Colorado Office of the State Auditor - Evaluation of the Colorado

Evaluation of the Colorado Recovery Audit Contractor Program

Colorado Office of the State Auditor

Evaluation of the Colorado Department of

Health Care Policy & Financing’s Medicaid

Recovery Audit Contractor Program

May 2024

bmitted by:

BerryDunn

2211 Congress Street

Portland, ME 04102-1955

207.541.2200

ko McCarthy, Principal

ymccarthy@berrydunn.com

Van

essa Maybury, Engagement Manager

vmaybury@berrydunn.com

Evaluation of the Colorado Recovery Audit Contractor Program

LEGISLATIVE AUDIT COMMITTEE

Representative Lisa Frizell , Chair Senator Dafna Michaelson Jenet

Representative Andrew Boesenecker, Vice Chair Representative Gabe Evans

Senator Rhonda Fields Senator Rod Pelton

Representative William Lindstedt Senator Kevin Van Winkle

OFFICE OF THE STATE AUDITOR

Kerri L. Hunter, CPA, CFE State Auditor

Michelle Colin, JD Deputy State Auditor

Monica Bowers Contract Monitors

Jenny Page

BerryDunn Contractor

REPORT NUMBER 2356P

Evaluation of the Colorado Recovery Audit Contractor Program

May 24, 2024

Members of the Legislative Audit Committee:

This report contains the results of a performance evaluation of the Medicaid Recovery Audit

Contractor (RAC) Program at the Department of Health Care Policy & Financing (HCPF). This

evaluation was conducted pursuant to Section 25.5-4-301(3.7), C.R.S., (House Bill 23-1295),

which requires a review of the RAC Program for compliance with applicable requirements and

standards, and an examination of policy recommendations. The report presents our findings,

conclusions, recommendations, and policy considerations, and the responses and comments of

the Department of Health Care Policy & Financing.

Yoko McCarthy, Principal

BerryDunn

Evaluation of the Colorado Recovery Audit Contractor Program

Contents

Chapter 1: Evaluation Overview and Background ............................................................... 4

Chapter 2: Evaluation of Compliance with Federal and State Requirements ................ 16

Finding 1 – Audit Scenario Investigation ............................................................................ 18

Finding 2 – Application of Contingency Fee ....................................................................... 24

Finding 3 – Use of Contract Transmittals ........................................................................... 27

Finding 4 – Monitoring of HMS Staff Credentials ................................................................ 31

Finding 5 – Mitigation of the Appearance of a Conflict of Interest ....................................... 37

Policy Consideration A – Medicaid RAC Federal Regulation Flexibilities............................ 43

Policy Consideration B – State Flexibilities to Resolve Overpayment Findings and Improve Provider

Accountability ..................................................................................................................... 45

Policy Consideration C – Case Review Timelines and Documentation of Review Staff Qualifications

.......................................................................................................................................... 51

Chapter 3: RAC Program Balance of Fiscal Accountability with Access to Care ........... 55

Finding 6 – Claims Limits on RAC Audits ........................................................................... 57

Finding 7 – Provider Support, Outreach, and Education ..................................................... 62

Policy Consideration D – Lookback Period Impact on Providers and HCPF ....................... 69

Policy Consideration E – Financial Implications of a Reduced Lookback Period ................ 75

Policy Consideration F - Administrative Burden on Providers from the RAC Program ........ 84

Policy Consideration G – Cost-Benefit Analysis of the RAC Program ................................ 93

Policy Consideration H – Payment Model and Percentage ................................................ 96

Chapter 4: How Colorado’s Recovery Audit Contractor Program Compares with Those in Other

States .................................................................................................................................... 103

Other State RAC Staff Qualification Requirements .................................................. 121

Appendix A – Survey of Providers ...................................................................................... 122

Evaluation of the Colorado Recovery Audit Contractor Program

Report Highlights

Evaluation of Colorado’s Medicaid Recovery Audit Contractor Program

Department of Health Care Policy & Financing

Performance Evaluation • May 2024 • 2356P

Key Findings

• Three of 31 audits conducted by HCPF’s RAC applied

inconsistent, unclear, or outdated policies which resulted in

some inaccurate findings, and inefficient use of HCPF and

provider resources for findings that were rescinded.

• HCPF pays its RAC based on overpayments found through

audits, even if they are not recovered from providers, which

is contrary to federal and state requirements and could

incentivize overzealous audits.

• HCPF does not directly verify that its RAC’s staff have

contractually-required credentials. HCPF stated that it relies

on the RAC’s national accreditation to provide assurance in

this area, but HCPF lacked evidence that 31 of 61 RAC staff

had required licenses or certifications.

• When

HCPF’s Medicaid fiscal agent acquired the RAC in

2021, HCPF did not obtain required disclosures related to

conflicts of interest. Also, HCPF has not communicated to

Medicaid providers that a conflict does not exist.

• HCPF has not provided clear guidance on its limits on the

number of claims or records that can be reviewed in a RAC

audit or ensured that the RAC offers provider outreach and

education as the contract requires, reducing program

effectiveness in improving provider billing practices.

• This report provides policy considerations to improve the

RAC program related to improving proper provider billing

and ensuring timely reconsideration or appeals of audit

findings.

• The evaluation found that the period covered by RAC

audits, called the lookback period, could be reduced to

the federal maximum without a substantial change in

recoveries, while reducing provider burden.

• The report includes a policy consideration for HCPF to

reevaluate the 18 percent fee it pays its RAC and the

ability to require the RAC to identify underpayments to

providers.

Background

• Medicaid is a federal-state program that provides 1.7 million eligible low-income

Coloradans with health care coverage and services through about 93,000

service providers.

• HCPF administers Medicaid in Colorado and is responsible for ensuring

compliance with applicable federal and state requirements and that

expenditures are appropriate.

• Federal law requires states to contract for RAC audits of paid Medicaid claims to

help ensure payments to providers are appropriate. States may obtain a federal

exemption from the law and Colorado is one of 18 states with a Medicaid RAC

program. HCPF contracts with Health Management Systems, Inc., as its RAC.

• Providers must repay overpayments identified through RAC audits, and the state

must repay the federal government its portion of the overpayments. In Fiscal Year

2023, HCPF recovered about $47 million in overpayments due to RAC audits.

Key Concern

The Department of Health Care Policy & Financing’s (HCPF) Medicaid Recovery Audit Contractor (RAC) program generally

adheres to federal and state requirements, but HCPF needs to improve contract oversight and program management to help

ensure the program operates efficiently and as intended to reduce Medicaid overpayments and improve provider billing.

Recommendations: 18

Department Responses

Agree: 17

Partially Agree: 0

Disagree: 1

Policy Considerations: 8

Evaluation of the Colorado Recovery Audit Contractor Program

Chapter 1: Evaluation Overview and

Background

Medicaid is a federal-state program that provides health care coverage and services to eligible

low-income individuals. Medicaid is administered at the federal level by the Centers for

Medicare & Medicaid Services (CMS) under Title XIX of the Federal Social Security Act. In

Colorado, the Department of Health Care Policy & Financing (HCPF) is the designated agency

responsible for administering and overseeing Medicaid. Colorado’s Medicaid program is

commonly known as Health First Colorado.

In Colorado, Medicaid represents approximately 37% of the State’s budget, or $14 billion in

Fiscal Year 2023. The federal government covers a share of state expenditures for Medicaid,

called the Federal Medical Assistance Percentage (FMAP), which is based on economic

conditions in the state, and varies based on the types of services provided and the populations

being served. The FMAP for Colorado Medicaid expenditures typically ranges from 50% to

about 56.2% but can be as much as 90% for certain eligible individuals.

HCPF is responsible for ensuring that Medicaid expenditures are appropriate and that the State

complies with all federal and state Medicaid requirements. Federal regulations [42 CFR § 440]

require states’ Medicaid programs to provide all eligible recipients certain basic services,

including, but not limited to, inpatient and outpatient hospitalization, physician and rural health

clinic services, and nursing facility services for recipients aged 21 and older.

In Fiscal Year 2023, there were about 1.7 million eligible Medicaid beneficiaries in Colorado and

roughly 93,000 Medicaid providers. Medicaid providers include a variety of health care entities,

such as physicians, hospitals, laboratories, hospice providers, medical equipment suppliers, and

imaging services providers. Providers submit claims to HCPF for the services they provide, and

the claims are processed and paid by HCPF’s fiscal agent – Gainwell Technologies – through

the interChange System. Providers must follow national medical coding and billing standards,

federal regulation, and HCPF Medicaid policy manuals when submitting health care claims

through interChange. Medical coding is the translation of treatments, services, and patient

diagnoses into a standardized numeric code to determine how much a provider is owed for

services rendered.

Recovery Audit Contractor Programs

State Medicaid agencies, such as HCPF, employ a variety of procedures and programs

intended to help ensure that payments to Medicaid providers are appropriate—that payments

are made only for services provided, that were medically necessary, that were offered in

compliance with Medicaid regulations, that were accurately coded, and that were billed within

regulatory time frames. One of these key programs is the Medicaid Recovery Audit Contractor

(RAC) program. Beginning in 2010, states were required by federal law to establish RAC

programs to review paid Medicaid claims to identify underpayments and overpayments made to

providers, and recoup any overpayments identified. Overpayments are payments that do not

Evaluation of the Colorado Recovery Audit Contractor Program

meet Medicaid program guidelines and can occur due to provider improper billing practices,

errors, and misapplication of billing policy. Providers must repay any amounts found to be

overpayments through a RAC audit, and the state must repay the federal government the

federal portion of the overpayment.

As shown in Exhibit 1, as of December 2023, there were 18 states, including Colorado, with

active Medicaid RAC programs.

Exhibit 1: States with Medicaid RAC Programs as of December 2023

Arizona

Mississippi

California

Nevada

Colorado

New Mexico

Connecticut

New York

Georgia

North Carolina

Hawaii

Oregon

Illinois

South Carolina

Indiana

Texas

Minnesota

West Virginia

Source: BerryDunn RAC State Research.

RAC programs are especially important given that most Medicaid claims do not require

preapproval of the services before providers serve Medicaid recipients. RAC audits help state

departments that administer Medicaid, including HCPF, fulfill their fiduciary responsibly to

ensure Medicaid funds are only used for allowable purposes and spent appropriately. According

to CMS, RAC programs can also be beneficial by encouraging actions that help prevent future

improper payments, such as by educating providers so that they can avoid submitting claims

that do not follow Medicaid requirements.

Colorado’s RAC Program

Under federal regulations, states must either contract with an eligible vendor to provide RAC

services or have a State Plan Amendment (SPA) approved by CMS to be exempted from the

requirement. HCPF’s first contract for RAC services began in July 2011. From July 2013

through June 2016, HCPF suspended the RAC program, with CMS approval, because it was

unable to secure a qualified contractor. Since July 2016, HCPF has contracted with Health

Management Systems, Inc. (HMS) to serve as the RAC.

Federal regulations establish requirements for all state Medicaid RAC programs, but also allow

states significant flexibility in designing their programs. Exhibit 2 cites key program design

elements of Colorado’s RAC program and the related federal provisions.

Evaluation of the Colorado Recovery Audit Contractor Program

Exhibit 2: Colorado Medicaid RAC Program and Federal Provisions

Colorado Features Federal Provision

Scope of services audited by the RAC program.

Applies only to fee-for-service claims in Medicaid.

The program does not audit Medicaid managed

care claims or fee-for-service dental claims.

States have the discretion to determine what

areas of their Medicaid programs to target for

RAC review and may exclude claims based on

the program integrity landscape in the state,

including all managed care claims.

Lookback period. Colorado has an approved State

Plan Amendment allowing the RAC to review

claims up to seven years old from the date the

claim was paid.

The RAC must not review claims that are older

than three years from the date of the claim,

unless CMS approves an exception.

Contingency fee for RAC contractor. Colorado has

a CMS-approved State Plan Amendment to pay a

contingency fee of up to 18% of overpayment

amounts recovered.

The contingency fee paid to a RAC may not

exceed the maximum specified by CMS, unless

CMS approves an exception. The maximum

federal rate for most claims is 12.5%.

Paying to identify underpayments. Colorado has a

CMS-approved State Plan Amendment that

exempts HCPF from the requirement to pay the

RAC to identify underpayments.

States must determine the fee paid to a

Medicaid RAC to identify underpayments.

States must adequately incentivize the

detection of underpayments.

Appeals. Colorado statute and regulations allow

providers to appeal RAC findings through an

administrative review. HCPF allows providers to

seek Informal Reconsideration of a finding in

addition to a formal appeal.

States must provide appeal rights, under State

law or administrative procedures, to Medicaid

providers that seek review of an adverse

Medicaid RAC determination.

Source: BerryDunn analysis of federal regulations, 42 CFR § 455 (F), and FAQs issued by CMS in December

2011.

The RAC Audit Process

RAC audits occur on a cyclical basis throughout the year. The process starts with HMS

analyzing the entire population of fee-for-service (FFS) paid claims to identify trends and

patterns that might indicate potential audit areas. HMS then develops audit plans, which HCPF

and HMS refer to as “scenarios,” that are expected to identify overpayments. Scenarios are

reviewed by HCPF and, if approved, HMS completes the audit. Each audit scenario is designed

to identify overpayments associated with a specific set of medical codes, common policy, or

benefit rules, and reviews specific claim types (e.g., outpatient, inpatient, professional claims) to

determine if they have been billed in error.

Colorado RAC audits are classified into two types - automated and complex, as follows:

1. Automated audits involve data analysis queries and algorithms to compare paid claims

data to applicable billing, coding, utilization, and reimbursement rules and policies.

Automated audits are conducted when improper payments can be clearly identified from

the claim itself, such as claims for services rendered after a patient’s date of death;

Evaluation of the Colorado Recovery Audit Contractor Program

claims for services rendered to recipients no longer eligible for Medicaid; and duplicate

claims for a given service. Automated audits do not require examination of medical

records for each claim, although according to HCPF, HMS staff may manually review

audited claims data in comparison to Medicaid rules and regulations, as a means of

quality assurance.

2. Complex audits involve examination of medical records supplied by the provider to

determine if the records document the appropriateness of the service and the accuracy

of the billed medical claim. Any claims for which the provider does not supply the

requested records on time are deemed to be overpayments, per regulations. An

example of a complex audit scenario is improper billing for hospice services. Billing for

hospice care can be complicated because the care is interdisciplinary, involving

physicians, nurses, social services, and medical supplies. In addition, hospice services

may be reimbursed at one of four care levels: routine home care, continuous home care,

inpatient respite care, and general inpatient care. To assess whether a hospice claim

was properly billed, HMS must review medical records for sufficient documentation that

the claimed services were provided and necessary. Such documentation may include a

certification by a medical professional that the individual is terminal and has a prognosis

of nine months or less and evidence that the Level of Care provided was justified,

especially for claims for continuous home care, which is the most expensive Level of

Care.

Once HMS completes its review of data and documentation on an audit, HMS prepares finding

letters for HCPF’s review. If HCPF approves the finding letters, HMS sends a Notice of Adverse

Action/Overpayment (Notice) to each provider for whom audits have identified claims as having

overpayments. The Notice sent to each provider includes a demand for repayment with a

deadline and outlines the provider’s rights to request an Informal Reconsideration and/or

appeal, which are described later in this chapter.

HMS conducts RAC audits of 31 different claim scenarios, and the audit process can vary

depending on the type of audit conducted and claim areas being reviewed; however, the

general audit process is depicted in Exhibit 3.

Evaluation of the Colorado Recovery Audit Contractor Program

Exhibit 3: HMS RAC General Audit Process

Source: CO RAC Overview Presentation 12.10.20.pptx (live.com)

HCPF also plays a key role in the RAC audit process. For example, as shown in Exhibit 4,

HCPF staff are responsible for reviewing and approving the RAC audit scenarios proposed by

HMS, as well as the audit findings.

Evaluation of the Colorado Recovery Audit Contractor Program

Exhibit 4: HCPF’s Review Role in RAC Audit Process

Source: https://resources.hms.com/state/colorado/rac “RAC Automated Process” (PowerPoint).

In addition to planning and conducting audits, HMS is responsible for provider outreach, which

includes informing providers about the audit process and deadlines, the rights and

responsibilities of all parties involved in the audit, and the resources and tools available to

providers. HMS is also responsible for provider education, which includes creating and

presenting information regarding the audit, including applicable federal regulations, audit

procedures, and communication resources, to providers, legislators, and stakeholders. HMS

must create educational materials and have them approved by HCPF before distributing them to

the public.

Recoveries of Overpayments

According to information provided by HCPF, RAC audits by HMS have resulted in annual

recoveries from overpayments identified during the audits. Exhibit 5 summarizes the

overpayments that HCPF reported as recoveries in Fiscal Years 2019 through 2023.

Evaluation of the Colorado Recovery Audit Contractor Program

Exhibit 5: Colorado RAC Program Recoveries of Overpayments

Fiscal Year

Overpayments Recovered

2019

$793,180

2020

$1,411,280

2021

$8,574,530

2022

$26,395,210

2023

$47,090,740

Source: Figures provided by HCPF.

- The Fiscal Year for the State of Colorado is July 1 through June

30.

Recoveries of overpayments have increased over time for a number of reasons. First, according

to HCPF, when HMS began administering Colorado’s RAC program in 2016, it audited fewer

years of past claims payments in order to allow providers time to learn billing requirements and

to correct their billing methods. Second, Colorado’s Medicaid population grew during the Covid

public health emergency, which resulted in an increase in claims that were audited and a

corresponding increase in unallowable payments that audits identified. Third, HCPF reported

that it took a cautious approach to auditing providers during the public health emergency by

pausing RAC audits for certain months and for rural hospital providers, slowing the pace of

sending audit findings and requests for documentation to providers to allow them time to

respond, and granting providers extensions. Fourth, HCPF and HMS have increased the

number and types of RAC audits conducted over time, which has resulted in more recoveries of

overpayments in recent years.

When overpayments are identified during a RAC audit, providers have four options to return the

funds to the State. Providers can choose from the following options:

1. Arrange an Electronic Funds Transfer

2. Arrange an offset against their future claims reimbursements

3. Arrange a payment plan by contacting HCPF’s RAC Contract Manager

4. Remit payment to HCPF via check.

Informal Reconsiderations and Appeals

Federal regulations [42 CFR § 455.512] and state statute [Section 25.5-4-301, C.R.S.] require

HCPF to have a process for providers to contest the findings of any RAC audit. HCPF offers

both an Informal Reconsideration process and a formal appeals process, as described below.

Informal Reconsideration. A provider has 30 days from the date it receives a Notice to request

an Informal Reconsideration of the findings by HMS. The request must be in writing, identify the

specific overpayment the provider is contesting and the reason, and be accompanied by

additional documentation to support the request. HMS’ contract states that it has 35 days to

review all new and previous documentation that a provider submits associated with the audit

Evaluation of the Colorado Recovery Audit Contractor Program

findings, and HMS decides whether to maintain or reverse the findings. According to HCPF,

HMS provides all Informal Reconsideration documentation, along with HMS’ decision letters, to

HCPF for its review and approval. If approved, HMS notifies the provider of its decision. The

letter informing a provider of HMS’ Informal Reconsideration decision includes information on

the process and deadline the provider must follow if it wishes to appeal the decision.

Appeal. Providers have the right to appeal a finding through the Office of Administrative Courts

within the Colorado Department of Personnel & Administration; providers do not have to request

an Informal Reconsideration prior to filing an appeal. Providers have 30 days to file an appeal

after the date of the Notice, or after the date of the Informal Reconsideration Determination.

HCPF may choose to settle appealed findings with the provider. If this route is chosen, the

provider and HCPF discuss and potentially compromise on the terms of the settlement, such as

the amount of repayment owed or the specific services in question. HCPF stated it considers

broader program objectives and other factors when deciding whether to settle an appeal,

including but not limited to, administrative efficiency, the cost of appeals to the RAC program,

the extent to which the provider participated in the Informal Reconsideration process, the

relevancy of additional medical documentation submitted by the provider during the appeal, and

maintaining positive relationships with providers. If no settlement is reached, then the case

progresses through the administrative review process, and if not resolved, will be heard and

decided by an Administrative Law Judge within the Office of Administrative Courts.

Evaluation Purpose, Scope, and Methodology

House Bill 23-1295, codified in Section 25.5-4-301, C.R.S., required the Office of the State

Auditor (OSA) to contract with an organization that had experience in reviewing Medicaid State

Plans and amendments to conduct an independent review of HCPF’s Medicaid RAC program

during Fiscal Year 2024. To conduct the review, the OSA contracted with BerryDunn, a

consulting and certified public accounting (CPA) firm that serves state, local, higher education,

and quasi-governmental agencies.

BerryDunn has extensive experience and expertise in health care consulting and auditing,

clinical coding and documentation, and health care compliance. It employs clinicians, certified

coding and documentation specialists, and health care compliance professionals. The

BerryDunn team assigned to this review includes nursing professionals with expertise in

compliance and risk management, quality improvement, and program integrity in a range of

government and health care environments, including state Medicaid agencies; individuals who

hold certifications by the American Academy of Professional Coders (AAPC), including but not

limited to: Certified Professional Coder (CPC)®, Certified Outpatient Coder (COC)®, Certified

Professional Medical Auditor (CPMA)®, and Certified Documentation Expert Outpatient

(CDEO)®; Medicaid compliance specialists; and data analysts.

Section 25.5-4-301(3.7), C.R.S., outlined 14 objectives for the review, as shown in Exhibit 6.

Evaluation of the Colorado Recovery Audit Contractor Program

Exhibit 6: RAC Program Evaluation Objectives

Statute Chapter Reference

1. Evaluate compliance with CMS requirements for Medicaid RAC

programs, state law, and coding practice standards. [Section 25.5-4-

301(3.7)(a), C.R.S.]

Chapter 2, Finding Nos. 2

and 4; Policy

Considerations B and C.

Chapter 3, Finding No.7

2. Examine the effectiveness and level of the payment model used for

HCPF’s RAC, including the level of payments sufficient to maintain a

contractor, the scope of the contract and deliverables, and impacts

on providers related to a contingency fee-based system significantly

above the federal standard. [Section 25.5-4-301(3.7)(a)(I), C.R.S.]

Chapter 2, Finding No. 2

Chapter 3, Policy

Consideration H

3. Examine the methods and effectiveness of HCPF’s approach to

addressing provider concerns regarding the Medicaid RAC program.

[Section 25.5-4-301(3.7)(a)(II), C.R.S.]

Chapter 3, Finding No. 7

4. Examine the requirements imposed by other states regarding overall

RAC contractor staffing and qualifications for reviewers to help

ensure alignment of specialty and subspecialty expertise for

conducting initial audits and final determinations. Consider how

Colorado can optimize staffing to balance potential overpayment

claims and medical necessity reviews. [Sections 25.5-4-301(3.7)(a)

(III)(A) & (3.7)(b)(II)(B), C.R.S.]

Chapter 4

5. Examine other states’ lookback periods and their relative financing

mechanisms. Consider the impacts on providers and Medicaid

beneficiaries of a lookback period in Colorado that exceeds federal

standards for Medicaid RAC programs. [Sections 25.5-4-301(3.7)(a)

(III)(B) & (3.7)(b)(II)(A), C.R.S.]

Chapter 3, Policy

Consideration D

6. Examine other states’ best practices, or best practices

recommended by providers, to help improve billing practices and

compliance and to provide support throughout the RAC audit

process. [Section 25.5-4-301(3.7)(a)(III)(C), C.R.S.]

Chapter 3, Finding No. 7

7. Examine the feasibility of incentives for underpayment identification,

including models from other states. [Sections 25.5-4-301(3.7)(a)

(III)(D) & (3.7)(a)(VI), C.R.S.]

Chapter 3, Policy

Consideration H

8. Assess the implications for providers and the State’s General Fund

of adjusting the lookback period used for RAC audits. [Sections

25.5-4-301(3.7)(a) (III)(D) & (3.7)(a)(VI), C.R.S.]

