidelines of the Secretary. Each such contract shall require a recovery audit contractor to pay a fee to the prevailing party in the case of a claim denial that is overturned on appeal.
The amount of the fee payable by a recovery audit contractor to a prevailing party under clause
(i)shall be determined under a fee schedule established by the Secretary for such purpose. The amount of such fee under such fee schedule shall reflect the cost incurred by a typical hospital in appealing a claim denied by a recovery audit contractor. The Secretary shall not approve the conduct of a postpayment or prepayment medical necessity audit by a recovery audit contractor unless such review addresses a widespread payment error rate (as defined in clause (ii)). A recovery audit contractor that commences an audit under subclause
(I)shall cease such audit or any similar audits, if upon annual review, the applicable payment error rate is no longer a widespread payment error rate (as so defined). In this subparagraph, the term widespread payment error rate means, with respect to medical necessity reviews conducted by a recovery audit contractor, a payment error rate that exceeds the rate specified in subclause
(II)for a particular medical necessity audit determined by the Secretary using a statistically significant sampling of claims submitted by hospitals in the jurisdiction of the recovery audit contractor and adjusted to take into account claim denials overturned on appeal. The rate specified in this subclause is 40 percent, except that the Secretary shall annually evaluate such rate and reduce it as necessary to account for changes in payment error rates with the aim of continued, steady improvement of billing practices. A recovery audit contractor may conduct prepayment review only in the manner provided under prepayment review guidelines (described in clause (ii)) established by the Secretary. For purposes of prepayment review activities authorized under this subsection and section 1874A(h) (relating to prepayment review by medicare administrative contractors), the Secretary shall establish guidelines under which consistent criteria for minimum payment error rates or improper billing practices occasion prepayment review by contractors under this subsection and section 1874A. Such guidelines shall include criteria and timeframes for termination of prepayment review. . Section 1893(h)(2) of the Social Security Act (42 U.S.C. 1395ddd(h)(2)) is amended by inserting , and amounts collected by the Secretary under paragraph (10)(A)(i) (relating to financial penalties for contractor compliance failures), after paragraph (1)(C) . Section 1874A of the Social Security Act ( 42 U.S.C. 1395kk–1 ) is amended by adding at the end the following new subsection: In addition to such other terms and conditions as the Secretary may require under contracts with medicare administrative contractors under this section with respect to a hospital, including a psychiatric hospital (as defined in section 1861(f)), the Secretary shall ensure each of the following requirements are included under such contracts: The Secretary shall not approve the conduct of a postpayment or prepayment medical necessity audit by a medicare administrative contractor unless such review addresses a widespread payment error rate (as defined in subparagraph (B)). A medicare administrative contractor that commences an audit under clause
(i)shall cease such audit or any similar audits, if upon annual review, the applicable payment error rate is no longer a widespread payment error rate (as so defined). In this paragraph, the term widespread payment error rate means, with respect to medical necessity reviews conducted by a medicare administrative contractor, a payment error rate of 40 percent or greater for a particular medical necessity audit determined by the Secretary using a statistically significant sampling of claims submitted by hospitals in the jurisdiction of the medicare administrative contractor and adjusted to take into account claim denials overturned on appeal. A medicare administrative contractor may only conduct prepayment review in the manner provided under prepayment review guidelines established by the Secretary under section 1893(h)(10)(D)(ii). . The amendments made by this section shall apply to contracts entered into or renewed with recovery audit contractors under section 1893(h) of the Social Security Act ( 42 U.S.C. 1395ddd(h) ) and medicare administrative contractors under section 1874A of the Social Security Act ( 42 U.S.C. 1395kk–1 ) on or after the date of the enactment of this Act.
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- 42 USC 1395kk–1
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