Chapter 3, Policy

Consideration E

9. Examine, compare to other states, and, to the extent feasible,

disaggregate by service date, audit finding date, and provider type:

a. The number, proportion, and value of claims reviewed relative to

total potential claims subject to the RAC program.

b. The number and proportion of providers impacted by claims

reviews and contested payments.

Chapter 4

Evaluation of the Colorado Recovery Audit Contractor Program

Statute Chapter Reference

c. The number, proportion, and value of contested payments,

including underpayments, overpayments, and recoupments.

d. The number, proportion, value, and result of contested payments

by disposition status, including resolution through Informal

Reconsideration and appeal. [Section 25.5-4-301(3.7)(a)(IV)(A)

– (D), C.R.S.]

10. Examine provider administrative burdens associated with the RAC

program. [Section 25.5-4-301(3.7)(a)(V), C.R.S.]

Chapter 3, Policy

Consideration F

11. Examine the impact of audits on provider participation and access to

care, and opportunities to increase meaningful provider participation

access to care. [Section 25.5-4-301(3.7)(a)(VII), C.R.S.]

Chapter 3, Policy

Consideration F and D

12. Assess the duplication of utilization management reviews and

approvals, such as prior authorization, with post-payment and audit

reviews. [Section 25.5-4-301(3.7)(a)(VIII), C.R.S.]

Chapters 3, Policy

Consideration F

13. Assess federal flexibilities that Colorado can use to improve the RAC

program, including provider education, training, and error rates, and

the timing and procedure when a potential overpayment is

“identified” or “determined.” [Sections 25.5-4-301(3.7)(b)(I),

(3.7)(b)(II)(E), & (3.7)(b)(II)(C), C.R.S.]

Chapter 2, Policy

Consideration A

14. Consider how the State could evaluate the cost benefit of the RAC

program to determine whether it is striking the right balance between

accountability and access to care. [Section 25.5-4-301(3.7)(b)(II)(D),

C.R.S.]

Chapter 3, Policy

Consideration G

Source: BerryDunn analysis of Section 25.5-4-301 (3.7), C.R.S.

This evaluation was performed from August 2023 through May 2024.

We developed and executed a work plan for this review that relied on both quantitative and

qualitative methodologies. In particular, we obtained information from HCPF, publicly available

sources, other states, providers, and provider associations. HCPF provided us with, and we

reviewed, more than 11,000 unique documents as part of our evaluation process.

Work performed on the evaluation involved the following key areas of activity:

• Interviewed HCPF staff responsible for the administration and oversight of the Colorado

RAC program.

• Interviewed HMS staff related to our review of a sample of audited claims as well as for

understanding of HMS’ role and responsibilities in the program.

• Reviewed RAC program documents from the following RAC program areas:

a. Requests for Proposals (RFPs) issued to procure a RAC vendor over the entirety

of Colorado’s RAC program

b. RAC program contracts in effect from July 2016 to the present

Evaluation of the Colorado Recovery Audit Contractor Program

c. RAC contract transmittals

d. RAC audit scenarios

e. RAC program policies and procedures

f. Policies and procedures related to the appeals and Informal Reconsideration

processes

g. Internal RAC program process documents

h. Notices and communications sent to providers

• Reviewed federal regulations and guidance pertaining to the Medicaid RAC program and

contacted CMS for information about Colorado’s RAC program.

• Reviewed Colorado statutes and regulations pertaining to the RAC program and other

Medicaid post-payment reviews.

• Interviewed four provider associations regarding their experiences with the RAC

program. Because of the interviews’ limited and voluntary nature, the results are only

representative of the associations and providers that participated, and cannot be

projected to any broader populations.

• Conducted a voluntary online survey of Colorado Medicaid providers that are subject to

RAC audits. The purpose of the survey was to gauge perceptions and attitudes of

providers about the RAC program. The survey was active from 10/31/23 – 11/27/23, and

we received 115 valid responses. The survey methodology and results are included in

Appendix A. Because of the design and voluntary nature of the survey, the results are

only representative of those providers that responded. The survey results are not

representative of and cannot be projected to any group of providers or the provider

community as a whole.

• Conducted online research to gather information on the RAC programs in the 17 other

states that had programs as of December 2023.

• Contacted eight other states with RAC programs for information on aspects of their

programs and audit statistics (Georgia, New Mexico, New York, North Carolina, Oregon,

South Carolina, Texas, and West Virginia). We interviewed representatives of five of

these states (Georgia, New York, Oregon, South Carolina, and Texas). To determine

which states to contact, we asked HCPF which RAC programs it considers most similar

to Colorado and we selected states that varied in the size and scope of their RAC

programs, their lookback periods, and their RAC vendors. This variety provided us a

broad perspective on how different RAC programs operate.

• Analyzed aggregate data on Medicaid claims that were audited by the RAC vendor

between January 2018 and June 2023.

• Reviewed a sample of 100 of the 482,509 paid Medicaid claims that were audited by

HMS between January 2018 and June 2023. The sample consisted of 76 claims that

underwent automated audits and 24 that underwent complex audits. The results of our

sample testing are not intended to be projected to the population. However, they are

Evaluation of the Colorado Recovery Audit Contractor Program

valid for corroborating some of the information we received from providers and

identifying potential weaknesses in RAC audit processes, as discussed later in this

report.

• Reviewed all 31 audit scenarios that HCPF had approved for use during the period

covered by our evaluation. We reviewed for the completeness of the scenarios and their

compliance with the requirements in the RAC contract. For three of these scenarios, we

conducted more detailed examination of documents related to the scenarios, including

the findings, correspondence, evidence of Informal Reconsideration reviews, and

appeals. These three scenarios were selected based on case review findings and data,

and during the reviews we noted potential problems with the scenario designs.

We appreciate the cooperation and assistance provided by HCPF and providers during this

evaluation.

Obtaining the views of responsible officials is an important part of our commitment to ensuring

that the report is accurate, complete, and objective. Drafts of this report were reviewed by HCPF

management and staff, and they had opportunities to provide us feedback. We were solely

responsible for determining whether and how to revise the report, if appropriate, based on the

HCPF's comments. The written responses to the recommendations and the related

implementation dates were the sole responsibility of HCPF. However, we included an

Addendum to HCPF's responses if they were inconsistent or conflicted with our findings or

conclusions, or if they did not adequately address the recommendations.

Evaluation of the Colorado Recovery Audit Contractor Program

Chapter 2: Evaluation of Compliance with

Federal and State Requirements

The purpose of the Medicaid Recovery Audit Contractor (RAC) program is to identify

overpayments and underpayments made on claims for health care services provided to

beneficiaries and to help recover overpayments. Federal regulations outline requirements for

state Medicaid RAC programs and require states to implement the programs in compliance with

state law.

House Bill (HB) 23-1295, which is incorporated into the Colorado Revised Statutes at 25.5-4-

301(3.7), required this evaluation to review compliance with federal regulations and State

statutes pertaining to the Medicaid RAC program. Overall, our review found that HCPF’s RAC

program is designed and operating in a manner that achieves its purpose, that is consistent with

its approved State Plan Amendment, and that adheres to most of the key requirements in

federal regulations and State statute. However, we identified some areas where the program is

not in full compliance with some requirements. Exhibit 7 below provides a summary of key

federal and State requirements for RAC programs and our conclusions on HCPF’s compliance

with them.

Exhibit 7: Key Requirements for Medicaid RAC Programs

Key Requirements for Medicaid RAC Programs

In Compliance?

Contracting for RAC Services

States must contract with an eligible RAC to review paid Medicaid claims to identify

underpayments and overpayments.

Yes

Lookback Period

A RAC must not review claims that are older than three years from the date of the

claim. HCPF’s Medicaid State Plan Amendment (SPA), which is approved by the

Centers for Medicare & Medicaid Services (CMS), allows the RAC to review claims

up to seven years old.

Yes

RAC Compensation

States pay RACs a contingency fee based on a percentage of overpayments

recovered. The fee may not exceed that specified by CMS, which is 12.5% for most

claim types. HCPF’s CMS-approved SPA authorizes a contingency fee of up to

18%.

Yes

States pay RACs a contingency fee based on a percentage of overpayments

recovered.

No, see Finding 2

Qualifications of RAC Personnel

The RAC must demonstrate its technical capability to carry out its duties and

employ trained and licensed medical professionals and certified coders.

Partial.

See Finding 4

Evaluation of the Colorado Recovery Audit Contractor Program

The RAC must employ a 1.0 full-time equivalent (FTE) medical director who is a

licensed Doctor of Medicine or Osteopathy. HCPF’s CMS-approved SPA allows the

RAC to hire a 0.10 FTE medical director.

Yes

Identification of Underpayments

States must set a fee for the RAC to identify underpayments and must adequately

incentivize the detection of underpayments. HCPF’s CMS-approved SPA authorizes

an exception to the fee.

Partial.

See Policy

Consideration H

Program Operations

RAC programs must offer education and outreach that informs providers about

audit policies and protocols, customer service measures including a toll-free

telephone number, and methods to accept electronic submission of medical

records.

Partial.

See Finding 7

States must provide appeal rights to providers seeking review of an adverse RAC

determination. Statute outlines appeal rights.

Yes

States must coordinate RAC audits with other audit entities. RACs should not audit

claims that have been or are being audited by another entity.

Yes

Cases of suspected fraud and/or abuse found through a RAC audit must be

referred to an appropriate law enforcement agency.

Yes

States must set limits on the number and frequency of medical records to be

reviewed by the RAC.

Yes

Source: BerryDunn analysis of RAC program requirements and HCPF’s RAC program.

1 - Requirements summarized from federal regulations at 42 CFR § 455 Part Subpart (F),, and state statute at Section

25.5-4-301, C.R.S.

Statute also required that we evaluate “compliance with coding practice standards.” Current

Procedural Terminology (CPT

) codes offer health care professionals a uniform language for

coding medical services and procedures to streamline billing and reporting and increase

accuracy and efficiency. CPT codes are also used for administrative management purposes,

such as claims processing and developing guidelines for medical care review. The CPT is a

standard code set—outlined in Health Insurance Portability and Accountability Act (HIPAA)

regulations—used for encoding data elements, such as tables of terms, medical concepts,

medical diagnostic codes, or medical procedure codes. We found that HCPF’s coding/billing

manuals generally follow industry standards for coding, including the use of CPT codes for

Medicaid claims.

Evaluation of the Colorado Recovery Audit Contractor Program

Finding 1 – Audit Scenario Investigation

According to the RAC contract, HMS must prepare a written audit “scenario” and receive HCPF

approval of the scenario before starting an audit. Each scenario describes a set of paid claims

that have overpayments or are likely to have overpayments and provide specific information,

including whether the audit will be automated or complex, the standards each claim will be

measured against to determine if an overpayment occurred, the estimated number of claims to

be reviewed in the scenario, and the provider type(s) that will be audited. Scenarios are

reviewed by not only HCPF’s RAC program staff, but also by other HCPF staff, including those

with Medicaid program and policy expertise and responsibilities. For example, a scenario that

proposes to audit Home and Community Based Services (HCBS) claims will be reviewed by

RAC program staff and staff from the Office of Community Living, which oversees the HCBS

waiver within HCPF. Currently HMS reviews claims for 25 automated audit scenarios and six

complex audit scenarios.

What Work Was Performed, and What Was the Purpose?

During our evaluation, we conducted high-level reviews of 31 scenarios, and we conducted a

more extensive evaluation of three audit scenarios based on case review findings and data and

noted potential problems with the design of the scenarios. The Level of Care audit scenario was

conducted between February 2018 and June 2023, and the Radiology Duplicates and the Billing

of Inpatient Visits audit scenarios were conducted between August 2022 and April 2023. For two

of these scenarios (Radiology Duplicates and Level of Care), the audits resulted in a significant

proportion of findings that were rescinded by HCPF after the providers had been notified of the

original findings. For the third scenario (Initial Inpatient Visits), our analysis of HCPF's report of

claims audited indicated that as of February 9, 2024, roughly 58.5% of the findings had

undergone an appeal and 59.6% of findings had undergone an Informal Reconsideration. In

addition, according to the information from our survey and interviews with providers, the Initial

Inpatient Visits audit created confusion and frustration for providers due to inconsistency in the

guidance HCPF had provided for coding and billing the services covered by the audit. As of

February 9, 2024, the Informal Reconsiderations had been completed and HMS had upheld all

the findings, but none of the appeals had been concluded.

To further assess these three scenarios, we reviewed the following documentation for each one:

• The written scenarios HMS submitted to HCPF, and documentation of HCPF’s review

and approval of the scenarios.

• HCPF Provider Bulletins and other guidance on proper billing for the services covered in

each of the three scenarios.

• Correspondence from February 2018 and June 2023, and other materials (such as a

settlement agreement) that explained how HCPF dealt with the claims during the

appeals process.

We also discussed the audit scenarios with HCPF and HMS.

Evaluation of the Colorado Recovery Audit Contractor Program

The purpose of our work was to assess the controls HMS and HCPF had in place to ensure that

scenarios were complete and accurate before the audits were conducted.

How Were the Results of the Work Measured?

HCPF’s RAC contract requires HMS’ scenarios to include specific information, including details

on the standards (i.e., professional coding manuals, Medicaid benefit plans, State and federal

regulations, reimbursement policies, contracts, billing instructions, and claims processing edits

in effect on the dates of service) that pertain to the audit. The audit scenarios take into

consideration the Date of Service on the provider submitted claim and the effective date of each

criterion for the audit. [Contract Section 1.15.1.2] The contract stipulates that, for each of these

standards, the scenario must include the citations and the full text of the regulation, policy,

instruction, etc. [Contract Sections 1.13.1.4.1 - 1.13.1.4.3] These requirements provide

information that HCPF RAC and policy staff need in order to review and approve audit

scenarios. This information is also used to provide HCPF policy staff the rationale for the audit

and information on the utilization of certain billing practices, as well as to develop the case

summaries made available to providers as part of the audit.

HCPF’s review and approval is intended to validate the scenario, including that the standards

that will be used in the audit are complete and accurate. If there are any changes to the

manuals, plans, regulations, or policies after an audit scenario is approved by HCPF, the

approved scenario should be reevaluated and potentially updated to help ensure accurate

audits of claims.

What Problem Did the Work Identify?

We found that each of the three scenarios we reviewed used standards to identify findings,

which were inconsistent, unclear, or outdated at the time of the audit, as described below.

Radiology Duplicates Audit Scenario. HCPF approved this automated audit scenario in June

2022 and the audit was completed in March 2023. Six months after the audit was completed,

HCPF rescinded all the findings from the audit due to a conflict between the guidance some

providers received from HCPF related to billing for radiology services and the official rules and

manuals that HMS used for the audit. For this audit, HMS applied a lookback period of 2015

through 2020. On June 1, 2018, which was during the lookback period, HCPF changed its billing

policy related to radiology (per provider bulletin B1800417). As a result, some of the claims in

this audit would have been submitted by providers and paid under the old policy (i.e., the policy

in effect prior to June 1, 2018) and some were submitted and paid under the new policy (i.e., the

policy effective beginning June 1, 2018). In the scenario, HMS recognized the change in policy

and indicated that it would test claims against the policy in effect when the claim was submitted.

However, it appears that HMS policy staff and RAC program staff did not know that HCPF had

informally provided guidance to some providers to begin billing according to the new policy

before June 1, 2018. Providers that followed this guidance had claims that were identified as

improper when the Radiology audit was conducted. In total, this audit identified $13.5 million in

overpayments to 17,000 providers.

Evaluation of the Colorado Recovery Audit Contractor Program

Level of Care Audit Scenario. The Level of Care inpatient audit is part of the larger Inpatient

Audits. HCPF approved this complex scenario in February 2017, and the first audit began in

February 2018. After the initial audit, in 2021 HMS conducted additional reviews under this

scenario with a lookback period that included Calendar Year 2019. In 2023, HCPF retracted

many of the findings from the 2021 reviews because the audit scenario had not been updated to

account for a change in policy that occurred in February 2019 for treatment of End Stage Renal

Disease (ESRD), which is one of the services covered by the audit. As a result, some of the

ESRD claims in the 2021 reviews would have been submitted and paid under the old policy (i.e.,

the policy in effect prior to February 2019) and some were submitted and paid under the new

policy (i.e., the policy effective beginning February 2019). The 2021 reviews did not account for

this change; they tested all claims against the old policy, so all claims billed after the policy

change in February 2019 were identified as overpayments.

HCPF retracted findings from the Level of Care audit that had been identified in error after some

providers appealed the findings. As an example, one provider appealed its findings of more than

$2.5 million in overpayments. During the appeals process for this provider, HCPF concluded

that most of these findings were not accurate and reversed its demand for repayment for all the

findings that had been identified related to the policy change. This resulted in a settlement with

the provider for a repayment of $60,000, which was for findings not related to the policy change.

Billing of Initial Inpatient Visits Audit Scenario. HCPF approved this automated audit

scenario in May 2022, based on American Medical Association (AMA) CPT guidance, and the

audit began in September 2022. According to our analysis of a HCPF report of claims audited,

providers appealed about 58.5% of the findings from this audit and several providers we talked

with during our evaluation mentioned this specific audit as one that has been problematic

because the guidance HCPF issued for these services lacked clarity and specificity. In March

2010, HCPF advised providers in a bulletin that specific codes for office/outpatient consultations

and for inpatient consultations could no longer be used and that other existing codes should be

used for both outpatient and inpatient consultations. The bulletin did not specify what other

codes would be appropriate for these services but did say that “This change is being

implemented to be consistent with Medicare policy.” According to provider documents we

reviewed, some providers interpreted this language to mean that, when they billed HCPF for

outpatient and inpatient consultations, they should use codes established in Medicare policy.

However, HCPF told us that was not the message the bulletin intended to communicate, and

submitting claims to Medicaid for these consultations using Medicare codes was not compliant

with HCPF’s billing requirements.

The audit identified almost 28,000 overpaid claims totaling about $1.7 million. According to

information from HCPF, as of December 2023, no decision has been rendered on any of the

appeals from this audit.

Evaluation of the Colorado Recovery Audit Contractor Program

Why Did the Problem Occur?

Although HCPF has some policies and procedures related to the development and approval of

RAC audit scenarios, we identified several areas where they could be strengthened.

Specifically, HCPF’s policies and procedures do not sufficiently:

• Define what HCPF divisions should be included in the review and approval of audit

scenarios, or what the role and responsibilities of each division should be in the review

process. For example, HCPF told us that when a scenario related to radiology services

is developed, HCPF radiology, physician and hospital policy staff would be responsible

to participate in the review and finalization of the radiology services scenario. However,

there is no policy that documents this responsibility or outlines what the participation

should entail.

• Identify the information each division needs to fulfill its responsibilities and establish

processes for distributing the information to the divisions. From our review of these three

scenarios, we noted that HCPF’s program, benefits, and policy staff involved in the

review and approval of audit scenarios did not receive complete information on the

scenarios. For example, the emails sent to the Medicaid program/policy staff did not

include the full detail included in the request HMS submitted to HCPF. Some of the

missing details included references to policies, bulletins, impacted providers, and

potential volume of claims with overpayments.

• Establish how HCPF will hold its RAC accountable for thorough development of audit

scenarios that includes ensuring the policies, rules, and other standards to be used in

the audit are complete and accurate.

Why Does This Problem Matter?

When HCPF and HMS do not thoroughly investigate the audit scenarios prior to an audit, there

is a risk of inaccurate audit findings, which can create additional costs for providers and HCPF.

For example, for the one provider discussed above that underwent the Level of Care audit and

appealed the findings in 2022, both the provider and HCPF spent time and other resources over

the course a year before finally settling the appeal and overturning nearly all the $2.5 million in

findings because they were inaccurate.

Demanding repayment of overpayments that are identified through audits that apply incorrect or

imprecise standards can also undermine HCPF’s credibility with the provider community and is

counter to the fundamental purpose of the RAC program, which is to improve program integrity.

Recommendation No. 1

The Department of Health Care Policy & Financing (HCPF) should improve the controls that it

has in place to ensure that Recovery Audit Contractor (RAC) audit scenarios are complete and

accurate and to identify any problems in the scenario design before the audits are conducted.

This should include implementing additional policies and procedures that:

Evaluation of the Colorado Recovery Audit Contractor Program

A. Define the HCPF divisions that should be included in the review and approval of audit

scenarios and identify the roles and responsibilities of each division.

B. Identify the information each division needs to fulfill its responsibilities and establish

processes for distributing the information to the divisions.

C. Establish how HCPF will hold its RAC accountable for thorough development of audit

scenarios that includes ensuring the policies, rules, and other standards to be used in

the audit are complete and accurate.

Response

Department of Health Care Policy & Financing

A. Agree

Implementation Date: 12/2024

The Department agrees with this recommendation. The Department will create a process

where HCPF’s Executive Leadership Team (ELT) approves all audit scenarios and will

enhance clarity around the roles and responsibilities of each division.

Documents were provided that show the level of interaction department policy staff has with

audit review, approvals, and clarifications. This includes all audit projects proposed as drafts

with track changes, comments, and recommendations from policy staff. The emails for

approval are the final assurance that we did validate the audits with that group. If the policy

team finds subsequent, previously unpublished policy notices, that revise a subset of claims

audited by the RAC, the RAC program staff at the Department and the RAC vendor

immediately will cease auditing to clarify information or adjust the audit based on policy and

Attorney General recommendations. These subsequent revisions do not invalidate previous

audit findings but do require revisions for forward audit standards. This recommendation

encompasses a review of 3 of 30 scenarios where policy was changed, rules were changed,

or federal guidance was changed after the review was completed. This includes cases

where litigation was active for years after the audit was conducted.

Addendum: This finding and recommendation do not address RAC audit scenarios “where

policy was changed, rules were changed, or federal guidance was changed after the review

was completed.” For the scenarios discussed in the finding where outdated policies, rules,

or guidance were applied, those changes occurred during the period covered by the RAC

audit, not after the RAC audit was completed.

B. Agree

Implementation Date: 12/2024

The Department agrees with this recommendation. HCPF recognizes that it can enhance e-

controls and is already working on a process to have the HCPF’s ELT as well as the RAC

provider advisory board review audits before final approval, have the documentation

showing dated approvals from each policy staff area or office within the Department, and

update the external communications to have better transparency with stakeholders.

Evaluation of the Colorado Recovery Audit Contractor Program

C. Agree

Implementation Date: 12/2024

The Department agrees with this recommendation.

There are currently controls in place and contract provisions that outline the quality metrics

and remedies to follow when issues with an audit arise. There are also specific cases where

evolving information necessitates a modernization of an audit. The current overall quality of

the RAC reviews and adherence to timelines is strong; still, HCPF will review national

standards, laws, and guidelines to enhance current processes.

The report indicates issues with three specific audits, out of an inventory of 30 audit

versions. Also, we noticed that the sample size against a claim population of over 482,000

claims was far below the CMS-recommended 384 reviews across all of the scenarios to

achieve 95% / 5% statistical sampling.

Addendum: This finding is based on in-depth review of materials related to the three RAC

audit scenarios discussed, not on a sample of claims. Further, CMS does not recommend

sample sizes for evaluations done by the OSA or its contractors.

Evaluation of the Colorado Recovery Audit Contractor Program

Finding 2 – Application of Contingency Fee

State Medicaid RAC programs are intended to be fully funded by the recovery of the

overpayments that the RAC vendors identify. Specifically, the RAC vendor fee must be paid out

of recoveries, as indicated in 42 CFR § 455.510(b)(1). Recovering funds from a specific

overpayment finding or group of findings can be a lengthy process. If providers request Informal

Reconsiderations and/or appeals, it may take months or years to finalize the finding and collect

overpayments.

According to 42 CFR §433.300(a), states must repay the federal share on the full identified

overpayment amount, regardless of whether the states actually recover the full identified

amount; 42 CFR §455.510(b)(1) requires states to pay their RAC vendors on amounts the

states actually recover. CMS RAC FAQs published in 2011 include that a RAC contingency-

based contract where the contractor is paid based on amounts recovered minimizes expenses

compared to other payment methodologies.

What Work Was Performed, and What Was the Purpose?

We reviewed federal and state requirements related to paying the RAC and the terms in HCPF’s

2016 and 2021 RAC contracts that outline how HMS will be compensated.

We also reviewed a series of emails between CMS and HCPF addressing a question from

HCPF regarding whether the RAC contingency fee can be paid on uncollected overpayments

from providers. The emails were dated between April 12, 2016, and June 10, 2016.

The purpose of this work was to evaluate HCPF’s compliance with federal and state

requirements related to paying the RAC.

How Were the Results of the Work Measured?

Federal and state regulations indicate that the contingency fee a state pays its Medicaid RAC

vendor is to be based on the amount of overpayments recovered from providers. Specifically:

• Under federal regulations, “The contingency fees paid to Medicaid RACs must be based

on a percentage of the overpayment recovered.” [42 CFR 455.510(b)(1)]. In a series of

emails between CMS and HCPF, CMS affirmed this expectation, stating: “The RAC final

rule, PDF page 15, states that payments to RACs may not be made based on amounts

merely identified but not recovered.”

• Under state statute, HCPF is authorized to enter into a contract with a qualified agent to

audit providers where the “compensation of the contracting agent shall be contingent

and based upon a percentage of the amount of the recovery collected from the provider.”

Further, the “compensation paid to the contracting agent under a contingency-based

contract shall not exceed 18% of the amount finally collected from the provider

overpayment” and “In any contingency-based contract authorized pursuant to this

paragraph (b), the state of Colorado shall not be obligated to pay the contracting agent

for amounts not actually collected from the provider.” [Section 25.5-4-301(3)(b), C.R.S.]

Evaluation of the Colorado Recovery Audit Contractor Program

These legal requirements specify that the contingency rate be applied to the amount

recovered—not the amount identified by the RAC as an overpayment. This distinction is

important because providers can appeal identified overpayments and it is not uncommon for

HCPF to enter into a settlement agreement with an appealing provider in which the provider

repays only a portion of the amount identified.

What Problem Did the Work Identify and Why Did It Occur?

We found that HCPF’s 2021 RAC contract contains a provision that is contrary to federal and

state requirements that contingency payments be based solely on funds recovered from

providers due to RAC audits. Specifically, Section 1.27.6 of the contract states,

“In the event of settlement of claims during the appeal process, where the

settlement amount is less than the full findings amount, the State will pay

Contractor the contingency fee associated with the full findings unless it is

determined that settlement occurred due to invalid findings by Contractor.”

Emphasis added.

HCPF confirmed that it pays HMS the contingency fee based on the full amount HMS identifies

as overpayments, even when HCPF does not recover the full amount identified due to

settlements. HCPF stated that it uses this payment approach because it fairly compensates

HMS for the work done and does not penalize HMS when the state chooses to settle, which

occurs frequently. HCPF could not explain how this payment approach is consistent with federal

and state requirements.

Further, the 2021 RAC contract contains other provisions that appear to conflict with Section

1.27.6, stating that “Contractor will be paid … a contingency fee of the total dollar amount of

overpayments recovered and received through Contactor’s audits during the full Contract

period,” that the “contingency fees to be paid by the Department to Contractor for the Work are:

(1) Contingency Fee Percentage Rate of 18% of recovered overpayments …” [Contract

Sections 2.1.1.2 and 2.1.2.1]

Why Does This Problem Matter?

The HMS contract may not comply with federal regulations for contingency fees. Non-

compliance with federal regulations could put the Colorado RAC program at risk for further

scrutiny and corrective action from CMS. Corrective action plans are typically written by the

State and approved by CMS. Corrective action plans provide information on how and when the

State will implement changes to address deficiencies in the RAC program.

In addition, the practice of compensating the RAC for identified but unrecovered overpayments

could provide an incentive for HMS to be overzealous in its audits. In any case where HCPF

settles an appeal with a provider, there is no final determination of whether the findings were

valid, because the cases do not go before an Administrative Law Judge. HCPF has stated that

no appeals from 2018 through 2023 have been heard by an Administrative Law Judge. As a

result, HCPF may settle with a provider on findings that were not valid, and pay HMS based on

the identified overpayment amount. Alternatively, HCPF may settle an overpayment finding and

Evaluation of the Colorado Recovery Audit Contractor Program

recover less than the full identified overpayment amount, but still pay HMS for the identified

amount.

We were unable to match the amount of overpayments identified through RAC audits, the

proportion of those identified that were not ultimately recovered, and the amounts HCPF paid

HMS for the findings. This is because HCPF does not track total identified overpayments and

the recoveries on such overpayments in any global manner. HCPF told us the amounts

identified and recovered are tracked only on an appeal-by-appeal basis. Thus, although HCPF

reported it recovered about $82 million in overpayments in Fiscal Years 2021 through 2023,

HCPF could not tell us the amount of total overpayments identified that resulted in these

recoveries or the amount it paid HMS for those identified overpayments.

Recommendation No. 2

The Department of Health Care Policy & Financing should amend the Recovery Audit

Contractor (RAC) contract to eliminate the provision to pay the RAC for the amounts identified

as overpayments during RAC audits but not recovered from providers to bring the contract into

compliance with federal regulations and State statute.

Response

Department of Health Care Policy & Financing

Agree

Implementation Date: 08/2024

The Department agrees with this recommendation. The Attorney General’s Office and HCPF

are reviewing all state and federal laws and are working with HMS to amend the contract

accordingly.

Evaluation of the Colorado Recovery Audit Contractor Program

Finding 3 – Use of Contract Transmittals

HCPF has established a practice of using “transmittals” to provide contractors with “official

direction within the scope of the Contract.” HCPF has issued nine transmittals related to the

RAC program since it began contracting with HMS in 2016. Transmittals are used to clarify

contract requirements, update deadlines, and provide detailed direction on how the contractor

should comply with provisions in the contract.

What Work Was Performed, and What Was the Purpose?

We reviewed HCPF’s 2016 and 2021 RAC contracts, Health Management Systems, Inc.’s

(HMS’) RAC Policies and Procedures Manual, and routine reports provided to HCPF by HMS.

We also reviewed all of the transmittals HCPF has issued to HMS since HMS first became the

RAC in 2016 and interviewed HCPF staff about the contract transmittal process.

The purpose of our work was to evaluate how HCPF uses transmittal letters and the role they

play in HCPF’s oversight and enforcement of the RAC contract.

How Were the Results of the Work Measured?

Language in HCPF’s RAC contract indicates that transmittals are a critical part of the

communication from HCPF to HMS and serve as official directives. For example, the contract

states that the contractor “shall comply with all direction contained within a transmittal” and

“shall retain all transmittals for reference." In addition, Section 1.8.5. of the contract directs HMS

to ensure that all official direction is documented in a transmittal, stating that “if the Contractor

receives direction from the Department outside of the transmittal process, it shall contact the

Department’s primary designee and have the Department confirm that direction through a

transmittal prior to complying with that direction.”

Section 1.8.2. of the contract states that for a transmittal to be considered complete, it must

include, at a minimum, an effective date, direction to the contractor regarding performance

under the Contract, and a due date or timeline by which Contractor shall comply with the

direction contained in the transmittal.

Section 1.8.6. of the Contract states “Transmittals may not be used in place of an amendment,

and may not, under any circumstances, be used to modify the term of the Contract or any

compensation under the Contract.”

What Problem Did the Work Identify?

We identified problems with how HCPF has used transmittals for the RAC contract. First,

although the contract stipulates that transmittals may not, “under any circumstances” be used to

modify the contractor’s compensation, we found one transmittal did increase compensation to

HMS without a contract amendment. On October 15, 2020, HCPF issued a transmittal to HMS

that increased its contingency fee. HCPF told us that this decision was made by management to

help address the emergency under the pandemic.

Evaluation of the Colorado Recovery Audit Contractor Program

Under the 2016 RAC contract, which was still in effect in October 2020, the contractual

contingency fee was tiered, with a maximum of 13.5% paid for automated audits and a

maximum of 17% paid for complex audits. These maximums were paid if the contractor met all

contractual performance measures. The October 2020 transmittal implemented a guaranteed

18% contingency fee for both automated and complex audits with a stipulation that the

contractor would be subject to a corrective action plan if performance metrics were not met. It

made the fee effective for automated audits that began on or after the date of the transmittal

and made it retroactive for complex audits that began no earlier than July 2020. (Contract

Transmittal #5; October 15, 2020).

Second, we found that six of the nine (67%) transmittals that HCPF issued to HMS for the RAC

program since 2016 were prepared and communicated before the 2021 contract was executed.

Although HCPF told us it expects HMS to continue adhering to these six transmittals, it did not

update or reissue them after executing the 2021 contract with HMS and all the transmittals

include references to specific sections of the 2016 contract, which is no longer in effect.

Third, there is a lack of consistency in HCPF’s use of transmittals to provide direction to HMS.

The transmittals that have been issued address items that appear to vary in importance, ranging

from defining the Department’s “business day” (Contract Transmittal #3; September 11, 2018) to

establishing limits on the number of claims HMS can audit each year (Contract Transmittal #2;

February 1, 2018). In contrast, we identified two instances of HCPF providing direction to HMS

about compliance with provisions in the RAC contract without using a transmittal, as described

below.

• Audit Project Plan. The 2021 RAC contract requires HMS to prepare a two-year Audit

Project Plan that contains a variety of information including a list of approved audit

scenarios, methods for conducting outreach and education to providers, and projected

audit start and completion dates. However, HCPF told us that the requirement was only

applicable to the 2016 contract because, when HMS first became the RAC, HCPF

wanted an initial two-year start-up plan. HCPF told us that it validates that the

requirements were met through communications with HMS including periodic reporting,

division-wide audit plans, and emails that provide a more fluid method of planning and

oversight of audits than a single document. From our review, it appears that the critical

components of an Audit Project Plan, as outlined in the contract, are encompassed in

other documents and reports. HCPF stated that it retained the requirement for the two-

year plan in the 2021 contract in case it decided it wanted such a plan in the future.

HCPF did not issue a transmittal to HMS to communicate that the plan was not required.

• Underpayment Reporting. The 2021 RAC contract includes a requirement for HMS to

report the number and amount of any provider underpayments identified during the audit

process and include a list of such underpayments in monthly status reports submitted to

HCPF. An underpayment occurs when the provider’s payment is less than what is

supported by the provided documentation and the Medicaid allowed amount for the

service provided. We reviewed the monthly reports for a four-year period and found no

discussion of underpayments. According to HCPF, it told HMS it did not need to prepare

monthly reports for underpayments because HMS notifies HCPF immediately on the rare

Evaluation of the Colorado Recovery Audit Contractor Program

occasions it finds an underpayment. HCPF told us that only 26 underpayments were

identified by HMS during audits from 2018 through 2023. HMS does not specifically audit

for underpayments to providers because this is not a federal requirement, and the RAC

contract does not require such audits and does not compensate for finding

underpayments. HCPF did not issue a transmittal to HMS to direct it to discontinue any

monthly reporting on underpayments.

Why Did the Problem Occur?

We found that HCPF has not fully defined the use of transmittals for the RAC program. First,

although the contract appears to intend for transmittals to serve as formal and official means for

HCPF to provide guidance to HMS, it does not outline when other forms of communication will

suffice. For example, the contract requires HMS to (1) comply with all direction contained within

a transmittal, (2) contact the Department to obtain direction if the contractor receives conflicting

transmittals, (3) contact the Department to obtain a transmittal prior to complying with any

direction provided by the Department outside of the transmittal process, and (4) retain all

transmittals for reference [Contract Sections 1.8.2, 1.8.4, 1.8.5, and 1.8.7]. The contract also

stipulates that “Transmittals may not be used in place of an amendment, and may not, under

any circumstances be used to modify the term of the Contract or any compensation under the

Contract.” [Contract Section 1.8.6]. These requirements appear to indicate the importance of

using transmittals for official direction and provide specific instances when they cannot be used.

However, in contrast to these precise directives, the contract also states that transmittals “are

not intended to be the sole means of communication between the Department and Contractor,

and the Department may provide day-to-day communication to Contractor without using a

transmittal.” [Contract Section 1.8.6]. The contract does not define or provide examples of the

kinds of communication that do not require the use of a transmittal.

Second, HCPF has no written policies or procedures to guide staff on the proper use of

transmittals.

Why Does This Problem Matter?

Given the extent of the contract language related to transmittals and the requirements for HMS

to comply with them, and the lack of direction in the contract about what kinds of information

should be provided through other means, there is a risk that HMS will consider any direction

from HCPF that is not contained in a transmittal to be optional. Similarly, not renewing or

updating old transmittals may cause HMS to disregard them since they refer to an expired

contract and transmittals may not, in fact, be binding on HMS.

Recommendation No. 3

The Department of Health Care Policy & Financing should promote appropriate and consistent

use of contract transmittals by implementing written policies and procedures that:

A. Specify the purpose of transmittals, including the scope of guidance or direction that is

appropriate for a transmittal.

B. Identify the kinds of direction, guidance, or changes to contract provisions that cannot be

provided through transmittals, such as changes that require a contract amendment.

Evaluation of the Colorado Recovery Audit Contractor Program

C. Require transmittals to be updated or reissued if they reference an expired contract but

the information they contain is still relevant.

Response

Department of Health Care Policy & Financing

A. Agree

Implementation Date: 08/2024

The Department agrees with this recommendation. HCPF will ensure that the RAC program

follows the Department's Standard Operating Procedures for amending contracts and

payments through the required eClearance process approved by and executed by the

Executive Director.

B. Agree

Implementation Date: 08/2024

The Department agrees with this recommendation. We do have Department guidance,

training, and policies. We are drafting additional RAC contract-specific guidance to ensure

that documentation gives clear procedures and rules related to the use of transmittals.

C. Agree

Implementation Date: 08/2024

The Department agrees with this recommendation and will ensure consistent use of contract

transmittals by implementing written policies and procedures that require transmittals to be

updated or reissued if upon contract expiration the information therein is still relevant.

Evaluation of the Colorado Recovery Audit Contractor Program

Finding 4 – Monitoring of HMS Staff Credentials

Federal regulations require that RACs have the technical capability to carry out the activities of

the RAC program and indicate that such technical capability is provided, in part, through “the

employment of trained medical professionals […] to review Medicaid claims.” The regulations do

not prescribe the qualifications or number of staff a RAC must employ other than requiring that a

licensed and experienced Doctor of Medicine or Osteopathy be on staff to serve as the RAC’s

medical director [42 CFR §455.508]. Therefore, states have the authority to establish the

specific requirements their RAC contractors must meet in terms of the qualifications and

responsibilities of the contractor’s reviewers. HCPF’s RAC contract includes requirements for its

current RAC contractor, HMS, to employ licensed medical professionals and certified medical

coders and assign them to RAC audits. A certified medical coder is a highly qualified health care

professional who translates medical diagnoses, procedures, services, and equipment into

medical codes so that claims can be billed or filed with insurance, Medicaid, or Medicare

accurately and consistently. The Certified Professional Coder (CPC) certificate, offered through

the American Academy of Professional Coders, is a nationally recognized standard in medical

coding. However, there are other certifications that are also accepted, including The American

Health Information Management Association (AHIMA) certification.

HMS is accredited by the Utilization Review Accreditation Commission (URAC), a non-profit

accreditation entity. According to the URAC website, one aspect of awarding accreditation to an

organization is an assessment of that organization’s reviewer qualifications to provide assurance

that review staff maintain current licenses and credentials. Accreditation expires after three

years unless it is renewed by the accredited entity.

RAC audits are divided into two types: complex and automated. In a complex audit, medical

records are reviewed by clinically licensed staff to determine if payments were proper and there

may be several reviews of medical records by RAC staff. Claims found to be improper upon

initial review undergo a secondary review by another licensed medical professional to confirm

the finding. In addition, if a provider requests an Informal Reconsideration or appeals a finding, a

physician is required to review the medical records to decide whether to uphold or withdraw the

finding.

Automated audits rely on electronic data analysis to identify improper payments. Automated

reviews involve analysis of claims data to identify overpayments based on medical coding and

billing policies. Although an automated audit typically does not involve review of medical records

to identify findings, as with complex audits, when a finding from an automated audit is involved

in an Informal Reconsideration all medical records are required to be reviewed by the

appropriate clinical professional, which could be a nurse, coder, or physician. In the case of an

appeal, the medical records for the finding are required to be reviewed by a physician.

What Work Was Performed and What Was the Purpose?

At the beginning of our review, we requested from HCPF the job descriptions, summaries of

experience and education, and copies of the licenses and certifications of the HMS staff

members involved in reviewing medical claims for RAC audits.

Evaluation of the Colorado Recovery Audit Contractor Program

In response to our request, we ultimately received information from HCPF that identified 61

unique HMS clinical staff assigned to work on RAC audits. The information was provided as

follows:

• In mid-September 2023, HCPF provided 24 resumes of HMS staff who worked on RAC

audits. Since 4 of the 24 resumes were for HMS staff whose positions did not require

license or certification, there were 20 HMS staff who held positions that required

professional medical license or certified medical coding credentials. HCPF did not

provide copies of professional medical licenses or certified medical coding credentials

for these 20 HMS staff.

• In early December 2023, HCPF provided a list of 42 HMS staff who worked on RAC

audits, without including copies of professional medical licenses or certified medical

coding credentials. However, HCPF included the job descriptions of these staff, which

required a certain license or credential applicable for each position. Two individuals on

this list were included in the previously received 24 resumes; therefore, this list added 40

HMS staff who worked on RAC audits and held positions that required professional

medical license or certified medical coding credentials.

• In April 2024, HCPF provided copies of 25 medical licenses and one medical coding

certification for HMS staff that worked on RAC audits. These included credentials for 25

of the individuals in the previously received resumes and list plus one additional HMS

staff who worked on RAC audits and held a position that required a medical license.

• On May 10, 2024, HCPF provided a screenshot showing that HMS is accredited by

URAC through May 1, 2027.

Since we were not provided the requested copies of licenses and certifications until April 2024,

we first conducted online research for the 20 staff whose resumes we received in September to

try to confirm if their licenses and certifications were current. For physicians and nurses, we

searched state regulatory agency websites; for medical coding staff, we attempted to verify

current certification status on the website of the American Academy of Professional Coders

(AAPC), however, we did not have sufficient information to complete our research. Therefore,

we were able to independently verify the required credentials for 15 out of the 20 HMS staff

whose resumes we received.

The 25 medical licenses and one coding certification HCPF provided us in April 2024, consisted

of 11 credentials that we had already verified ourselves and 15 we had not found through our

online research. Therefore, out of the 61 HMS staff HCPF identified for us that work on RAC

audits, we obtained verification that 30 had current credentials at the time of our evaluation. We

were unable to verify the credentials of the other 31 staff.

The purpose of our work was to assess if HCPF monitors HMS staff working on RAC audits to

ensure required professional medical licenses or certified medical coding credentials are

maintained by HMS staff who conduct the audits, including reviewing medical records,

identifying overpayments, validating findings, and making determinations when findings undergo

an Informal Reconsideration or are involved in an appeal, as required in the RAC contract.

Evaluation of the Colorado Recovery Audit Contractor Program

How Were the Results of the Work Measured?

HCPF has established requirements for RAC staff to have appropriate training and experience

to review claims, in accordance with federal regulations. In general terms, HCPF’s RAC contract

requires HMS to (1) employ a medical director who has the qualifications and experience

outlined in federal regulations, and (2) use “appropriately licensed, experienced health care

professionals [during RAC audits] to pre-screen and make initial case review findings.” The

contract more specifically states that, for staff who review claims during a RAC audit, HMS

must:

• “… peer-match case reviewers to the kind of Provider being reviewed (i.e. doctors will

review doctors; dentists will review dentists, etc.).” [Contract Section 2.4.3.7.3.]

• use only “experienced and appropriately certified professional claims coding specialists

to review provider coding.” [Contract Section 2.4.3.7.6].

In August 2020, HCPF issued a contract “transmittal” to HMS to provide clarification on these

requirements. HCPF issues transmittals to provide official direction within the scope of a

contract. This transmittal included specific direction that:

• Coding findings must be reviewed and verified by professional certified coders. Coding

findings are overpayments identified as a result of improper coding of a claim, such as

using unauthorized coding.

• A physician is not required to conduct an initial review of all claims but is required to

review findings, whether identified through complex or automated audit, during Informal

Reconsiderations or appeals.

Further, the RAC contract requires that HMS provide HCPF with certain details about the staff

assigned to the contract, including a list of such staff and copies of professional licenses or

certifications held by those staff, if licensing or certification is part of their job requirements. HMS

must also provide HCPF with copies of new and renewed licenses or certifications as they

occur. The following language is included in HCPF’s 2022 RAC contract:

2.1.6. If any of Contractor's Key Personnel and Other Personnel are required to have and

maintain any professional licensure or certification issued by any federal, state or local

government agency, then Contractor shall submit copies of such current licenses and

certifications to the Department.

2.1.6.1. DELIVERABLE: All current professional licensure and certification documentation as

specified for Key Personnel or Other Personnel

2.1.6.2. DUE: Within five Business Days of receipt of updated licensure or upon request by the

Department

What Problem Did the Work Identify?

Although HCPF told us it uses URAC accreditation to verify HMS staff’s credentials, HCPF has

not established sufficient processes to monitor HMS to ensure that HMS staff conducting RAC

audits have the qualifications and experience required by the RAC contract.

Evaluation of the Colorado Recovery Audit Contractor Program

Based on our review, we concluded that HMS does employ a medical director who has the

qualifications and experience outlined in federal regulations and the RAC contract. However,

although the RAC contract requires HMS to provide HCPF with the licenses and certifications

held by HMS staff assigned to the contract, HCPF was not able to provide verification of current

licenses or certifications for 31 out of the 61 HMS staff (51%) whose names HCPF supplied to

us.

The information HCPF provided us about HMS staff was incomplete and disjointed; none of the

information supplied by HCPF could be fully reconciled. Specifically:

• The information provided in September 2023 was for 20 HMS staff who worked on RAC

audits and whose jobs required professional medical licenses or certified medical coding

credentials.

• The information provided in December 2023 was for 40 additional HMS staff who worked

on RAC audits and whose job responsibilities required current nursing licenses and/or

coding certifications, although the list did not specify what license or certification each

individual held.

• The credentials provided in April 2024 were for two additional HMS staff and 22 HMS

staff that HCPF had already informed us of.

Due to the incomplete information in the list, and the disconnect between the list and the

resumes, we were unable to verify whether all 61 staff were currently assigned to work on RAC

audits or what their exact job duties were.

Why Did the Problem Occur?

According to HCPF, Section 2.4 of the 2022 RAC contract outlines that HMS has the

responsibility to ensure it is hiring qualified staff to review claims data or medical documentation.

In addition, to reinforce this responsibility, HCPF has provided a desk procedure manual and the

Colorado RAC policies and procedures documents to HMS, all of which discuss the licensing

and certification requirements for HMS staff who review medical records, claims data, and other

documentation submitted by providers. Further, HCPF told us it relies on HMS’ certification by

URAC for assurance that HMS staff working on RAC audits are properly credentialed. For these

reasons, HCPF has not required HMS to provide routine staffing updates, including licensing

and certification documentation.

There is a disconnect between HCPF’s described method of verifying that HMS assigns

qualified staff to RAC audits and the provisions of the RAC contract. Although HCPF told us it

relies on HMS’ URAC accreditation for this purpose, requirements in the RAC contract indicate

that HCPF expects HMS to provide documentation that would allow HCPF to directly verify HMS

staff qualifications. Further, the contract does not require HMS to maintain URAC accreditation

or indicate that such accreditation will serve to assure HCPF that HMS staff assigned to RAC

audits are qualified for their work.

Evaluation of the Colorado Recovery Audit Contractor Program

Why Does This Problem Matter?

It is important that HCPF adequately monitor to ensure that HMS staff who are conducting

claims reviews have the necessary qualifications and experience, and that HMS is complying

with RAC contract requirements. Consequences of unqualified or inexperienced staff performing

RAC procedures may result in:

• Unidentified overpayments resulting in excessive Medicaid costs for both the federal and

state governments.

• Inaccurate findings, which could cause providers to repay funds they do not actually owe

or to contest the findings through Informal Reconsideration or appeals processes, which

could result in additional costs to the providers, as well as HMS and HCPF.

• Systemic billing errors may not be identified and would then not be addressed through

policy or guidance changes, or provider education, to prevent the errors from recurring in

the future.

In addition, if RAC claim reviewers are not qualified, it can erode confidence and trust in the

RAC program on the part of both providers and CMS.

Recommendation No. 4

The Department of Health Care Policy & Financing (HCPF) should strengthen its monitoring

processes for ensuring that its Recovery Audit Contractor (RAC) staff, who are reviewing

claims, have the qualifications and experience required by the RAC contract. This should

include either requiring its RAC to provide routine staffing updates, including licensing and

certification documentation, as part of its monthly reports to the Department and implementing a

process for consistently tracking this information or revising the RAC contract to reflect that

HCPF will rely on the RAC’s accreditation by URAC and to require the RAC to provide evidence

of ongoing accreditation.

Response

Department of Health Care Policy & Financing

Agree

Implementation Date: 09/2024

The Department provided the auditors with the URAC certification for HMS, including third-

party validation from the URAC website proving HMS certification. URAC is the nation’s

leading accreditation organization for pre- and post-utilization review organizations, like

HMS. URAC verifies an organization’s processes and procedures to ensure that the

organization is operating at the highest standards, including personnel qualifications;

specifically, this accreditation by URAC reflects compliance with the highest national review

standards, assuring full faith and confidence that the HCPF RAC vendor that reviews claims

comply with those high industry standards.

The Department will update its contract to require URAC certification, as a reflection of the

proper credentials and processes, versus collecting and maintaining resumes on every

Evaluation of the Colorado Recovery Audit Contractor Program

vendor employee. The Department will maintain a tracking mechanism that ensures the

credentials of the contractually defined Key Personnel and consistent achievement of URAC

accreditation of its RAC vendor through the life of the contract, reflecting the highest national

standards of industry operations. The Department will also work with the CMS to institute an

updated SPA with definitive criteria that follow national requirements outlined by the federal

government that funds the RAC program for Colorado Medicaid. Any contractual reporting

will be updated via transmittals to ensure clarity in the standards for both the State and the

vendor.

The Department keeps all key personnel resumes, certifications, and licenses and verifies

them. We also will be using the URAC accreditation to avoid claim-by-claim reporting and

verification of each reviewer, which is not a feasible standard to institute. URA also avoids

the need for HCPF is to verify each resume of each reviewer, which is beyond the scope of

normal processes.

Addendum: Although HCPF provided the URAC certification for HMS, as stated in the

finding, HCPF did not provide the credentials for some of the HMS personnel who were

required to have them, which is required in the RAC contract.

Evaluation of the Colorado Recovery Audit Contractor Program

Finding 5 – Mitigation of the Appearance of a Conflict of

Interest

HCPF contracts with a variety of vendors to provide Medicaid program services and support.

One of these vendors is Gainwell Technologies, which serves as HCPF’s fiscal agent for

Medicaid, operating the State-owned Medicaid Management Information System (MMIS).

Gainwell’s responsibilities include, but are not limited to, the following:

• Processing and paying Fee-For-Service (FFS) provider claims

• Answering provider billing questions

• Assisting providers in the Medicaid enrollment process

HCPF has contracted with Gainwell Technologies for these services since at least 2016.

In December 2020, HMS publically announced that HMS and Gainwell Technologies had

reached a definitive agreement for Gainwell to purchase HMS. In April 2021, Gainwell

Acquisition Corporation, the parent company of Gainwell Technologies, announced that it had

acquired HMS. HCPF has contracted with HMS for RAC audit services since 2016. Thus, since

April 2021, both the processing of claims payments and the auditing of provider billings has

been conducted by private sector entities that are part of a single corporation – Gainwell

Acquisition Corporation.

What Work Was Performed, and What Was the Purpose?

We reviewed HCPF’s 2016 and 2021 RAC contracts with HMS, interviewed HCPF and HMS

staff regarding Gainwell Acquisition Corporation’s purchase of HMS, and reviewed HCPF emails

from 2020 and 2021 regarding Gainwell’s acquisition of HMS as well as HCPF documents from

2024 related to possible conflicts due to the acquisition. We also reviewed the RAC Program

FAQs that CMS published in 2011 to address states' questions regarding Medicaid RAC

programs, including questions and answers related to conflicts of interest.

The purpose of the work was to determine if HMS and Gainwell Technologies provided required

disclosures to HCPF related to any actual or apparent conflicts of interest that might exist

because of Gainwell Acquisition Corporation owning both Gainwell Technologies and HMS. We

did not evaluate whether an actual conflict of interest exists as a result of the acquisition.

How Were the Results of the Work Measured?

CMS’ FAQs for Medicaid RAC programs, issued in 2011, states that CMS sees an inherent

conflict of interest when a state contracts with the same entity to provide both fiscal agent and

RAC services. Specifically, CMS FAQs stated:

Q24: Can fiscal agents or MMIS vendors perform the identification and recovery work

associated with the Medicaid RAC program while simultaneously serving in the capacity

of the respective State’s fiscal agent or MMIS vendor?

Evaluation of the Colorado Recovery Audit Contractor Program

A24: CMS believes that there is an inherent conflict of interest if the same entity

simultaneously acts as both a Fiscal Agent or Medicaid Management Information

System vendor and a Medicaid RAC in the same State. We believe that states should be

cognizant of potential organizational conflicts of interest and should take affirmative

steps to identify and prevent any conflicts of interest. (Emphasis added)

HCPF’s RAC contract with HMS includes the following conflict of interest provisions:

• Contractor shall not engage in any business or activities or maintain any relationships

that conflict in any way with the full performance of the obligations of Contractor under

this Contract. [Contract Section 9A]

• Contractor acknowledges that, with respect to this Contract, even the appearance of a

conflict of interest shall be harmful to the State’s interests. Absent the State’s prior

written approval, Contractor shall refrain from any practices, activities or relationships that

reasonably appear to be in conflict with the full performance of Contractor’s obligations

under this Contract. [Contract Section 9B]

• If a conflict or the appearance of a conflict arises, or if Contractor is uncertain whether

a conflict or the appearance of a conflict has arisen, Contractor shall submit to the State

a disclosure statement setting forth the relevant details for the State’s consideration.

Failure to promptly submit a disclosure statement or to follow the State’s direction in

regard to the actual or apparent conflict constitutes a breach of this Contract. [Contract

Section 9C]

What Problem Did the Work Identify and Why Did it Occur?

HCPF received an email from HMS in December 2020, notifying HCPF that an agreement had

been reached for Gainwell Technologies to acquire HMS. However, between 2021 when

Gainwell Technologies acquired HMS, and early 2024, HMS did not provide HCPF with a

conflict-of-interest disclosure related to its purchase by Gainwell Technologies. The email

notifying HCPF that Gainwell Technologies had acquired HMS did not include information on

how operations would be managed to ensure that an actual conflict of interest would not occur.

HCPF explained to us that it did not ask for additional disclosures because of the following:

1. HCPF does not require contractors to notify it in the event of a purchase, merger, or

other change in legal or financial relationships during the contract term.

2. HCPF did not consider it to create a conflict of interest, in part because it does not view

Gainwell Technologies and HMS as being the “same entity,” as intended by CMS

guidance. However, HCPF did not have disclosures about the potential for a conflict of

interest due to the purchase or documentation that it thoroughly assessed the

relationship for actual or perceived conflicts of interest.

3. Since Colorado’s MMIS system is owned by the State and decisions regarding which

edits are applied in the MMIS are controlled by the Department, not Gainwell, HCPF did

not believe that an actual or perceived conflict of interest existed. In addition, HMS would

not conduct any audits or reviews on Gainwell Technologies, the State’s fiscal agent.

Evaluation of the Colorado Recovery Audit Contractor Program

4. HCPF reported to us there is no interaction between HMS’ RAC staff and Gainwell

Technologies’ fiscal agent staff.

In response to our inquiries, in February 2024, HCPF obtained a statement from HMS about its

conflict of interest practices, which included the following:

• HMS is a legal entity separate and distinct from its affiliate, Gainwell Technologies LLC.

The parent company of both entities is Gainwell Acquisition Corporation. This corporate

structure maintains the separation between HMS and Gainwell.

• HMS maintains entirely separate employees, platforms, processes, procedures, and

systems to operate its RAC contracts from those of Gainwell. HMS interfaces with

Colorado’s MMIS system, operated by Gainwell, in a manner that is no different than

with any other MMIS vendor for any state; such interfaces do not present a conflict of

interest but rather are an operational function where multiple entities are contracted by

the same State. Only those HMS employees who support the Colorado RAC contract

have access to RAC data.

• HMS is focused on preventing conflicts of interest related to its RAC work given the

affiliation with Gainwell and, for that reason, has taken extensive steps to ensure that no

conflict exists.

• HMS is fully compliant with its contractual obligations including the conflict-of-interest

disclosure requirements.

According to HCPF, this statement is not the disclosure required in the contract, but it explains

all the relevant details of the relationship between HMS and Gainwell Technologies and

supports HCPF’s stance that no actual conflict exists. However, this statement was not provided

until almost three years after Gainwell Acquisition Corporation purchased HMS, and only due to

the questions we raised in this evaluation.

Why Does this Problem Matter?

HCPF’s RAC contract with HMS includes the following provision, “even the appearance of a

conflict of interest shall be harmful to the State’s interests.” Based on comments made by some

providers during our interviews and surveys, it appears there may be some questions about the

relationship between HMS and Gainwell Technologies. For example, we found there is an

appearance of a conflict, at least among some Colorado Medicaid providers that responded to

our survey and participated in interviews with us.

In interviews and survey responses, some providers referred to the RAC vendor as “Gainwell”

or “Gainwell/HMS,” indicating that the distinction between the RAC and the fiscal agent is

unclear to these providers.

The potential appearance of a conflict of interest between HMS and Gainwell could also be

caused by the following:

• Communications from HMS employees to providers are delivered from a Gainwell email

account.

Evaluation of the Colorado Recovery Audit Contractor Program

• HMS uses Gainwell branding in some cases. For example, HCPF maintains a RAC

program webpage with a link to HMS. Clicking the link opens a webpage that has an

HMS logo and contains information specific to Colorado’s RAC program

(https://resources.hms.com/state/colorado/rac). Clicking on the HMS logo at the top of

this page leads the viewer to the Gainwell Technologies homepage. Also, typing

“hms.com” into the address bar of a web browser opens the Gainwell Technologies

homepage.

• One of the monthly status reports HMS submitted to HCPF, in May 2023, used Gainwell

branding only; HMS is not mentioned. In addition, the HMS employee who manages the

Colorado RAC contract is identified in the monthly status report as working for Gainwell

Technologies with a Gainwell email address. All the other monthly status reports, prior to

May 2023, we reviewed used HMS branding.

• Since Gainwell purchased HMS almost three years ago, HCPF has not issued any

communications to the provider community, such as bulletins or newsletters, to reassure

providers that HCPF has assessed the situation and determined that there is no conflict.

HCPF also has not given the provider community an explanation of any controls that

Gainwell, HMS, and HCPF, have established to prevent a conflict of interest.

We could not determine, from our survey or interviews, whether the perception of the RAC and

the fiscal agent being the same entity is pervasive throughout the Medicaid provider community.

According to HCPF, providers have not indicated any concerns that they have related to a

conflict of interest between HMS and Gainwell. However, the information we obtained during the

evaluation, indicates that there may be some questions among providers about the relationship.

Therefore, it is important that HCPF clarify to providers the steps that it has taken to ensure that

there is not a conflict of interest.

Recommendation No. 5

The Department of Health Care Policy & Financing should strengthen its oversight and

enforcement of the Recovery Audit Contractor (RAC) contract provisions related to conflicts of

interest by:

A. Obtaining disclosures from both HMS and Gainwell Technologies that comply with

contract conflict of interest provisions, and documenting its thorough assessment of the

disclosures

along with its determination that no conflict exists.

B. Clarifying policies and practices to align with contract provisions requiring contractors to

notify the Department of any purchases, mergers, or other changes in legal or financial

relationships during the contract period that could create an actual conflict of interest or

create the appearance of a conflict.

C. Distributing a communication to the provider community about the purchase of HMS by

Gainwell Acquisition Corporation that includes information about how an actual conflict

of interest is being prevented.

D. Working with HMS to ensure it communicates with providers under HMS branding with

respect to its RAC function in Colorado.

Evaluation of the Colorado Recovery Audit Contractor Program

Response

Department of Health Care Policy & Financing

A. Disagree

The Department disagrees with this recommendation. U.S. Securities and Exchange

Commission (SEC) filings, communications of the review, and other documentation were

supplied showing that HCPF knew about the acquisition far in advance and that the conflict

did not exist. The Department further clarified that the RAC FAQ from 2011 gives guidance

for when a claims system and a RAC are owned by the same entity there should be a

thorough review, however, the documentation supplied shows that HMS and Gainwell are

completely separate entities with their own CEOs, and staffing.

Unlike other states, the processing of provider payments and MMIS edits are completely

controlled by the Department, which owns the payment system. Further, the Department

controls all the edits and approvals in the claims system. HMS does not review claims

system controls but rather reviews the actual submitted claims information from providers. In

no way does HMS have any control or influence over the claims system.

Addendum: As noted in the finding, the RAC contract states: “Contractor acknowledges that,

with respect to this Contract, even the appearance of a conflict of interest shall be harmful to

the State’s interests” and “If a conflict or the appearance of a conflict arises …Contractor

shall submit to the State a disclosure statement setting forth the relevant details for the

State’s consideration”. [Contract Sections 9B and 9C]. The documentation provided by

HCPF did not address the appearance of a conflict of interest and how HCPF ensured that a

conflict of interest did not exist.

B. Agree

Implementation Date: 12/2024

The Department agrees with this recommendation. The Department can agree that we will

update policies and procedures and strengthen the process using state and federal laws

and guidance.

In our contracts, we do now have provisions that ensure when there is a purchase, merger,

or change in ownership that the contractor does report this change in advance. However,

the report indicates that we did not know in advance that this transaction was happening.

We believe we were aware and that this was substantiated in the communications and

documents provided.

Addendum: The focus of this finding is on HCPF establishing controls to require contractors

to provide notice if they are involved in purchases, mergers, or other changes in legal or

financial relationships during a contract. As of the time we completed work on the

evaluation, in mid-May 2024, HCPF had not provided documentation that it had amended

the RAC contract to require such notice.

Evaluation of the Colorado Recovery Audit Contractor Program

C. Agree

Implementation Date: 10/2024

The Department agrees with this recommendation. As noted in the previous

recommendations, HCPF reviewed to ensure there was no conflict in advance of the

merger. We are willing to document and publish the oversight and define the roles of both

HMS and Gainwell to ensure there is clarity in those roles.

D. Agree

Implementation Date: The Department did not provide an implementation date.

The Department can continue to provide clarification of roles and responsibilities between

Gainwell and HMS to our provider partners and other stakeholders, as indicated above.

Addendum: The response does not address the concern of HMS communicating with the

Medicaid provider community using Gainwell email addresses or preparing documents

related to its RAC function that use Gainwell branding.

Evaluation of the Colorado Recovery Audit Contractor Program

Policy Consideration A – Medicaid RAC Federal Regulation

Flexibilities

Statute required us to “assess federal flexibilities pursuant to 42 CFR 455.516 that Colorado can

utilize in order to improve the RAC program and assist in pursuing those flexibilities, when

already authorized [including] provider education, training, and error rates” and “the timing and

procedure [for] assessing when a potential overpayment is “identified.”” [Sections 25.5-4-

301(3.7)(b)(I), (b)(II)(E), and (b)(II)(C).]

We reviewed Medicaid RAC federal regulations to assess program flexibilities and exceptions

offered to the states. States have considerable flexibility regarding the design, procurement, and

operation of their respective RAC programs, including the ability to:

• Establish the compensation structure for the identification of underpayments.

• Define the state’s appeals process.

• Exclude claims from Medicaid RAC review.

• Coordinate the collection of overpayments (how and when overpayments are collected).

• Set contingency fee rates.

The states can also request exceptions from some of the key CMS requirements via a State

Plan Amendment (SPA):

• To exceed the maximum RAC contingency rate established by CMS.

• To implement a longer lookback period than the three-year standard established by

CMS.

• To allow the RAC vendor to hire less than the 1.0 FTE Medical Director required by

CMS.

• To not implement a RAC program at all if the state’s law prevents the state from

following key federal requirements.

HCPF has exercised these flexibilities and exceptions, including setting a contingency rate

above the rate established by CMS, using a seven-year lookback period instead of the three

years set by CMS, and requiring HMS to employ a 0.1 FTE medical director instead of a 1.0

FTE medical director. CMS has approved all of the Colorado requested exceptions.

Through interviews with other states’ RAC programs and review of other states’ RAC program

documentation, we found that each state uses flexibilities and exceptions in the Medicaid RAC

program based on its individual needs and state laws. Although we did not identify features or

practices of other states’ RAC programs that are clearly more advantageous than Colorado’s, in

our evaluation we have noted differences between how Colorado and other states use the

flexibilities offered in federal regulations. These include:

Evaluation of the Colorado Recovery Audit Contractor Program

• The contingency fee rate, as discussed in Policy Consideration H.

• The lookback period, as discussed in Policy Considerations D and E.

• Paying the RAC to identify underpayments, as discussed in Policy Consideration H.

Policy Consideration – We do not provide an overall suggestion on implementing these

federal flexibilities, which are policy decisions for Department of Health Care Policy & Financing

and the General Assembly, and may require guidance from CMS.

Evaluation of the Colorado Recovery Audit Contractor Program

Policy Consideration B – State Flexibilities to Resolve

Overpayment Findings and Improve Provider

Accountability

As part of our review of methods that Colorado could use to improve its RAC program, we

assessed processes for providers to contest RAC audit findings and for HCPF to identify and

address the causes of provider overpayments. We interviewed HCPF staff and reviewed HCPF

data to understand how providers participate in the audit and appeals processes. We also

interviewed staff from the Attorney General’s Office, which represents HCPF when a provider

formally appeals RAC findings.

The RAC program has been set up so that providers have a voice to express any concerns they

have with the RAC findings that identify overpayments. For example, when HMS identifies

potential overpayments during an audit, the associated provider has an opportunity to send

HMS medical documentation to support the services they provided and the amounts they billed

for those services. For complex audits, HMS also gives providers the opportunity to request and

participate in an exit conference to discuss the findings and any concerns.

According to HCPF, for complex audits, the provider has 10 days from the date that HMS

requests medical records for the audited claims to request that HMS schedule an exit

conference. During the exit conference, HMS meets with the provider to discuss clinical

opinions related to the questioned claims in the audit findings, and the provider is given time to

send HMS additional documentation, which can result in HMS overturning or eliminating

findings based on the additional information received. HCPF and HMS do not offer exit

conferences for automated audits.

Regardless of whether a provider participates in the audit exit conference process the provider

may contest the audit findings by using two options— (1) Colorado statute and regulations

allows providers to file a request for Informal Reconsideration, and (2) Colorado statute and

regulations allow providers to file an appeal with the Office of Administrative Courts. An Informal

Reconsideration is an administrative process that allows a provider time to contest the findings,

and for HMS and HCPF to review additional provider documentation and determine whether to

maintain or reverse the findings. The provider can choose to accept the Informal

Reconsideration Determination or can appeal the decision to the Office of Administrative Courts.

The benefit of the Informal Reconsideration process is that it can resolve findings without

progressing through the court hearing process.

If the provider contests the Informal Reconsideration Determination, or chooses to bypass the

Informal Reconsideration process and file an appeal directly with the Office of Administrative

Courts, the provider must send a prehearing statement and evidence to support its case, such

as medical documentation, to the Office of Administrative Courts, HMS, and HCPF. Providers

are not required to include the prehearing statement and evidence with their appeal, but must

provide them 30 days prior to the hearing (OAC 1 CCR 104-1, Rule 8). According to HCPF, this

short time frame can limit its and HMS’ ability to review the evidence prior to the hearing. As

part of the appeals process, there is also a mandatory settlement conference among attorneys

Evaluation of the Colorado Recovery Audit Contractor Program

for HMS, HCPF, and the provider, during which the parties discuss and potentially compromise

on the terms of a settlement, such as the amount of repayment that the provider owes or the

specific services in question. If no settlement is reached, then the case progresses in

accordance with the Colorado Administrative Procedure Act [Section 24-4-101 et seq., C.R.S],

and there is a hearing and decision by an Administrative Law Judge (ALJ).

According to HCPF, some providers routinely contest RAC audit findings, often bypass audit

exit conferences and the Informal Reconsideration process, and choose to file an appeal. For

example, Exhibit 8 shows a snapshot of appeals for three large providers that operate a total of

40 hospitals and health care facilities in Colorado. The data, which were provided by HCPF,

show that these three providers filed appeals on 4,641 RAC audit findings, along with data on

the Informal Reconsiderations and exit conferences that preceded the appeals.

Exhibit 8: Examples of Exit Conference Participation, Informal Reconsiderations, and Appeals by

Three Large Providers in Colorado

Provider and

Count of

Facility

Locations

Involved in

These Audits

Claims that

Provider

Requested to

Discuss in

Audit Exit

Conferences

Claims with

Findings After

the Audit Exit

Conference

Informal

Reconsideration

s Submitted By

The Providers

For These

Claims

Findings Overturned

During Informal

Reconsiderations

Based on New

Information from

Providers

Findings Upheld by

HMS/HCPF

Informal

Reconsiderations

Appeals Filed By

The Providers

Without Informal

Reconsiderations

For These Claims

Appeals Filed After

Informal

Reconsiderations

For These Claims

Provider #1,

5 facilities

5,317 2,755 840 174 666 554 680

Provider #2,

4 facilities

7 3,448 669 240 429 796 424

Provider #3,

16 facilities

72 8,323 5,554 1,264 4,290 11 3,537

Totals

5,396 14,526 7,063 1,678 5,385 1,361 4,641

Source: HCPF provided data.

– For Providers 2 and 3, the number of Claims with Findings After the Exit Conference are higher than the Claims Requested to Discuss in

Exit Conference because Providers 2 and 3 did not request exit conferences for the majority of their findings.

HCPF also provided the data in Exhibit 9 showing increased appeals over recent years, by the

same three large providers.

Evaluation of the Colorado Recovery Audit Contractor Program

Exhibit 9: Appeals by Three Large Providers that Operate 40 Facilities in Colorado

Year

Number of

Hospital/Facility

Locations

That

Filed Appeals

Annually

Number of RAC

Finding Letters

Number of

Claims in RAC

Finding Letters

Number of

Claims

Appealed

Appeal Rate

2019

134

42%

2020

59%

2021

983

809

82%

2022

127

4,401

4,231

96%

Source: HCPF provided data.

– Out of a total of 40 hospitals and health care facilities operated by the three large providers for which

HCPF provided data.

According to HCPF, when providers contest RAC audit findings by choosing to file an appeal,

rather than participating in the audit exit conference and the Informal Reconsideration process,

they may not provide HMS and HCPF timely information on their concerns with the findings.

According to the Attorney General’s Office, the State may decide to settle appeals instead of

proceeding to a hearing with an ALJ, which may result in overpayments that are not repaid to

the State. In addition, the appeals process typically involves more resources for attorneys and

staff time for all parties.

We identified the following gaps in HCPF’s RAC program, with respect to statutory or regulatory

requirements for providers to comply with best practices for resolving RAC findings:

• Providers are not required to exhaust the preliminary administrative process to contest

the findings before filing an appeal. They are not required to request and attend the audit

exit conferences to discuss their concerns or participate in the Informal Reconsideration

process to provide documentation to support their position.

• According to HCPF, providers are not required to provide HMS and HCPF with

documentation to support an appeal within a time frame that would allow HMS and

HCPF to reasonably review and respond to the appeal prior to settlement.

• Providers are not required to provide HMS and HCPF an explanation of the basis of their

appeal. According to HCPF, providers can appeal based on an argument that the

findings are arbitrary or capricious without providing explanation of the argument or

support to show that the RAC findings are inaccurate.

HCPF reported that it does not have the statutory authority to require providers to

address the causes of ongoing or repeated billing errors or improper billing, which can

result in providers having RAC findings for consecutive years. For example, according to

HCPF, settlement agreements cannot require the provider to take corrective action, such

as attending additional training, to improve their billing compliance.

Evaluation of the Colorado Recovery Audit Contractor Program

We identified five other states that have established these types of requirements in their statutes

or Medicaid regulations to help resolve findings that the state identifies through Medicaid audits.

For example:

• Ohio, Texas, and Virginia require providers to exhaust the preliminary

administrative process to contest findings before filing an appeal. Ohio regulations

state that a provider must “first [request] an informal review” of any preliminary adverse

determination; if the provider does not agree with the informal review decision, they may

request reconsideration; and they may only externally appeal the reconsideration

decision with a court [Ohio Admin. Code 5160-57-04(B)]. Texas regulations specify that,

after the provider exhausts the administrative process (i.e., the exit conference and

Informal Reconsiderations process), they may appeal only if they send the state

evidence of the dispositions from that administrative process [1 Tex. Admin. Code §

354.2217]. Virginia regulations state that the “internal reconsideration process is a

prerequisite to filing for an external appeal” [12 Va. Admin. Code § 30-120-690(A)].

• Illinois, New York, Ohio, and Texas require providers to submit documentation

and support for the basis of their requests for reconsideration and for appeal.

Illinois regulations state that, during a post-payment audit, “the provider must cooperate

and furnish to the Department, or to its authorized designee, pertinent information

regarding claims for payment,” and the state may deny or suspend payment to any

provider who fails to grant the state timely access to full and complete records [Illinois

Administrative Code 89-140.28 and -140.30]. New York regulations allow providers 30

days after receiving the draft findings, to object to the findings, and “any objection must

include a statement detailing the specific items of the draft report to which the provider

objects and provide any additional material or documentation which the provider wishes

to be considered in support of the objections” [18 CRR-NY 517.5]. Ohio regulations state

that when the provider requests Informal Reconsideration, they must provide “the basis

for requesting reconsideration; and supporting documentation….” [Ohio Admin. Code

5160-57-04(B)(4)(b)], and after reconsideration, if the provider files an appeal with the

court, they must “identify the decision being appealed and the specific grounds for the

appeal” [Ohio Admin. Code 5160-57-04(B)(5)]. Similarly, Texas regulations specify that,

after the provider exhausts the administrative process, they may appeal only if they send

a written explanation of the appeal request and supporting documentation for the

request [1 Tex. Admin. Code § 354.2217], and providers must submit an affidavit that all

medical records were submitted.

• Texas allows two to three months for the state to review supporting

documentation prior to the appeal. Texas regulations allow 60 to 90 days (depending

on the type of claim involved in the finding) for the state to review the supporting

documentation that the provider submits when contesting a finding [1 Tex. Admin. Code

§ 354.2217].

• New York requires providers to implement plans to help ensure ongoing

compliance with Medicaid requirements. Specifically, New York regulations require

Medicaid providers that are hospitals, residential health care facilities, home care

Evaluation of the Colorado Recovery Audit Contractor Program

services agencies, providers of developmental disability services or mental disability

services, and long-term care providers, to implement and maintain an “effective

compliance program” to prevent, detect, and correct fraud, waste, abuse, and non-

compliance with Medicaid requirements. As part of the compliance program, providers

must complete an annual compliance plan that documents their strategy for identifying

these risk areas and for addressing the risks through corrective action, and that includes

training for provider staff to ensure compliance with Medicaid requirements; these

provider plans are subject to review by the state department [18 NYCRR Part 521].

It is important that all parties involved in Colorado’s Medicaid RAC program are active

participants, and act in good faith, to ensure that public funds are used effectively and in line

with Medicaid billing and reimbursement requirements. HCPF is responsible for being a good

steward of taxpayer dollars. One way that HCPF can accomplish this is by ensuring that

providers are billing accurately through reviews and training, and by recovering overpayments.

When providers are not required to (1) participate in the administrative processes for RAC

audits and for contesting findings prior to appeal, (2) explain and support the basis of their

appeals, and (3) correct noncompliant practices that lead to RAC findings, it can negate the

benefits of Colorado’s RAC program efforts to reduce improper billing practices and billing

errors, and to maximize the use of public funds for Medicaid services.

Policy Consideration for the General Assembly – The General Assembly may want to

consider revising statute related to the Recovery Audit Contractor (RAC) program to require, or

give the Department of Health Care Policy & Financing (HCPF) the authority to require Medicaid

providers to:

• Participate in the preliminary administrative process to address audit findings, such as

by requiring audit exit conferences and use of the Informal Reconsideration process,

before filing an appeal with the Office of Administrative Courts.

• Provide the RAC and HCPF timely documentation to support an appeal within a time

frame that would allow the RAC and HCPF to review and respond to the appeal prior to

settlement and provide an explanation of the basis of their appeal beyond stating that

the findings are arbitrary and capricious.

• Address the causes of any ongoing or repeat improper billing practices and billing errors

identified through RAC audits. For example, this could include giving HCPF the authority

to hold providers accountable by: (1) requiring providers to establish and implement

corrective action plans, and (2) HCPF reviewing the corrective action taken by providers

and taking other steps as appropriate to address improper billing.

Policy Consideration for HCPF – The Department of Health Care Policy & Financing (HCPF)

may want to consider directing its Recovery Audit Contractor to increase the amount of time that

providers have to request an exit conference after the providers have received a request for

medical records for an audited claim. The ten-day time frame for providers to request an exit

Evaluation of the Colorado Recovery Audit Contractor Program

conference was established by regulation at [10 CCR 2505-10, Section 8.076.2.H.A]. If the

deadline were longer, more providers might request and participate in exit conferences. HCPF

may also want to consider offering exit conferences for automated audits as well as complex.

Response

Department of Health Care Policy & Financing

Thank you for the suggestion. This particular timeline would need to be changed through an

Medical Services Board rule change and posted for public comments. Per 10 CCR 2505-10

8.076.2.H. it states “8.076.2.H. A Provider subject to a review or audit may request an

interview in person or by telephone with the Department or its designees before the final

written post-review correspondence is released. The request for an interview must be in

writing, specify whether an in-person or telephone interview is being requested, and must be

received by the Department within ten (10) calendar days from the date of the Department’s

request for records. During this interview, the Provider may discuss the preliminary findings

of the review or audit, what documentation the Provider may use to refute the findings, and

the next steps in the review or audit process.” This rule is not just for RAC audits but is for all

audits from the Department. While HMS and the Department are in agreement that the

timelines for notices, informal reconsiderations and appeals are very strict, they are all in

statute, which makes the updates to specific timelines very difficult to change. We can

commit to researching and following up with the federal government and the state legal

counsel to verify steps needed to change the timelines for RAC audits.

Additionally, these rules align with Colorado laws, CMS rules, and federal laws regarding

audit timelines, which would require further research and work with CMS to verify if we could

create specific timelines for RAC through a SPA, or if we needed to change laws within the

state or the federal rules. The RAC final rules do state that if there is a specific change for

the program, including different timelines, appeals processes, or structure, there is potential

that CMS can grant that authority through a SPA. We would be happy to explore those

options.

Evaluation of the Colorado Recovery Audit Contractor Program

Policy Consideration C – Case Review Timelines and

Documentation of Review Staff Qualifications

HCPF’s contract with HMS establishes deadlines for various RAC activities such as providers

requesting Informal Reconsideration of findings or appealing findings; and HMS re-evaluating

and issuing a determination in an Informal Reconsideration.

HCPF’s contract with HMS also requires HMS to use “appropriately licensed, experienced health

care professionals [during RAC audits] to pre-screen and make initial case review findings.”

In our review of the sample of 100 claims that HMS had audited, we tracked the date of each of

the activities outlined below and compared them to the contractual deadlines. We also reviewed

other documentation in the audit files provided by HCPF for these claims, which included

correspondence notifying providers about the audits, notes of any meetings with providers about

the audit findings, and communications related to any time extensions requested by providers

and granted by HCPF or HMS. The purpose of the work was to evaluate HMS’ compliance with

several of the deadlines listed below. For each one, we indicate the number of claims in our

sample that were subject to the deadline:

1. Informal Reconsideration Requests. Providers that want an Informal Reconsideration of

their findings must submit a request to HMS within 30 days after receiving a Notice of

Adverse Action Overpayment Determination Letter (Notice). Notices inform providers of

the findings from an audit and identify the amount of overpayments the provider is

expected to repay. Our sample included 21 claims for which providers requested

Informal Reconsiderations (13 automated and 8 complex).

2. Informal Reconsideration Determinations. If HMS believes it will be unable to render a

decision on the request for Informal Reconsideration within 45 days after the provider’s

request, they must submit a written notification to HCPF and the provider stating why

they are unable to render a timely decision. The letter must be sent to the provider no

later than the forty-fifth day after the provider’s request. [Contract Sections 1.18.5 and

1.18.6]

3. Appeals. Providers have 30 days to file an appeal after one of the following: (1) receiving

a Notice, (2) receiving a determination in an Informal Reconsideration, or (3) receiving a

letter that HMS is unable to render a timely decision in an Informal Reconsideration. Our

sample included 16 claims for which providers appealed the findings (14 automated and

2 complex).

4. Appeal Summaries. HMS must provide HCPF a case summary within 30 days after HMS

has been notified of an appeal.

In our review, we also looked for evidence that the claims had been reviewed by properly

qualified HMS staff.

Evaluation of the Colorado Recovery Audit Contractor Program

Case Review Results

Timelines

From our sample review, we found instances where HMS and providers appeared to miss

contractual deadlines, as described below. HCPF did not provide supporting evidence in

response to the discrepancies identified.

Informal Reconsideration Requests. For 5 of the 21 claims we reviewed for which providers

requested Informal Reconsiderations, the request was made past the 30-day deadline from

when the provider received a Notice. The Informal Reconsiderations were requested between

39 and 160 days from the date of the Notice. For four of the claims, we were unable to ascertain

if the deadline was met due to incomplete information in the case files. For the remaining 12

cases, we verified that the Informal Reconsideration was filed on time.

Informal Reconsideration Determinations. For the 21 claims we reviewed for which providers

requested Informal Reconsiderations, we found:

• HMS was unable to render a timely decision on five claims but did not notify providers

within the 45-day deadline. The notifications were issued between 49 and 231 days after

the Informal Reconsideration was filed.

• We were unable to verify when HMS made its determination on six of the Informal

Reconsiderations due to incomplete information in the case files.

• We verified that the Informal Reconsideration Determinations were made on time for the

remaining 10 claims.

Appeals. For 4 of the 16 claims in our sample for which providers submitted appeals, the

appeals were filed after the 30-day deadline. All four were from automated audits. The appeals

were filed between 35 and 159 days after the providers received Notices, determinations in

Informal Reconsiderations, or a notice that HMS was unable to render a timely determination in

an Informal Reconsideration. The Office of Administrative Courts makes the determination of

whether to accept an appeal that is filed after the 30-day deadline.

Appeal Summaries. For 3 of the 16 claims in our sample for which providers filed appeals, we

could not identify Appeal Summaries in the case files. For one claim, the appeal case was still

open, so an Appeal Summary had not been submitted. For the other 12 claims, we verified that

Appeal Summaries were submitted on time.

In some cases, HCPF may approve extensions to the deadlines, such as allowing providers

additional time to submit Informal Reconsideration requests on a case-by-case basis, or allowing

HMS more time to issue a determination in an Informal Reconsideration. The Office of

Administrative Courts may also accept late appeals for some cases. As such, these missed

deadlines are not necessarily violations of the RAC contract. However, consistent adherence to

the deadlines is important to help ensure that provider audits are processed efficiently and

equitably and to promote equitable treatment for providers.

Evaluation of the Colorado Recovery Audit Contractor Program

Staff Qualifications

Colorado RAC audit review documentation does not identify which HMS staff performed medical

review activities. All clinical reviews are indicated as reviewed by “Clinical Staff at HMS.”

Because the reviewer was not identified, we were not able to verify that the reviewer had the

required qualifications to perform the review.

Specifically, we found the following:

• Claims undergoing complex audits. For all 24 claims, the review files indicated that the

claims had been reviewed by “Clinical Staff at HMS”; however, there was no

documentation that the medical record reviews were conducted by qualified staff to

identify or verify findings. Out of these 24 claims, HMS identified 15 overpayments, and

providers requested Informal Reconsiderations for and/or appealed 3 of the 15. Based

on the documentation HCPF provided, we could not verify that any of these three claims

were reviewed by a physician, as required.

• Claims undergoing automated audits. For 13 of the 76 claims in our sample that

underwent automated audits, providers requested Informal Reconsiderations and/or

appealed the findings. Based on the information HCPF provided, we were not able to

identify documentation showing whether these claims were reviewed by a physician, as

required. The remaining 63 claims in our sample were not appealed and the provider did

not request an Informal Reconsideration, so they were not required to be reviewed by a

physician.

HCPF’s contract with HMS does not require that HMS document the information of an individual

who conducts a claim review. According to HCPF, HMS does maintain this information and

HCPF reviews it as needed on an ad hoc basis or in the case of appeals. Including the

reviewer’s information in a case file is considered a best practice as it allows the oversight

agency to monitor the RAC’s compliance with contract requirements related to staff

qualifications. To monitor HMS’ use of qualified medical professionals for claims reviews, HCPF

would need to establish a requirement in the RAC contract for HMS to document the names

and, when appropriate, the qualifications of staff who review each claim. HCPF would then be

able to periodically review claims to verify HMS’ compliance with RAC contract requirements

related to qualified staff reviews.

Policy Consideration for HCPF – The Department of Health Care Policy & Financing may want

to consider:

a) Establishing a mechanism for tracking the frequency of and reason for missed deadlines

in the case review process to help identify and address any systemic problems in the

process and to maximize efficiency and fairness.

b) Requiring its Recovery Audit Contractor to document the names and qualifications of

staff that review each claim during an audit, an Informal Reconsideration, or an appeal.

Evaluation of the Colorado Recovery Audit Contractor Program

Response

Department of Health Care Policy & Financing

The Depar

tment does require reporting on missed deadlines from HMS, as well as reporting

on provider compliance, which we have used to make additional communications to the

specific providers who are having issues with turning in medical records or documentation

during the course of an audit. While we have these reporting mechanisms in place, we can

always commit to having more robust or clearer reporting so that there is transparency in the

processes. We also would like to ensure that any reporting is also communicated externally,

as this may help with transparency and confidence in the program.

HMS does track the exact reviewer for each claim they make a determination on; however,

historically we have not put this into our reporting since the vendor maintains a URAC

certification, which is the national standard where the accredited business has an annual

review of the staff in order to ensure that the highest requirements for licensure are

maintained and documented. We have already started to put in place more frequent

verifications of licensure.

The Department can commit to reviewing reporting, standards, and requirements with CMS

and with other states so that we can define what the best practice is and what the standard

should be so we are in alignment with other RAC programs and in alignment with CMS. Any

changes to the reporting, standards, and best practices will be updated as needed in the

following documents; an approved CMS SPA for the RAC program, contract amendments or

contract transmittals, as well as policies and procedures.

Evaluation of the Colorado Recovery Audit Contractor Program

Chapter 3: RAC Program Balance of Fiscal

Accountability with Access to Care

Colorado House Bill 23-1295, which is codified as Section 25.5-4-301(3.7), C.R.S., directed that

this evaluation review a number of aspects of the Recovery Audit Contractor (RAC) program to

assess how providers are affected by the program in terms of:

• The payment model and percentage used to compensate the RAC. Statute required

us to examine “the level of payments sufficient to maintain a RAC contractor”; the

“impacts on providers related to a contingency fee significantly above the federal

standard;” and “other states’ … financing mechanisms” for RAC contractors and to

identify practices used in other states to compensate the RAC to identify underpayments

to providers. [Sections 25.5-4-301(3.7)(a)(I), (a)(III)(D), (a)(VI), (b)(I), (b)(II)(A), and

(b)(II)(E), C.R.S.]

• The l

ookback period for RAC audits. Statute required us to assess the impacts on

providers and Medicaid beneficiaries of the RAC program’s seven-year lookback period,

which exceeds federal standards for Medicaid RAC programs; the implications for

providers and the State’s General Fund of adjusting the lookback period; and the lookback

periods used in other states. [Sections 25.5-4-301(3.7)(b)(II)(A), (a)(IV), and (a)(III)(B),

C.R.S.]

• The

administrative burden on providers. Statute directed us to assess the

administrative burden on providers associated with undergoing RAC audits and “the

impact of audits on provider participation and access to care.” [Sections 25.5-4-

301(3.7)(a)(V) and (a)(VII), C.R.S.]

• How the RAC program supports providers. Statute required us to evaluate how the

RAC program supports providers throughout the audit process and how it is used to

improve provider billing. This included specific requirements to evaluate (1) how the

Department of Health Care Policy & Financing (HCPF) addresses provider concerns

with the RAC program and (2) if federal regulations allow flexibility in establishing

timelines and processes for when overpayments are identified, when repayments are

due from providers, and when HCPF must refund the federal government its share of

recoveries. [Section 25.5-4-301(3.7)(a)(II), (a)(III)(C), (a)(V), (a)(VII), (b)(I), (b)(II)(E),

C.R.S]

• Cost-Benefit Analysis. Statute required us to “consider … how the state should

evaluate the cost-benefit analysis to determine whether the … [RAC] program is striking

the right balance between accountability and access to care.” [Section 25.5-4-

301(b)(II)(D), C.R.S.]

• Improvements to the RAC program. Statute required us to seek ways that HCPF

could improve “provider education, training, and error rates” and “the timing [for] …

Evaluation of the Colorado Recovery Audit Contractor Program

assessing when a potential overpayment is “identified.”” [Sections 25.5-4-301(3.7)

(b)(II)(E) and (b)(II)(C), C.R.S.]

This chapter discusses our review and conclusions in these areas.

Evaluation of the Colorado Recovery Audit Contractor Program

Finding 6 – Claims Limits on RAC Audits

One way the burden on providers can be minimized is by limiting the number of claims included

in RAC audits in a given time frame. HCPF has established limits in terms of (1) the number of

claims per provider that can be audited in a given time period and (2) the frequency of audits of

any one provider.

Most states have different limits, such as limiting RAC audits to a percentage of total claims

submitted by a provider in a year, or numerical records limits that differ from Colorado’s. States

will set these limits based on their own RAC program objectives and focus areas.

What Work Was Performed, What Was the Purpose, and How Were the

Results Measured?

We reviewed the claims limits that HCPF has established for RAC audits, interviewed HCPF

staff, interviewed providers, and reviewed documents submitted to us by providers to evaluate

the use of RAC audit claims limit.

The purpose of this work was to assess whether HMS has applied the established limits as

HCPF intended, and to assess concerns regarding the limits raised by providers.

Federal regulations at 42 CFR § 455.506(e) require states to “set limits on the number and

frequency of medical records to be reviewed by the RACs, subject to requests for exception

from RACs to States.”

The RAC contract requires HMS to apply limits on its audits in accordance with direction from

HCPF. Specifically, the contract states “Contractor shall calculate limits on the amount of claims

and/or medical records that can be audited for each review conducted by Contractor. The

Department will approve formulas and methodology to be used by Contractor to calculate the

limits. The Department will also determine and approve maximum limits on the amount of claims

and/or medical records that can be audited. Contractor shall adhere to the limits for the amounts

of claims and medical records that can be audited for each review as directed by the

Department.” [1.13.2.6.]

HCPF used transmittals to establish and communicate specific limits for RAC audits during both

the 2018 and 2021 RAC contracts. The audit limits are expressed in terms of the number of

claims or number of medical records. As of March 2023 (the most recent update), the limits are as

follows:

Frequency – For both complex and automated audits, HCPF requires that HMS allow for a

45-day break between the initiation of new RAC audits, which means that a provider can

only be sent a new Medical Record Request Letter or Notice every 90 days. HCPF also

prohibits HMS from including a provider in an automated audit and a complex audit at the

same time.

Number of Claims – For complex audits, HCPF has established upper limits on the number

of medical records HMS may request each month for audits of inpatient claims, with

different limits depending on the type of provider and type of claim being audited. For

Evaluation of the Colorado Recovery Audit Contractor Program

example, for a large hospital undergoing a complex audit, HMS may request up to 600

medical records per month; for a small hospital, the limit is 20 records per month. For

complex audits of hospice claims, HCPF has established a limit of 10 cases per month.

For automated audits, HCPF allows HMS to include up to 800 claims per provider per audit.

However, HMS may exceed this claims limit if approved to do so by HCPF. Because

automated audits identify overpayments based on information in the claims database,

providers are not required to provide any medical records.

Contract transmittals sent by HCPF to HMS included the following limits for complex audits:

Exhibit 10: Tiers and Limits 2023, Effective March 14, 2023

Tier Name Hospital Reimbursement (FY 2021- 2022)

Monthly Maximum

Claims Limit

Alpha $250 Million+ 600

Beta $69 Million - $250 Million 400

Gamma $39 Million - $69 Million 200

Delta $19 Million - $39 Million 100

Epsilon $9 Million - $19 Million 50

Zeta $1 Million - $9 Million 25

Kappa < $1 Million 20

Sigma Out of State Facilities 10

Source: HCPF Contract Transmittal dated March 14, 2023

Physician-Administered Drug (PAD) Complex Audit Claims Limits

In 2016, the RAC claims limits methodology for PAD claims was based on previous Fiscal Year

reimbursements to that provider location, as ident

ified by the Provider Medicaid ID.

As of March 14, 2023, the PAD claims limits will be a maximum of 50 claims per month, with the

limit based on the provider location, as identified by the Provider Medicaid ID.

Hospice Complex Audit Claims Limits

In 2016, the RAC claims limits methodology for hospice claims was based on the previous

Fiscal Year reimbursements to that provider location as identified by the Provider Medicaid ID.

These claims limits were built for inpatient audits only.

As of March 14, 2023, the RAC claims limits will be a maximum of 10 patient cases per month,

with the limit based on the provider location, as identified by the Provider Medicaid ID.

Evaluation of the Colorado Recovery Audit Contractor Program 59

We identified challenges related to the application of the RAC audit claims limits that may be

exacerbating provider administrative burden. HCPF informed us in multiple interviews that HMS

has been instructed to apply the claims limits based on the “Provider Location ID”, which is

unique to a provider’s physical location. A large health care system with multiple locations

should have a unique Provider Location ID for each physical location, despite being part of the

same overall health system or ownership entity.

Through interviews with providers, and our review of documentation submitted by providers, we

identified that a misunderstanding exists between the provider community and HMS/HCPF

regarding how the claims limits are applied to providers for the RAC audits. Our meetings with

providers indicated that certain health care systems with multiple locations, that receive Medical

Record Requests or an Automated Audit Notices of Adverse Action (Notices), can become

overwhelmed due to the number of claims being audited. Based on our analysis, Notices sent

from automated audits include an average of about 85 claims with findings. HCPF’s claims limits

cap the number of claims per Notice at 800 but, in some cases, HCPF approves Notices with

more claims. We spoke with one provider that showed that it received Notices related to an

automated audit with more than 20,000 claims. The provider indicated that HCPF had

authorized HMS to exceed the limits. Receiving a Notice for more than 800 claims in one

automated audit cycle is not typical. In addition, although providers that receive Notices due to

an automated audit are not required to provide any documentation, the providers interviewed as

part of this evaluation stated they tend to review claims that are included in a Notice to assess

their response, such as to file an Informal Reconsideration or appeal.

The contract transmittals sent by HCPF to HMS that established the claims limits do not clearly

articulate that the claims limits are being applied based on the "Provider Location ID”, instead of

the health care system. While there may be an understood application of the claims limits

between HCPF and HMS, they are not clearly articulated in the contract transmittals nor

communicated to providers.

As shown in Exhibit 10, for complex inpatient audits, the limits on the number of claims per

provider that can be audited vary based on the amount the provider billed to Colorado Medicaid

in the previous Fiscal Year. As an example, if Hospital A, Location 1 billed $150 million to

Colorado Medicaid in Fiscal Year 2022, it is in the “Beta” tier for audits that occurred in Fiscal

Year 2023. The “Beta” tier has a limit of 400 medical records per provider per month, which

means that Hospital A, Location 1 can only be asked to produce 400 medical records per audit.

However, if this health system has multiple locations, such as a main hospital with smaller

satellite locations, HMS may also be auditing claims that occurred at Hospital A, Location 2. If

Location 2 was in the “Epsilon” tier, the limit would be 50 records per month for a complex audit.

Based on our review, it appears that HMS applies the record limits for Hospital A to each

location individually. Thus, if HMS audits Location 1 and Location 2, it may request 400 medical

records per audit cycle from location 1, and 50 from location 2.

As part of evaluating the administrative burden of the claims limits, we reviewed documents

providers sent us. Our review of these documents found that confusion exists around the

application of the complex inpatient claims limits. In response to a provider’s letter that included

What Problem Did the Work Identify?

Evaluation of the Colorado Recovery Audit Contractor Program

concerns regarding the claims limits, HCPF acknowledged the necessity of creating clearer

guidance.

Why Did the Problem Occur?

The guidance that HCPF has provided to HMS and providers on the application of the claims

limits for RAC audits is vague. Specifically, it fails to provide a clear definition of “provider” in the

application of claims limits for providers with multiple locations. For example, the term “provider”

may be used to refer to a hospital system that handles the billing for all its individual locations as

well as to refer to each individual location of the hospital.

Why Does This Problem Matter?

The application of the claims-based audit limits is designed to regulate provider burden,

however the lack of clarity for providers has caused ongoing dissatisfaction. For example, the

provider mentioned above that had received Notices for overpayments in more than 20,000

claims in a single automated audit described the administrative burden of responding to the

audit of this many claims at one time as extremely challenging.

Further, two providers we interviewed explained that the administrative burden can be

excessive due to the number of concurrent audits that occur at multiple locations. The

application of the claims limits described above may also cause this additional burden on multi-

location practices because Medical Record Request letters and Notices are sent to the

practice’s centralized location and overwhelms the staff who are responsible for managing RAC

audits and other audits.

Recommendation No. 6

The Department of Health Care Policy & Financing (HCPF) should revise its guidance on

Recovery Audit Contractor (RAC) audit limits to clearly define the intent of the established limits

on the number of claims selected for audit from a provider. This guidance should define what

constitutes a provider for purposes of determining the RAC claims limit and clearly describe how

the claims limits are calculated in instances where a provider has multiple locations. Further,

HCPF should consider providing a training for providers that explains how claims limits are

applied for health care systems with multiple practices.

Response

Department of Health Care Policy & Financing

Agree

Implementation Date: 06/2024

The Department agrees with this recommendation.

HCPF has published the structure for claims limits and the identification of what a provider’s

service location is. We agree and have already started to create documentation that better

clarifies this information, which is based on CMS guidance and methodology. Further, we

will post all the limits on the RAC website so that each provider and location understand the

Evaluation of the Colorado Recovery Audit Contractor Program

claims limits in place, how they work, and the volume for that location. HCPF will also

increase provider training on this issue.

As the Department receives clarifications on which physician groups are owned by which

hospitals, we can enhance the clarity of claim audit volume by hospital. Because of the

massive acquisition of physician practices and other health care providers by hospitals,

hospitals will have a far higher claim audit volume than other providers.

Evaluation of the Colorado Recovery Audit Contractor Program

Finding 7 – Provider Support, Outreach, and Education

HCPF and HMS, as part of their RAC program duties, and in accordance with federal

regulations, [42 CFR § 455.508], are charged with supporting providers during the RAC process

through means such as provider outreach, education, and customer service. Both HCPF and

HMS provide training and resources to providers on the RAC audit process. For example, HMS

has presentations available on its website that give an overview of the RAC audit process and

of the differences between complex and automated reviews. The website also has links to

authoritative guidance, such as provider billing manuals. HCPF has similar resource links on its

RAC webpage along with links to register for trainings that are offered roughly every month on

specific aspects of the program. HMS is the primary point of contact for providers with respect to

RAC audits and plays a key role in provider outreach and education. However, providers also

communicate with HCPF directly by phone, email, or an online form that was implemented in

March 2023 on the HCPF RAC website when questions or concerns about the program arise.

What Work Was Performed, and What Was the Purpose?

We performed the following procedures to gain information regarding the policies and practices

HCPF and HMS have established to support and communicate with providers regarding the

RAC program:

• Interviewed HCPF and HMS staff in charge of RAC audits.

• Reviewed HCPF policies and procedures, and the 2021 RAC contract with HMS.

• Obtained input from providers through several means. We conducted a survey of 4,162

providers and received 115 responses. A full description of the survey methodology can

be found in Appendix A. We also interviewed four provider associations and talked with

11 providers through interviews and email exchanges.

• Performed online research for eight other states with RAC programs and interviewed

representatives from five of those states.

• Reviewed tools and resources HCPF and HMS have for outreach and education

regarding the RAC program, including webinars available on HCPF’s website that

provide an introduction to and overview of RAC audits; periodic outreach flyers and

bulletins that provide updates and information regarding RAC audits; training available

on HMS’ website; and materials from an HMS Stakeholder Meeting in 2023.

• Reviewed monthly status reports submitted to HCPF by HMS. We requested all monthly

reports from January 2020 through September 2023; HCPF provided nine reports from

2020, six from 2021, four from 2022, and one from 2023.

• Reviewed 10 weekly Quality Control Review reports submitted to HCPF by HMS. We

reviewed reports from 2020, 2021, and 2023, as provided by HCPF.

The purpose of the work was to evaluate how HCPF addresses provider concerns; understand

HMS’ responsibilities for provider outreach and education; and identify potential best practices

Evaluation of the Colorado Recovery Audit Contractor Program

from other states related to provider education, training, and support. Statute required that our

evaluation consider these issues. [Sections 25.5-4-301(b)(III)(C) and (b)(IIE), C.R.S.]

How were the Results of the Work Measured?

HCPF maintains overall responsibility for the operation of the program, including monitoring

provider concerns and education, as required by the State Plan Amendment.

According to the RAC contract, HMS has primary responsibility for conducting outreach to

providers and managing questions or problems from providers related to the RAC program.

Specific HMS responsibilities assigned in the RAC contract, include requirements for HMS to:

• Maintain a provider call center and respond to provider questions and requests for

information “expeditiously, within forty-eight (48) business hours, maximum.”

• Conduct periodic informal conferences with providers. This expectation is reiterated in a

communication plan HMS developed, stating that HMS would “conduct regular telephone

calls with providers, provider associations, and other interested parties to discuss the

RAC program, our process, and our findings.”

• Prepare and implement provider education plans. The contract requires HMS to develop

a Provider Education Plan and provide it to HCPF within 10 business days after

completing an audit, and conduct provider education at least once a quarter. It also

requires provider education plans to “contain, at a minimum, … identification of common

billing trends or issues that result in erroneous payments [and] the methods Contractor

will utilize to communicate the trends and issues and corrective actions to Providers.”

• Prepare and implement a provider outreach plan that outlines how HMS will inform

providers about various aspects of a RAC audit, including audit policies, providers’ rights

to request extensions and exit interviews, and the appeals process.

What Problem Did the Work Identify?

HCPF and HMS have processes in place for informing providers about the RAC process and

requirements. However, we identified shortcomings in these processes where we were not able

to determine if HMS is complying with contract requirements, as described below.

First, we found that although HMS has a toll-free call center for providers, HCPF did not have

data we could use to validate that provider communication from HMS met the 48-hour response

requirement included in the RAC contract. HCPF stated that they monitor the 48-hour

requirement on a weekly basis, but they do not maintain a historical log of all calls and response

timing. Our review of the weekly reports HMS submitted to HCPF indicated that HMS tracks the

number of calls and emails received from providers and whether a response was provided

within 24-hours. However, we found no reporting by HMS about whether it was meeting the 48-

hour response time requirement. Out of 10 weekly reports reviewed, HMS reported that zero

calls out of the 359 calls received during that time were returned within 24-hours for seven of

the 10 weeks and four calls were returned within 24-hours for the other three weeks. The

Evaluation of the Colorado Recovery Audit Contractor Program

weekly reports did not provide enough information to determine whether all the calls required a

response.

Second, although HMS has a formal exit conference process where it discusses audit findings

with providers, we could not verify that HMS conducts periodic informal conferences or phone

calls with providers or provider associations to discuss the RAC program, processes, and

findings, as required by the customer service standards in the contract. The HMS presentations

and webinars we reviewed did not indicate that HMS regularly held telephone calls or informal

conferences with providers to help them understand the program. According to HCPF, providers

can use the call center as needed to attain information related to the RAC program.

Third, HCPF provided us a single draft education plan that HMS prepared back in 2016 that

does not fulfill the requirements of the current RAC contract. The plan is a broad outline of

educational efforts that HMS prepared at the beginning of its tenure as HCPF’s RAC. However,

HMS does not appear to prepare formal provider education plans after it completes each audit

to inform HCPF of any common billing errors HMS found through its audits or describe the

content and materials HMS will use to educate providers to prevent such errors in the future.

These specifics are required by the contract and appear to be intended to ensure that HCPF is

aware of the kinds of errors and issues HMS finds in its audits and has approved the training

HMS will give to providers to help correct these errors in the future. HCPF stated that they

provide education to providers through provider bulletins, however this does not meet the

contract requirement to develop provider education plans. We were not provided support to

show that HMS conducted provider education quarterly.

We did not identify any deficiencies in the content of the outreach plan prepared by HMS, but

noted that it has not been substantively updated since it was initially written in 2016. HCPF

reported that it reviews the plan each year and HMS only updates it when HCPF determines it is

needed.

Fourth, HCPF could not provide documentation to show how often providers have contacted

HCPF directly or what types of concerns they raised with the RAC program. HCPF stated that it

rarely receives concerns from providers directly and that most providers initially contact HMS

with questions or problems.

Why did the Problem Occur?

HCPF is not enforcing some of the contract requirements for the RAC program, including for

HMS to report on its outreach and education activities, including how well it is meeting the 48-

hour response requirement, conduct periodic informal conferences with providers, and prepare

and submit provider education plans after each audit. Our review of 20 monthly HMS status

reports found no mention of such activities, although the contract requires that the monthly

reports have a section describing the provider education and outreach activities from the

previous month and upcoming activities.

Without such monthly reporting, HCPF lacks assurance that HMS is complying with customer

service, communication, outreach, and education expectations. Further, the lack of reporting

means there is no reasonably accessible, aggregated, documented information available to

Evaluation of the Colorado Recovery Audit Contractor Program

gauge HMS’ compliance with the RAC contract and evaluate whether there are gaps or

deficiencies in these processes that contribute to the provider dissatisfaction discussed below.

HCPF also lacks written policies, procedures, and guidance for communicating with providers

and addressing their concerns about the RAC program. Specifically, HCPF’s policies and

procedures do not (1) establish guidance or clear expectations for HCPF’s own staff in

responding to questions or concerns from providers, including time frames for responses, or (2)

establish a mechanism for tracking communications from providers and the issues raised or

how they were resolved. Our interviews with other states’ RAC programs about their education

and outreach efforts, found that they appear to be similar to Colorado in their means of

informing providers about the program and offering provider education and none of them were

able to provide written department policies for communicating with providers either. However,

implementing policies and procedures or other guidance related to communicating with

providers could help to manage provider relations and reduce provider frustration with the RAC

program.

Why Does This Problem Matter?

A provider’s experience with the RAC program is affected by the education and communication

they receive from HMS and HCPF, and these elements influence provider satisfaction with the

program. Responses to our provider survey indicated that some providers are dissatisfied with

the RAC program in these areas. Four of the 28 questions in our survey related to education,

communication, and support. For all four, provider responses indicated a high degree of

dissatisfaction, as follows:

• Training and education – 45% (51 of 114) of respondents disagreed or strongly

disagreed that the RAC program provides adequate training, education, and

informational resources about audits. (Q 8)

• Clarity about how audit areas are selected – 41% (47 of 115) of respondents disagreed

or strongly disagreed that audit selection criteria and methodologies were clearly

explained to them. (Q 9)

• Collaboration – 46% (51 of 96) of respondents disagreed or strongly disagreed that the

RAC program fosters collaboration and communication between providers and auditors.

(Q 21)

• Balancing accountability and support – 58% (56 of 96) of respondents disagreed or

strongly disagreed that the RAC program adequately balances its roles of detecting

improper payments and supporting providers in compliance efforts. (Q 22)

The complete results of our survey are included in Appendix A.

Our review of the reasons providers left Medicaid, described in detail in Policy Consideration D

of this chapter, found no instances of providers reporting they left because of issues with the

RAC program. However, some providers and provider organizations we talked to during the

evaluation stated that poor communication and education has caused some practices to

consider whether they will continue to provide care to Medicaid patients.

Evaluation of the Colorado Recovery Audit Contractor Program

Further, if providers experience a lack of response or delayed communications from HMS or

HCPF, it can potentially make the RAC program less efficient and effective and increase the

provider burden. For example, if providers cannot get timely, complete, and accurate answers to

their questions or resolution of problems, they may undertake work to provide records that do

not meet the RAC’s needs, thus increasing their workload and cost. This could lead to HMS

identifying an overpayment based on incomplete records and ultimately result in the provider,

HMS, and HCPF dealing with Informal Reconsideration requests and appeals. These add not

only to provider costs but also to the workload of HMS and HCPF. If providers do not receive

regular education about common billing errors, they are likely to repeat them in future billings,

leading to additional overpayments and all parties potentially incurring costs if those erroneous

claims are later audited.

Finally, by not tracking communications from providers, HCPF is missing an opportunity to

identify and analyze common themes or recurring issues. Such analysis could be used to

improve the RAC program, including provider outreach, education, and support, and help HCPF

hold HMS accountable for fulfilling its responsibilities in these areas. Providers that employ

experienced medical billing professionals may have feedback that would be valuable in helping

HCPF clarify policies and processes, better inform providers, and better educate them to use

proper billing.

Recommendation No. 7

The Department of Health Care Policy & Financing (HCPF) should enhance provider support,

outreach, and education in the Recovery Audit Contractor (RAC) program by:

A. Establishing a means for HCPF to monitor the RAC’s compliance with the 48-hour

response requirement, such as through requiring the routine reporting of how the RAC is

meeting this requirement.

B. Enforcing the contractual requirement that the RAC conduct informal conferences or

phone calls with providers or provider associations to discuss the RAC program,

processes, and findings.

C. Enforcing the contractual requirement for the RAC to prepare provider education plans

after each audit that identify and address the common errors and issues found through

the audit and describe the content and materials the RAC will use to educate providers

to prevent such errors in the future.

D. Enforcing the contractual requirement for the RAC to include updates on its outreach

and education activities in its monthly reports to HCPF.

E. Implementing written policies, procedures, and/or guidance, that establish a process for

HCPF to log provider communications, provide direction on how HCPF staff should

respond to communications in a manner that is timely and relevant, and institute routine

analysis of provider communications to inform decisions on program improvements.

Evaluation of the Colorado Recovery Audit Contractor Program

Response

Department of Health Care Policy & Financing

A. Agree

Implementation Date: 12/2024

The Department agrees with this recommendation. We consider our network providers our

ustomers and will more effectively track this response time and hold HMS more

accountable goi

ng forward to better provider service, thereby enhancing the processes we

have in place now.

B. Agree

Implementation Date: 08/2024

The Department agrees with this recommendation. Both the Department and HMS have

policies and procedures in place for logging communications; however, HCPF can commit to

creating better tracking and reporting to ensure that these types of engagements are tracked

and documented in a manner that better creates transparency and can be used in reporting.

Additionally, the Department can create educational materials with our vendor to ensure

there is a process in place and expectations when a provider or association does reach out

for an informal conference. This will align the contract with expectations and timelines that

we can give to providers which will help ensure that we have the resources needed to

schedule, follow-up and document the meetings and any outcomes we may have from these

meetings.

Given that the challenge is largely about getting the providers to leverage the RAC system of

Exit Conferences and Informal Reconsiderations - versus going straight to the appeals

process - these enhancements will also serve to hold providers more accountable to

following the process.

C. Agree

Implementation Date: 12/2024

The Department agrees with this recommendation. Accordingly, HCPF will create processes

that better identify the common errors and issues found through each provider’s RAC audit

and will improve its communications that train providers to address such findings. The

Department will also create policies that require providers to address repeat behaviors to

better achieve the goals of the RAC program and to better hold providers accountable for

addressing identified billing errors, thereby mitigating future overpayments within the

Medicaid program.

The HMS provider portal also has reporting and trending in place to help providers review

the statistics on what was reviewed, what the findings were, and the trends of the findings

over the course of the audits. HCPF/HMS also provides monthly provider training.

Evaluation of the Colorado Recovery Audit Contractor Program

Implementation Date: 12/2024

The Department agrees with this recommendation. While HMS does provide this reporting,

HCPF can commit to updating transmittals and reporting to better define our requirements,

reporting, and expectations for both the Department and our HMS vendor.

Addendum: During the evaluation, HCPF provided no documentation that HMS reports to

HCPF on its outreach or education activities.

E. Agree

Implementation Date: 06/2025

The Department agrees with this recommendation. We will strive to accomplish this

recommendation sooner than June 2024. The Department has policies and procedures for

provider and external communications; however, HCPF can commit to making a specific

tracking log, policies, procedures, and reporting that is specific to the RAC program and can

create a robust reporting mechanism that will better help with tracking trends in the

communications. We also can report on these externally which will help with transparency

for our stakeholders. We have already begun developing a tracking system via a ticket

system which would show open items we need to follow up on and can help to create

standards for response times and ensure that we are communicating those expectations

externally.

D. Agree

Evaluation of the Colorado Recovery Audit Contractor Program

Policy Consideration D – Lookback Period Impact on

Providers and HCPF

The lookback period refers to the time between when a claim was paid and when it was audited

by the RAC. The lookback period can be calculated several ways, but in Colorado, it is the

period between the date of claim payment and the date a provider first receives notification of

an audit. For complex audits, the first notification is the “Medical records request letter”, which

informs the provider of the claims being audited and requests the medical records for those

claims. For automated audits, the first notification is the “Notice of Adverse Action, Overpayment

Determination letter”, which includes the recovery demand. This is because automated audits

use data analysis to identify overpayments based on data in the claims database. Providers are

notified only after the review of the claims has been completed and overpayments have been

identified. Automated audits do not involve a review of provider medical records, unless

providers should choose to submit records in the Informal Reconsideration phase of an audit.

Colorado’s approved SPA permits a seven-year lookback period for Medicaid RAC audits,

which is an exception to the federally established maximum of three years, and the longest

lookback period granted by CMS. Colorado’s lookback period for RAC audits is aligned with

Colorado Medical Board policy 40-7,1.c, regarding medical record retention, which states “The

Board recommends retaining all patient records for a minimum of seven years after the last date

of treatment, or seven years after the patient reaches age 18 - whichever occurs later.”

Additionally, hospitals are required under state regulations to maintain records for at least 10

years. [6 CCR 1011-1, 11.4(B)]

Exhibit 11 shows the lookback periods of other states that had operational RAC programs as of

December 2023.

Exhibit 11: RAC Lookback Period Used in Other States

Lookback Period States

7 years

• Colorado • Oregon

6 years

• New York

5 years

•

Georgia

• Minnesota

•

Texas

• West Virginia

3 years

• Arizona

• California

• Connecticut

• Hawaii

• Illinois

• Indiana

• Mississippi

• Nevada

• New Mexico

• North Carolina

• South Carolina

Source: BerryDunn research on state RAC programs.

HCPF told us it has several reasons for its use of a seven-year lookback period.

Evaluation of the Colorado Recovery Audit Contractor Program

First, after unsuccessfully soliciting for RAC services in 2014, HCPF received feedback that the

lookback period of three years was too short for audits to be financially viable for contractors;

longer lookback periods can provide a larger window of opportunity to identify overpayments.

HCPF then applied and was approved for the SPA that allows the seven-year lookback period.

Second, HCPF stated that the seven-year lookback period for RAC audits can help identify

systemic billing problems and correct them, such as through policy changes, before a federal

audit. The Office of Inspector General, U.S. Department of Health and Human Services (HHS

OIG), conducts audits and reviews of State Medicaid agencies and, according to HCPF, may

look at claims as old as 10 years. The seven-year lookback period not only allows HCPF to

resolve billing problems to reduce possible HHS OIG findings, but it also demonstrates the

State’s commitment to program integrity. In the event that HHS OIG identifies a deficiency that

causes or allows overpayments, HCPF would utilize a post-payment review process other than

the RAC audit to audit and potentially recover overpaid funds from providers.

Third, HCPF stated that the lookback period for HCPF’s other post-payment reviews is seven

years, and that using the same period for RAC audits provides consistency.

The statute requiring this evaluation raised two main questions about the seven-year lookback

period - (1) what is the impact on providers, and (2) what would be the impact if the period was

reduced. [Sections 25.5-4-301(3.7)(b)(II)(A), (a)(IV), and (a)(III)(B), C.R.S.]

To address these questions, we conducted the following analyses:

1. Determined the proportion of claims actually audited that were paid in each year within

the lookback period for RAC audits performed from January 2021 through June 2023.

2. Analyzed how the lookback period relates to the number of requests for Informal

Reconsideration and the number of appeals providers submit on claims audited.

3. Assessed provider perspectives on the burden caused by a long lookback period and

whether it causes providers to leave the Medicaid program.

4. Estimated how a reduction in the lookback period might affect recoveries.

Our analysis of the lookback period is limited to the RAC program and is not applicable to other

post-payment reviews HCPF performs.

Claims Audited by Lookback Period

We analyzed data from the RAC audits performed between January 2021 and June 2023 and

calculated the lookback periods of the claims audited. We then grouped the claims by their

effective lookback period. To calculate the lookback period, we subtracted the difference

between the “Medical Record Request” letter date (complex reviews) or the “Notice of Finding”

letter date (automated reviews) and the “Claim Paid Date”.

The results of our analysis are shown in Exhibits 12 through 14. We found that most of the

claims (93%) that underwent a RAC audit during this period were within a five-year lookback

period and about 66% were within a three-year lookback window, which is the maximum

Evaluation of the Colorado Recovery Audit Contractor Program

lookback period established by CMS. Exhibit 12 shows the distribution of all audited claims

across the seven-year lookback period.

Exhibit 12: Total Audits Performed for both Automated and Complex Reviews

From January 2021 through June 2023

Lookback Period

(Years)

Number of

Claims Audited

Percent of Total

Number of

Claims

Dollar Value of

Identified

Overpayments

Percent of Total

Audited Claim

Value

0-1

2,287 0.5% $2,659,331 0.9%

1-2 77,680 16.1% $138,983,578 47.5%

2-3 34,673 7.2% $50,390,999 17.2%

3-4 60,186 12.5% $46,369,889 15.8%

4-5 140,233 29.1% $34,333,705 11.7%

5-6 78,083 16.2% $10,214,278 3.5%

6-7 89,253 18.5% $9,585,401 3.3%

7-8 114 0.0% $62,062 0.0%

Grand Total 482,509 100.0% $292,599,243 100.0%

Source: BerryDunn analysis of data from HCPF on claims audited by HMS.

1 – The Lookback Period refers to the time period when a claim was paid relative to when it was audited by the

RAC. Lookback Period 1-2 includes claims that were audited more than one year, but less than two years, after

being paid.

2 – The claims with a lookback period of less than one year were audited outside of the timely filing period, which

in Colorado is one year from the claim’s Date of Service. The lookback period is calculated differently by using

Letter Date – Claim Paid Date. The Claim Paid Date will always be after the Date of Service.

Evaluation of the Colorado Recovery Audit Contractor Program

Exhibits 13 and 14 provide an analysis of the frequency of the lookback period lengths. Exhibit

13 shows that about 57% of the automated audits had an effective lookback period of less than

five years. Exhibit 14 shows that about 98% of complex audits have an effective lookback

period of less than five years.

Exhibit 13: Frequency of Lookback Period for Automated Audits

From January 2021 through June 2023

Lookback Period (Years)

Number of Claims

Audited

Percent of Total Number of

Claims Audited

0-1

2,167 0.6%

1-2 20,920 5.5%

2-3 22,847 6.0%

3-4 46,133 12.0%

4-5 126,083 32.9%

5-6 77,047 20.1%

6-7 88,173 23.0%

7-8 114 0.0%

Grand Total 383,484 100.0%

Source: BerryDunn analysis of data from HCPF on claims audited by HMS.

1 – The Lookback Period refers to how long ago a claim had been paid at the time it was audited by the RAC.

Lookback Period 1-2 includes claims that were audited more than one year, but less than two years, after being

paid.

2 – The claims with a lookback period of less than one year were audited outside of the timely filing period, which

in Colorado is one year from the claim’s Date of Service. The lookback period is calculated differently by using

Letter Date – Claim Paid Date. The Claim Paid Date will always be after the Date of Service.

Our analysis identified 114 claims audited that had a lookback period longer than seven but less

than eight years, and were included the tables above. HCPF did not provide an explanation for

these claims.

Evaluation of the Colorado Recovery Audit Contractor Program

Exhibit 14: Frequency of Lookback Period for Complex Audits

From January 2021 through June 2023

Lookback Period (Years)

Number of Claims

Audited

Percent of Total Number of

Claims Audited

0-1

120 0.1%

1-2 56,760 57.3%

2-3 11,826 11.9%

3-4 14,053 14.2%

4-5 14,150 14.3%

5-6 1,036 1.0%

6-7 1,080 1.1%

Grand Total 99,025 100.0%

Source: BerryDunn analysis of data from HCPF on claims audited by HMS.

1 – The Lookback Period refers to how long ago a claim had been paid at the time it was audited by the RAC.

Lookback Period 1-2 includes claims that were audited more than one year, but less than two years, after being

paid.

2 – The claims with a lookback period of less than one year were audited outside of the timely filing period, which

in Colorado is one year from the claim’s Date of Service. The lookback period is calculated differently by using

Letter Date – Claim Paid Date. The Claim Paid Date will always be after the Date of Service.

Relationship Between Informal Reconsideration/Appeal Request and Length of

Lookback Period

We then analyzed the relationship between the length of the lookback period and the rate of

Informal Reconsideration requests and appeals to assess whether a potential correlation exists.

These analyses compared the total number of audited claims where an overpayment was

found, by lookback period to the total number of those claims that resulted in an Informal

Reconsideration request or an appeal.

Exhibit 15 compares the Informal Reconsideration request and appeal rates by lookback period

to show whether there is a relationship between the length of the lookback period applicable to

an audited claim and the rate of Informal Reconsideration request and appeal by providers. As

shown, it appears that providers are less likely to request an Informal Reconsideration or appeal

older audited claims than newer claims.

Evaluation of the Colorado Recovery Audit Contractor Program

Exhibit 15: Complex and Automated Audited Claims with Overpayment Findings That Had

Informal Reconsiderations and Appeals by Lookback Period

Lookback

Period

(Years)

Total Number

of Claims

Audited With

Overpayment

Findings

Total Number of

Claims With

Findings That

Had Informal

Reconsideration

Requests

Percentage of

Claims With

Findings That

Had

Reconsideration

Requests

Total

Number of

Claims with

Findings

Appealed

Percentage

of Claims

with

Findings

Appealed

0-1

2,244 299 13.3% 231 10.3%

1-2 52,137 18,461 35.4% 8,929 17.1%

2-3 28,899 10,070 34.8% 7,253 25.1%

3-4 52,457 14,882 28.4% 7,191 13.7%

4-5 132,353 29,030 21.9% 10,712 8.1%

5-6 77,765 16,169 20.8% 5,317 6.8%

6-7 88,964 17,791 20.0% 7,434 8.4%

Grand Total 434,819 106,702 24.5% 47,067 10.8%

Source: BerryDunn analysis of data from HCPF on claims audited by HMS.

1 – The Lookback Period refers to how long ago a claim had been paid at the time it was audited by the RAC.

Lookback Period 1-2 includes claims that were audited more than one year, but less than two years, after being

paid.

2 – The claims with a lookback period of less than one year were audited outside of the timely filing period, which

in Colorado is one year from the claim’s “Date of Service.”

3 – Only includes claims with findings for the purposes of assessing the Informal Reconsideration and Appeal Rate

accurately

According to providers we interviewed, they retain medical records in compliance with Colorado

regulations, which require that records be retained by hospitals for 10 years and by non-hospital

providers for seven years. However, it may be more time consuming for providers to locate

older records, which might help explain why the rate of Informal Reconsideration requests and

appeals for lookback years six and seven are lower than for earlier periods.

Impact on Providers

As discussed in more detail in the Provider Burden section of this chapter, we reviewed the

limited information available on the reasons providers gave for leaving the Medicaid program

over the last five years and did not find any indication that the length of the lookback period

prompted any provider departures. However, the length of the lookback period is a point of

dissatisfaction for most providers that responded to our survey and who we interviewed. In our

provider survey, which was sent to 4,162 providers, 67 of the 95 providers (71%) that

responded to our question regarding the lookback period indicated that the seven-year lookback

period poses a challenge due to the age of the records.

Evaluation of the Colorado Recovery Audit Contractor Program

Open comments on the survey and information we gathered through interviews with 10

providers and three provider organizations indicate that the primary issues providers have with

the seven-year lookback include:

1. Electronic health record system updates or changes cause older records to be archived

or maintained in legacy systems, and some providers archive records for patients who

are deemed inactive by their internal policies. Retrieving records from old systems or

that are maintained in hard copy can require the expenditure of significant staff time.

2. Medical coding guidance changes regularly, and during a seven-year period, the

guidance for billing a specific service can change multiple times. Providers stated that

they typically analyze Notice of Adverse Action letters to assess whether they agree with

the RAC audit findings. This helps the provider decide whether to request an Informal

Reconsideration or appeal and whether they need to make changes to their coding and

billing practices to come into conformance with billing requirements. Providers noted that

assessing older claims to validate findings is more time consuming when they need to

refer to previous versions of coding and billing guidance.

3. Reviewing old claims does not help providers understand current billing requirements or

implement billing practice changes, since older claims were often submitted under

different requirements. Some providers expressed frustration with learning that they may

have been billing incorrectly for years but did not find out until a RAC audit was

conducted as many as seven years later.

Policy Consideration - We do not provide a suggestion on the length of the lookback period for

the Colorado RAC program, as this is a policy decision for the Department of Health Care Policy

& Financing and the General Assembly. However, we do report the results of these analyses to

provide decision-makers with detailed information on the lookback period and possible

outcomes if the decision is made to make a change.

Policy Consideration E – Financial Implications of a

Reduced Lookback Period

Medicaid is jointly financed by the federal and state governments. The federal share, known, as

the Federal Financial Participation (FFP) rate, typically ranges from about 50 to 56% in

Colorado, but can be as much as 90% for certain eligible individuals. When overpayments are

identified during a RAC audit, the RAC contractor is to be paid from recovered amounts and the

state must refund to the federal government its share of overpayments.

The exhibit below shows a standard Medicaid RAC contract payment flow. In this exhibit, the

following assumptions were used:

1. Contingency fee rate of 18% for which FFP will be available

2. Federal Medical Assistance Percentage (FMAP) rate of 50%, which means a state share

of 43.8%

Evaluation of the Colorado Recovery Audit Contractor Program

Exhibit 16: Example of RAC Overpayments Recoveries Financial Flow

Source: Government Accountability Office. 2023. CMS Oversight and Guidance Could Improve Recovery Audit

Contractor Program. (GAO Publication No. 23-106025). Washington, D.C.: U.S. Government Printing Office. Accessed

January 23, 2024 https://www.gao.gov/assets/gao-23-106025.pdf

To assess the potential financial impact of reducing the RAC lookback period, we started by

reviewing the fiscal note for the introduced version of House Bill 23-1295. The introduced

version of the bill, which is not the version that was ultimately passed, would have established a

statutory maximum lookback period of three years that would apply to all audits conducted by

HCPF, not just RAC audits. As such, the fiscal note contained an estimate that the provisions of

the introduced bill, in combination, would result in a 50% reduction in audit recoveries. This

estimate is not all related to the RAC program. HCPF also provided their analysis of the

financial implications to the RAC program that could result from reducing the lookback period to

three years. We subsequently performed our own analysis of data provided by HCPF to assess

the financial implications of a reduction in the lookback period. The results of that analysis are

shown further in this Policy Consideration.

We analyzed HCPF data on the number of claims that were audited in 2021, 2022, and 2023,

and the amount of overpayments identified from the audits. We grouped the data into time

frames of (1) claims that were three years old or less at the time of audit, or (2) claims that were

more than three years old at the time of audit. The results are shown in the exhibits below.

Limitations: Our analysis used the amount of overpayments that were identified in RAC audits,

not the amount actually recovered. Recovered amounts may be lower than identified amounts in

some cases due to provider appeals in which HCPF may settle with providers to accept a

repayment that is less than the total identified overpayment amount. Further, our analysis was

not intended to produce a specific estimate of reduced recoveries from a shorter lookback

period; it was designed to provide insight into the potential financial magnitude of changing the

lookback period from seven to three years. The analysis is also limited by the historical nature of

the data used and the possibility that future audit scenarios and RAC program focuses could

result in different recovery rates and dollar values.

As shown below, our analysis indicates that a three-year lookback period is likely to reduce

recoveries from RAC audits by an average of $26 million per year, or 30% and reduce the

number of claims audited by an average of about 120,000 per year, or 58%. These figures are a

simple average across the three years in our analysis and they assume no other changes to the

RAC program, such as changing the audit scenarios.

Evaluation of the Colorado Recovery Audit Contractor Program

More specifically, in 2023, for complex audits, over 90% of claims audited and nearly 90% of the

identified overpayments were from a lookback period of three years or less while, for automated

audits, only about 2% of claims reviewed and 12% of identified overpayments were from a

lookback period of three years or less. These results indicate that implementing a three-year

lookback period would likely reduce the proportion of claims audited and the amount of

overpayments found through complex reviews by only about 10%, but would likely reduce the

proportion of claims audited and the amount of overpayments found through automated reviews

by more than 90% and 75%, respectively. The exhibits below also show there is more year-to-

year variance for automated audits than complex audits.

Exhibits 17 and 18 show our analysis for complex audits in Fiscal Years 2021 through 2023.

Exhibit 17: Number of Claims Audited - Complex Audits

Source: BerryDunn analysis of claims audited by HMS from January 1, 2021 to June 30, 2023.

13,337

(56%)

16,060

(97%)

38,026

(91%)

10,517

(44%)

565

(3%)

3,533

(9%)

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

45,000

FY2021 FY2022 FY2023

3 Years or Less

Over 3 Years

Evaluation of the Colorado Recovery Audit Contractor Program

Exhibit 18: Dollar Value of Identified Overpayments - Complex Audits

Source: BerryDunn analysis of claims audited by HMS from January 1, 2021 to June 30, 2023

Exhibits 19 and 20 show our analysis for automated audits in Fiscal Years 2021 through 2023.

Exhibit 19: Number of Claims Audited – Automated Audits

Source: BerryDunn analysis of claims audited by HMS from January 1, 2021 to June 30, 2023

$31,392,856

(63%)

$32,457,595

(97%)

$87,221,050

(90%)

$18,010,787

(37%)

$1,159,316

(3%)

$9,515,285

(10%)

$20,000,000

$40,000,000

$60,000,000

$80,000,000

$100,000,000

$120,000,000

FY2021 FY2022 FY2023

3 Years or Less

Over 3 Years

6,716

(33%)

7,155

(36%)

31,135

(9%)

13,620

(67%)

12,791

(64%)

308,799

(91%)

50,000

100,000

150,000

200,000

250,000

300,000

350,000

400,000

FY2021 FY2022 FY2023

3 Years or Less

Over 3 Years

Evaluation of the Colorado Recovery Audit Contractor Program

Exhibit 20: Dollar Value of Identified Overpayments – Automated Audits

Source: BerryDunn analysis of claims audited by HMS from January 1, 2021 to June 30, 2023

Exhibits 21 and 22 show our analysis with complex and automated audits combined and show

that approximately one-third of the claims reviewed were from the most recent three-year

period, and more than two-thirds of all identified overpayments in the past three years are from

claims with a lookback period of less than three years.

$14,782,858

(80%)

$14,278,470

(39%)

$10,034,129

(29%)

$3,653,121

(20%)

$22,147,605

(61%)

$24,474,528

(71%)

$5,000,000

$10,000,000

$15,000,000

$20,000,000

$25,000,000

$30,000,000

$35,000,000

$40,000,000

FY2021 FY2022 FY2023

3 Years or Less

Over 3 Years

Evaluation of the Colorado Recovery Audit Contractor Program

Exhibit 21: Number of Claims - Automated and Complex Audits

Source: BerryDunn analysis of claims audited by HMS from January 1, 2021 to June 30, 2023

20,053

(45%)

23,215

(63%)

69,161

(18%)

24,137

(55%)

13,356

(37%)

312,332

(82%)

50,000

100,000

150,000

200,000

250,000

300,000

350,000

400,000

450,000

FY2021 FY2022 FY2023

3 Years or Less

Over 3 Years

Evaluation of the Colorado Recovery Audit Contractor Program

Exhibit 22: Dollar Value of Identified Overpayments - Automated and Complex Audits

Source: BerryDunn analysis of claims audited by HMS from January 1, 2021 to June 30, 2023.

Exhibit 23 below shows the potential financial impact of a change from a seven- to a three-year

lookback period. The example uses actual figures from the RAC audits conducted in 2021 and

estimates how the funds recovered and returned to the State would decrease from

approximately $31 million to $22 million using a three-year lookback period. This assumes that

changes to the RAC audits are not made, such as changes to scenarios, and the age of paid

claims that are audited.

$46,175,715

(68%)

$46,736,065

(67%)

$97,255,179

(74%)

$21,663,908

(32%)

$23,306,920

(33%)

$33,989,813

(26%)

$20,000,000

$40,000,000

$60,000,000

$80,000,000

$100,000,000

$120,000,000

$140,000,000

FY2021 FY2022 FY2023

3 Years or Less

Over 3 Years

Evaluation of the Colorado Recovery Audit Contractor Program

Exhibit 23: Recoveries under Seven-Year and Three-Year Lookback Periods

Source: BerryDunn analysis of claims audited by HMS in FY2021

The current RAC audit scenarios and audit approach were developed by HMS and HCPF with

the seven-year lookback period in place. In the event that the lookback period was shortened,

tailoring the scenarios and approach for a shorter lookback period would be reasonable and

could help prevent the level of recoveries from dropping significantly due to looking back fewer

Evaluation of the Colorado Recovery Audit Contractor Program

years. Modifications could include expanding the scope of complex reviews from the current

focus on hospitals, hospice, and physician-administered drugs to more provider types and

developing new automated audit scenarios to increase the review of claims in a three-year

period, rather than a seven-year period. Developing new scenarios would incur development

costs for HMS, and likely increase workload for HCPF staff. HCPF also stated that reducing the

lookback period to three years would increase workload for HCPF staff responsible for

administration of the RAC program, due to needing to process more audits simultaneously in

order to maintain the same level of audits and recoveries if the audits were required to occur

within three years of the “Claim Paid Date”.

Another change could be to include claims from the current year, which are now excluded

because they are in their first year, which is considered to be the “timely filing period.” The

timely filing period allows providers up to a year from the Date of Service to submit a claim for

payment and to edit or correct a submitted claim, if needed. HCPF told us the reason it excludes

claims in the timely filing period from RAC audits is to avoid reviewing claims that may be

changed. There is no regulation or requirement that prohibits the auditing of claims within the

timely filing period. Other payers, including Medicare and some other state Medicaid programs,

also have a one-year timely filing period but perform RAC audits of claims in that period.

Policy Consideration - We do not provide a suggestion on the length of the lookback period for

the Colorado RAC program, as this is a policy decision for the Department of Health Care Policy

& Financing and the General Assembly. However, we do report the results of these analyses to

provide decision-makers with detailed information on the lookback period and possible

outcomes if the decision is made to make a change.

Evaluation of the Colorado Recovery Audit Contractor Program

Policy Consideration F - Administrative Burden on

Providers from the RAC Program

Statute directed us to assess the administrative burden on providers associated with undergoing

RAC audits and “the impact of audits on provider participation and access to care.” [Sections

25.5-4-301(3.7)(a)(V) and (a)(VII), C.R.S.] Provider administrative burden is, at the most basic

level, the time and costs placed on providers to comply with RAC audit demands. However,

there is not a standard metric to measure administrative burden imposed on providers through

RAC audits, and each provider may perceive the onerousness of an audit differently. For

example, one provider may view the time spent responding to a RAC audit as an unnecessary

burden, while others may view it as simply a cost of doing business.

Regar

dless of varying perceptions, RAC audits do place demands on providers, requiring them

to expend resources to submit required medical records; review audit findings and, in some

cases, contest them; and repay overpaid amounts. To assess the administrative burden of RAC

audits on providers, we conducted the following procedures and analyses:

• Obtained providers’ perspectives through a survey and interviews.

• Analyzed the distribution of audits across provider types. Although RAC audits are not

designed to affect all providers equally, reviewing audits by provider type provides an

indicator of how the administrative burden is distributed throughout the population of

Medicaid-enrolled providers.

• Assessed how HCPF avoids duplicative audits to minimize burden.

• Analyzed whether the burdens imposed by RAC audits have led to providers leaving the

Medicaid program.

CMS has made efforts to reduce the administrative burden on providers in the Medicaid

program. In its Final Rule implementing the federal law for state Medicaid RAC programs, CMS

acknowledged the importance of minimizing the burden of these programs on providers. The

Final Rule cites several regulatory requirements as features designed to limit provider burden

resulting from RAC audits, including the three-year maximum lookback period [42 CFR §

455.508(f)], and federal requirements for states to set auditing limits within the RAC program.

The State of Colorado received a waiver from CMS that permits the use of a seven-year

lookback period.

Provider Perspectives on Administrative Burden

In our provider survey and interviews, we asked providers to submit documentation and written

statements regarding the costs that they have incurred from being audited by the RAC program.

We received quantified anecdotal estimates from seven providers but most lacked sufficient

details to allow us to estimate a cost per audit, or per claim reviewed. However, some of the

anecdotal information from providers gives their perspective on the time and cost that can be

involved in a RAC audit, as follows:

Evaluation of the Colorado Recovery Audit Contractor Program

• “Responding to an audit can range from $10 - $30,000.”

• “Depending on the audit, it can take a few minutes or a few days. I would average that it

takes 45 minutes per account that we are researching and pulling documents for.”

• “Even the 500 charts audited so far have cost us probably conservatively over $150,000

in staff/physician/response/lost productivity.”

• “Our legal bills were $4,750 for this audit.”

• One hospital stated they are considering a software manager for their audits, which

costs $100,000 and that their outside legal expenses have now exceeded $500,000.

Various aspects of a RAC program can affect the administrative burden providers experience,

including how many audits they undergo and how extensive the audit is (e.g., how many claims

per provider the audit reviews). These aspects are discussed later in this section.

Distribution of Burden Across Provider Types

We analyzed data to identify the frequency of RAC audits by provider type, to identify how the

administrative burden is distributed throughout the population of Medicaid-enrolled providers.

Our analysis shows that there is not an even distribution of audits across providers and provider

types. This is appropriate given the nature of the RAC program, which is designed to audit

providers based on the risk of improper claims being filed. However, a concentration of audits

among a limited number of providers results in those providers experiencing a more significant

burden than providers that are audited less.

We analyzed data for RAC audits conducted in Fiscal Years 2018 through 2023, which included

claims paid between January 2014 and March 2023, to identify whether certain provider types

are under- or over-represented in RAC audits when considering that provider type’s portion of

claims paid by number and dollar value. Both the number of claims audited, and the dollar value

of identified overpayments, can be drivers of administrative burden. The number of claims

audited affects the staff time necessary to respond to audits; the amount of identified

overpayments can influence whether a provider challenges a finding through the Informal

Reconsideration or appeals processes, which add to the provider’s cost for the audit.

Exhibit 24 shows the percentage of claims audited, from highest to lowest, by provider type.

Evaluation of the Colorado Recovery Audit Contractor Program

Exhibit 24: Claims Audited and Overpayments Identified by Provider Type

Provider Type

# of Claims

Audited

# of Claims Paid

% of Paid Claims

Audited

Identified

Overpayments

Claim Payment

Amounts

% of Payment

Amounts

Audited

Hospice 2,644 93,970 2.8% $9,692,704 $394,487,075 2.5%

Psychiatric Residential

Treatment Facility

29 1,138 2.5% $2,322 $11,797,342 0.0%

Hospital - General 123,047 18,976,261 0.6% $203,455,882 $6,058,420,792 3.4%

Supply 42,451 6,737,710 0.6% $6,231,533 $1,291,359,211 0.5%

Clinic - Practitioner 275,055 61,157,662 0.4% $16,636,181 $6,520,025,518 0.3%

Hospital - Mental 16 4,149 0.4% $307,268 $18,039,433 1.7%

Audiologist 9 2,747 0.3% $13,306 $666,105 2.0%

Community Clinic 356 128,590 0.3% $89,322 $25,267,224 0.4%

Physician 801 359,413 0.2% $46,245 $36,936,007 0.1%

Independent Laboratory 18,132 8,414,542 0.2% $53,261,724 $787,959,543 6.8%

Ambulatory Surgical Center 564 285,534 0.2% $192,850 $105,090,722 0.2%

Non-Physician Practitioner -

Group

11,477 5,819,493 0.2% $1,038,947 $886,831,701 0.1%

Pharmacy 3,329 2,397,017 0.1% $418,049 $195,747,486 0.2%

Podiatrist 57 45,826 0.1% $38,826 $3,617,272 1.1%

Clinic - Dental 37 74,609 <0.1% $23,820 $12,448,492 0.2%

Osteopath 28 63,976 <0.1% $2,746 $4,991,202 0.1%

Indian Health Services –

Federally Qualified Health

Center

14 38,558 <0.1% $54,645 $16,666,172 0.3%

Evaluation of the Colorado Recovery Audit Contractor Program

Provider Type

# of Claims

Audited

# of Claims Paid

% of Paid Claims

Audited

Identified

Overpayments

Claim Payment

Amounts

% of Payment

Amounts

Audited

Community Mental Health

Center

85 279,082 <0.1% $53,339 $78,651,036 0.1%

Nurse Practitioner 14 51,924 <0.1% $950 $6,217,618 <0.1%

Optometrist 30 140,034 <0.1% $2,450 $18,209,318 <0.1%

Substance Use Disorder -

Clinics

4 21,790 <0.1% $440 $4,955,968 <0.1%

Home & Community Based

Services (HCBS)

3,148 18,318,918 <0.1% $573,687 $8,381,044,719 <0.1%

Speech Therapist 12 106,018 <0.1% $1,128 $14,268,978 <0.1%

X-Ray Facility 50 449,028 <0.1% $8,627 $62,778,013 <0.1%

Home Health 605 6,475,202 <0.1% $159,351 $3,698,156,802 <0.1%

Federally Qualified Health

Center

414 7,294,807 <0.1% $214,007 $1,378,582,751 <0.1%

Residential Child Care Facility 10 197,919 <0.1% $921 $39,891,998 <0.1%

Family Planning Clinic 5 113,380 <0.1% $1,384 $19,312,651 <0.1%

Case Manager 9 224,560 <0.1% $933 $128,897,733 <0.1%

Dialysis Center 6 208,023 <0.1% $2,029 $94,616,593 <0.1%

Rural Health Clinic 24 1,436,207 <0.1% $1,775 $218,323,841 <0.1%

Nursing Facility 33 2,483,168 <0.1% $70,892 $3,595,657,275 <0.1%

Rehabilitation Agency 14 1,856,099 <0.1% $962 $179,789,774 <0.1%

24 other Provider Types 0 13,606,721 0.0% $0 $1,717,865,149 0.0%

Total 482,509 157,864,075 0.3% $292,599,245 $36,007,571,516 0.8%

Source: BerryDunn analysis of reports provided by HCPF for claims audited by HMS and claims paid by Colorado Medicaid from January 1, 2018 – June 30, 2023.

Evaluation of the Colorado Recovery Audit Contractor Program

We also analyzed the RAC audits at the billing National Provider Identifier Number (NPI) level,

in addition to the provider type analysis above. NPIs are unique numbers assigned to each

provider and can be assigned to an individual provider, such as a physical therapist, or to a

provider organization, such as a hospital. We performed this analysis to assess the distribution

of RAC audits across the population of providers. We found that 3,403 providers were audited

between January 1, 2018 and June 30, 2023. Among the 3,403 providers, 39% of the claims

audited and 37% of the identified overpayment dollars were from 10 providers. For the complex

audits, we found that 43% of the audited claims and 48% of the identified overpayment dollars

were from 10 billing NPIs. For the automated audits, we found that 47% of the audited claims

and 51% of the identified overpayment dollars were from 10 providers. None of the providers

are included in the list of 10 providers for both complex and automated audits. This shows that

less than 1% of the audited providers accounted for roughly 40% of the audit volume.

HCPF stated that in general the number of claims audited from a specific provider is

proportionate to the provider’s size, meaning the concentration of audits may be higher on

certain large health care systems that operate multiple locations with high audit volume.

Additionally, some of these large health care systems may use a centralized office to respond to

RAC audits while other providers may have RAC audit letters sent to the location where the

medical service was rendered.

The analysis further shows that hospitals account for the largest portion of identified

overpayments, and also the largest portion of claims paid by Colorado’s Medicaid program.

HCPF stated this is due to the dollar value of hospital services generally being more expensive

than services rendered by other provider types. Additionally, HCPF stated that hospital identified

overpayment amounts are large due to Colorado not utilizing hospital pre-authorizations. We

note that some hospitals would disagree with this assertion, who stated to us that they disagree

with a large portion of HCPF’s overpayment demands.

The largest providers are primarily larger hospitals and health care systems, that typically have

more human and financial resources to respond to RAC audits than smaller providers, often

including staff whose primary responsibilities include compliance and audit related functions.

However, even three of the largest providers interviewed during this evaluation expressed

frustration with the burden imposed on them by the number of medical records requested for

RAC audits and the number of claims identified as overpayments that the providers had to

analyze.

State Medicaid RAC audit programs are not designed to be proportionate to the population of

providers; they select claims for audit based on a variety of risk factors, including the assessed

risk of improper payments and avoiding duplication with other audit and review activities.

However, from this data, it appears that certain provider types are inherently at higher risk of

being selected for RAC audits than others due to HCPF’s risk assessment of certain medical

services and claim types being assessed as a higher priority for identifying and recovering

overpayments. HCPF’s risk assessment factors include, but are not limited to, analysis of

historic overpayment frequencies for different medical services, and provider types, and

consideration of CMS publications regarding which provider and claim types are higher risk.

Evaluation of the Colorado Recovery Audit Contractor Program

Duplication of RAC Audits and Other Claims Reviews

Section 2.5.-4-301(3.7)(a)(VIII), C.R.S., required this evaluation to assess the duplication of

“utilization management reviews and approvals” with RAC audit reviews. Federal regulations for

Medicaid RAC programs require that states “coordinate the recovery audit efforts of their RACs

with other auditing entities” and “not audit claims that have already been audited or that are

currently being audited by another entity.” [42 CFR § 455.506(c) and 508(g)]. This is one of

several federal regulations that CMS indicated, in its Final Rule for Medicaid RAC programs, is

intended to minimize the burden placed on providers due to RAC audits.

To determine if the RAC program is coordinating review efforts and not duplicating audits by

other entities, we reviewed policies and procedures for HCPF's program integrity functions that

involve both post-payment and pre-payment claims reviews, and the process HCPF and HMS

use to select claims for RAC audits to ensure they exclude claims that are undergoing other

reviews. We also reviewed a sample of 100 claims that had undergone RAC audits as part of

our procedures outlined in Chapter 2, and interviewed 11 providers participating in recent RAC

audits and four provider associations that chose to provide information for this evaluation.

Finally, we interviewed HCPF staff to gain an understanding of the current processes,

challenges, and procedures that help ensure claims audits are not duplicated.

We found that HCPF has procedures in place to prevent duplicate review of claims between the

RAC and other types of reviews. First, the RAC contract prohibits duplicative reviews, stating:

• All of the following kinds of claims are excluded from this Contract: Claims that have

previously been audited; claims under investigation for criminal or civil recovery actions;

claims currently subject to reviews or audits by other contractors or entities; any claims

identified by HCPF for any reason including, but not limited, to situations where an active

investigation is occurring, and litigation is occurring related to a formal appeal. [1.3.3]

• Contractor shall not review claims that have already been audited or that are currently

being audited by another entity. Excluded claims may include, but are not limited to,

reviews conducted by HCPF’s Program Integrity and Contract Oversight section or other

HCPF staff or contractors; other Colorado state agencies; and federal agencies including

CMS; Federal Medicaid Integrity Contractors (MIC); the Federal Payment Error Rate

Measurement (PERM) project; and the Health and Human Services, Office of the

Inspector General (HHS OIG). [Contract Section 1.4.5]

• In order to minimize the impact on the Provider Community, Contractor shall avoid

situations where Contractor and another entity are working on the same claim or where

fraud investigations or law enforcement actions are being contemplated or are

underway. [Contract Section 1.15.5.1]

In addition, HCPF has an established process to identify claims that should be excluded from

RAC audits. HMS must provide HCPF a list of all claims that HMS intends to include in a

complex or automated audit and HCPF compares the list to information in its database of

excluded providers and claims. This database includes claims, each of which has a unique

Evaluation of the Colorado Recovery Audit Contractor Program

identification number, that are under review by another entity. HCPF notifies HMS if any claim

on its list should be excluded from audit.

Through our review of the sample of 100 claims that had been audited by HMS, we found one

claim involved in an automated RAC review for which the provider filed a request for Informal

Reconsideration because the claim had been reviewed by the HHS OIG and the Medicaid

Fraud Control Unit (MFCU) at the Colorado Office of the Attorney General. HCPF ultimately

retracted the findings for this provider that involved claims that had also been under review by

federal agencies and the MFCU.

We discussed this claim with HCPF, which said that, in some cases, its controls to prevent

duplicative reviews are not 100% effective. HCPF said that, in this case, the MFCU and the

federal agencies that had reviewed these claims did not assign a unique number to each claim.

As a result, when HCPF checked claims HMS planned to audit, there was no matching identifier

in the excluded database. HCPF noted that this is a challenge for all states’ RAC programs,

because there is no national claims number system. One way HCPF attempts to compensate

for this gap in preventing audit duplication is by notifying other agencies, such as the MFCU,

prior to the launch of a new RAC audit. HCPF lists the providers that will be included in the audit

and asks to be notified if any of those providers are under review by the other agency.

Provider Disenrollment due to Administrative Burden

Statute required this evaluation to assess “the impact of audits on provider participation.”

[Sections 25.5-4-301(3.7)(a)(V) and (a)(VII), C.R.S.] To address this requirement, we obtained

data from HCPF on provider disenrollments for since 2018.

We then reviewed information on providers subjected to a RAC audit at any time between

January 2018 and June 2023, and on providers that disenrolled from Medicaid during that

period. According to this information, there were 2,603 providers audited by the RAC and, of

those, 29 voluntarily disenrolled from Medicaid.

HCPF does not maintain any information on the RAC program’s impact on provider participation

in Medicaid and does not track the reasons providers disenroll. To try to determine the reasons

each of these 29 providers left the Medicaid program, we analyzed information attributed to the

provider’s NPIs, which is assigned to each provider by CMS. The NPI number is a unique

identification number for HIPAA-covered health care providers and organizations and is used to

track administrative and financial information about the providers’ operations. The NPI database

does not track disenrollment information specifically, but in some cases, it contains information,

such as state of licensure, current address, and whether the provider is still active, that helped

us determine why a provider disenrolled. In cases where we could not identify a disenrollment

reason from the NPI database, we performed searches of other publicly available records, such

as the HCPF provider directory to identify if the provider is still enrolled as part of a different

practice, and the HHS OIG Excluded Providers list to identify whether the provider is no longer

eligible for participation in federally funded health care programs.

Evaluation of the Colorado Recovery Audit Contractor Program

Based on our reviews, we could find no information on why 9 of the 29 providers disenrolled.

For the other 20 providers, the most common reasons for disenrollment were related to the

following circumstances:

1. Acquisition of the practice that resulted in the practice’s deactivation as a unique

entity.

2. Practice/provider moved out of Colorado.

3. Disenrollment of part of a practice, or the provider is no longer affiliated with a larger

practice.

We also found that 20 of the 29 providers that disenrolled were part of health care practices

where the practice is still enrolled in Colorado Medicaid, but the individual provider (e.g.,

physician) is no longer participating in the Medicaid program

Thus, our analysis did not find any evidence that providers have disenrolled from Colorado

Medicaid due to any aspect of the RAC program, including the administrative burden, the

lookback period, or the contingency fee. However, as indicated above, there were significant

limitations associated with our review due to the absence of any tracking of the causes of

provider disenrollments.

We reviewed provider Medicaid enrollment statistics provided by HCPF from September 2021 –

June 2023 and identified that provider enrollment in Colorado’s’ Medicaid program has

increased consistently since 2021.Total provider enrollment increased from 88,791 in

September 2021 to 107,829 in June 2023.

Policy Consideration for HCPF - Our reviews of the administrative burden of RAC audits on

providers indicate that the Department of Health Care Policy & Financing appears to have

effective processes to prevent duplicative audits of providers, but that there is the potential for a

greater burden on a small number of provider types. Although we did not find any evidence that

providers disenrolled from Colorado Medicaid due to RAC audits, HCPF may want to establish

methods to track in more detail why providers voluntarily disenroll from Medicaid.

Response

Department of Health Care Policy & Financing

The Department has tracking tools in place for the distribution of audits, however, provider

disenrollment is not handled by the RAC program. This would require updating provider

participation, enrollment requirements, and provider-submitted information in the context of

disenrollment. While we are in agreement that these details would be extremely helpful to

maintain and to build reporting and trending around, we will need to review the feasibility of

the resources needed within the Provider Relations group, the changes to responsibilities for

the Department, the claims system vendor, and for provider services at the Department,

along with any other areas affected.

Evaluation of the Colorado Recovery Audit Contractor Program

There is no documented correlation between the RAC program and provider disenrollments,

however, any tracking for the Department would be helpful for all areas of policy, programs,

or reporting.

Addendum: Although the analysis we conducted of the reasons providers left the Colorado

Medicaid program indicated no correlation to RAC audits, the analysis was very limited

because there is no systematic tracking of the reasons providers disenroll, by either HCPF

or any other entity.

Evaluation of the Colorado Recovery Audit Contractor Program

Policy Consideration G – Cost-Benefit Analysis of the RAC

Program

Statute required us to “consider … how the state should evaluate the cost-benefit analysis to

determine whether the … [RAC] program is striking the right balance between accountability

and access to care.” [Section 25.5-4-301(b)(II)(D), C.R.S.] To address this issue, we first asked

HCPF if it had conducted a cost-benefit analysis of the program. HCPF stated that it performs

an informal cost-benefit analysis each time it submits a budget request to increase FTE for the

RAC program; in essence, the decision to request additional resources for the RAC program

indicates that HCPF has concluded that the added cost is outweighed by the benefits the

program produces. Aside from routine analyses associated with any budget request, HCPF has

not attempted to prepare a cost-benefit analysis of the RAC program or to otherwise quantify

the accountability provided through the RAC program or the risk that audits could drive

providers out of Medicaid and, thereby, reduce access to care.

On the surface, Colorado’s RAC program appears to be very cost beneficial, as shown in the

simplistic analysis in Exhibit 25.

Exhibit 25: Quantified Costs and Benefits of the RAC Program – Fiscal Year 2023

Quantified Costs Quantified Benefits

HCPF RAC program costs $405,000

Recoveries $47,000,000

RAC Contractor Fee paid $8,965,000

Office of Administrative Courts

cost

$233,000

Total Quantified Cost $9,603,000 Total Quantified Recoveries $47,000,000

Source: Information provided by HCPF on RAC program costs and RAC fee. Information provided by the

Colorado Department of Personnel & Administration on Office of Administrative Courts cost.

1 – HCPF RAC program costs include wages and benefits paid in FY23. This amount is shared 50/50 with the

federal government. Colorado’s share of the RAC program costs was approximately $202,608.

However, the analysis above does not account for costs and benefits that are not readily

quantifiable. To develop a comprehensive cost-benefit analysis, monetary values would need to

be assigned to all aspects of the program. For example, HCPF’s cost for employing staff for the

RAC program and for paying HMS are readily apparent, but it is much more difficult to put a

dollar value on the burden experienced by providers involved in audits. Similarly, the value of

funds recovered as a result of RAC audits is known, but the extent to which the audits lead to

more efficiency in Medicaid billing and payments is neither tracked nor quantified.

Because a comprehensive cost-benefit analysis has not been conducted on the RAC program,

decision-making about the program relies on analyses and estimates that are oversimplified.

Notably, HCPF views the RAC program as cost-free to the State because recoveries each year

far exceed the readily quantified costs, as shown in Exhibit 25 above. However, this

Evaluation of the Colorado Recovery Audit Contractor Program

perspective may lead to over-reliance on the program as a control measure instead of up-front

controls and processes to prevent overpayments to begin with.

A comprehensive cost-benefit analysis would also need to factor in other variables, including the

following.

Settlement of appeals. HCPF sometimes settles with providers that appeal RAC findings even if

the finding was accurate. Settlements result in the State collecting less in repayment than the

total identified as overpaid. Settlements generally reduce the cost to providers of repaying

funds, but also create costs for the provider to engage in the appeals and settlement processes.

Settlements also create costs for the State to direct resources to consider the appealed issues

and to develop and negotiate settlement offers, in addition to the reduced amount repaid. A

cost-benefit analysis should consider the costs associated with the exit conference, Informal

Reconsideration, and appeals processes, which might include the potential cost of increased

administrative burdens on providers. Identifying the costs associated with the provider dispute

processes would also allow HCPF to better assess if the RAC program is properly balancing

accountability and access to care. HCPF stated that many providers are bypassing the exit

conference and Informal Reconsideration processes. A cost analysis may help HCPF identify

the financial impact of the increased number of appeals caused by circumventing these

preliminary dispute resolution methods. If the appeals process is too expensive and time

consuming, some providers might choose to absorb the cost of the wrongly denied claim rather

than appeal it. This could limit access to care for patients, as providers become less likely to

submit claims for complex or expensive procedures if they are concerned about the cost of the

appeals process. By tracking the frequency and cost of each dispute resolution option, HCPF

can pinpoint areas for improvement and optimize the program's cost-effectiveness.

Efficiencies gained as a result of audits. In addition to post-payment reviews, such as RAC

audits, that identify Medicaid overpayments for recovery, HCPF has pre-payment controls

designed to prevent improper payments from occurring. RAC audits sometimes identify issues

that can be corrected though added or strengthened pre-payment controls to prevent improper

payments up front, thereby reducing the need for after-the-fact reviews. Similarly, audits can

identify conflicts or a lack of clarity in policies and guidance, which can lead to improper billing.

A cost-benefit analysis should consider the benefits gained by reducing the number of improper

billings and payments by calculating the cost of implementing stronger pre-payment controls

based on identified audit findings, versus the potential future cost savings from preventing those

errors up front.

Working with HMS to update policy and guidance sources (e.g., provider billing manuals and

provider bulletins) to provide clear, unambiguous direction for preparing and submitting claims

would help providers bill more accurately and reduce the incidence of overpayments.

Colorado Senate Bill 18-266, which directed HCPF to implement cost-saving strategies for the

Medicaid program, provided HCPF with the authority to perform preadmission reviews of

hospital claims via an evidence-based hospital review program. Currently HCPF is not

exercising its statutory authority to perform these preadmission reviews.

Evaluation of the Colorado Recovery Audit Contractor Program

The FAQ published by CMS in December 2011 reflects the expectation that states will use RAC

programs not only to recover improper payments, but also to improve payment accuracy from

the front end. The FAQ states: “CMS anticipates working with States to ensure that any program

vulnerabilities that are identified by Medicaid RACs are addressed through policy changes,

MMIS edits, or other alternatives available to the States.” Further, HCPF’s RAC contract

specifically requires HMS to notify HCPF of areas it finds in RAC audits where Medicaid policies

or systems require changes.

Policy Consideration – The Department of Health Care Policy & Financing (HCPF) should

assess its existing processes and revise them, if needed, to ensure that it places a priority on

translating what is learned in RAC audits into improved front-end payment controls. This should,

over time, reduce the number of improper claims initially submitted and paid, but does require

HCPF to devote staff resources from other units within the Department to implement. However,

preventing an improper payment is, ultimately, much more cost effective than recovering one,

for both the state and providers.

Response

Department of Health Care Policy & Financing

The Department agrees with this policy consideration. While we have policies, reporting, and

documentation in place to ensure the policy area is aware of the audits, approves of them,

and has the information and recommendation on how to best put in front-end edits, we are

happy to revise the processes and make a more robust process for the future. We have

already implemented some of these recommendations and we will continue to build both

internal and external communications, tracking and reporting to maintain oversight of what

RAC audits found, the trends, and the recommendations for policy staff at the Department.

Evaluation of the Colorado Recovery Audit Contractor Program

Policy Consideration H – Payment Model and Percentage

Under federal regulations, states must compensate their RAC contractors on a contingency

basis for overpayments identified and recovered. Federal regulations allow states to set their

own rates, but only provide matching funds for a contingency fee rate of up to the maximum

Medicare RAC rate (12.5% or 17.5% for recoveries of claims for durable medical equipment)

unless a state is approved a higher rate through a State Plan Amendment (SPA) in accordance

with 42 CFR § 455.510(b)(5). Federal regulations also require states to offer their RACs

incentives for finding provider underpayments. [ 42 CFR § 455.510(c)(2)].

A variety of factors affect a state’s ability to attract and retain a qualified RAC. Perhaps the most

significant of these is the amount of overpayments the contractor can identify for recovery.

Because of the contingency fee payment structure, the compensation paid to a RAC varies with

amounts recovered. According to a U.S. Government Accountability Office (GAO) study of the

Medicaid RAC program, issued in June 2023, there were 21 states that had not implemented

RAC programs as of federal Fiscal Year 2021. This was due, at least in part, to the states’

assessments that RAC audits would not generate sufficient recoveries for a contract to be

lucrative enough to support the business model and risk associated with a RAC contract.

Further, according to HCPF, there can be significant financial risk for a RAC contractor when it

first contracts with a state. RAC contractors must be willing and able to cover up-front

implementation costs to provide RAC services, such as expenses to develop and implement

state-specific data systems. RAC contractors are only paid after they have conducted audits

that identified overpayments, and are paid on a contingency basis, meaning there is no

minimum guaranteed compensation.

Although the ability or inability to secure a RAC contractor may be due primarily to the potential

for recoveries, and not the contingency fee offered, this discussion focuses on the contingency

fee due to the statutory direction for this evaluation. Specifically, the statute required us to

examine “the level of payments sufficient to maintain a RAC contractor” and “other states’ …

financing mechanisms” for RAC contractors. [Sections 25.5-4-301(3.7)(a)(I), (b)(I), (b)(II)(A),

and (b)(II)(E), C.R.S.].

HCPF’s 18% Contingency Fee for Identifying Overpayments

Overall, we could not definitively conclude on whether HCPF’s flat 18% contingency fee is the

minimum rate necessary to retain a RAC contractor in Colorado or whether HCPF is statutorily

prohibited from paying a RAC contractor to identify underpayments, as discussed in the

following sections.

HCPF has an approved SPA to pay a maximum contingency fee to the RAC of 18% of

overpayments recovered; under the RAC contract, HCPF is paying a guaranteed 18% fee to

HMS. However, HCPF could not provide a documented rationale for establishing the 18%

guaranteed fee, which is the highest among states with RAC programs. For the period of July 1,

2011, through July 1, 2021 (when the current RAC contract was executed), we reviewed

Evaluation of the Colorado Recovery Audit Contractor Program

HCPF’s solicitations for RAC services, its executed RAC contracts, and its approved SPAs and

developed a timeline of these events, as illustrated in Exhibit 26. The exhibit shows that the

contingency fee paid to the RAC contractor has increased over time, with the current 18% rate

being implemented in 2020. In developing this timeline, we noted several concerns:

• HCPF began paying the 18% fee in 2020, in the midst of an existing contract with HMS.

Because HCPF told us that the higher rate was needed to retain RAC services, we

expected that the higher rate would be offered when HCPF was procuring a new RAC

contract (most recently in 2021). The increase in contingency fee was communicated via

Contract Transmittal #5 on October 15, 2020. The use of contract transmittals to adjust

contract elements is discussed in Finding 3.

• HCPF’s rationale for implementing the 18% rate in 2020 is based on several factors,

including its experience and bidder comments in failed procurements of a RAC from

2013-2016. HCPF told us that, around mid to late 2020, HMS had implemented a new

methodology to help identify fraudulent Medicaid payments and began conducting more

complicated audits than in the past. HCPF increased the rate to 18% to compensate

HMS for these activities. However, HCPF could not provide any documentation that it

evaluated the need for those services, or their value to the state, as a basis for

increasing the fee. Further, HCPF did not amend the RAC contract to state that the RAC

contractor is required to provide these expanded services or to increase the contingency

fee. Nor has HCPF evaluated the impact that a lower contingency fee, or a tiered

structure, might have on costs and recovery rates. In addition, the rationale does not

explain why HCPF changed the structure of the fee from a tiered maximum to a

guaranteed flat rate. Until this change, the contract offered a base fee of 11% for

automated audits and 14.5% for complex audits, with another 2.5% being added if the

contractor met performance goals. HCPF now pays the flat fee of 18% for both

automated and complex audits regardless of performance level.

Evaluation of the Colorado Recovery Audit Contractor Program

Exhibit 26: Colorado RAC Vendor Contract Timeline

Time Frame RAC Contract Situation Contingency Fee

July 1, 2011 to

June 30, 2013

HCPF contracted with CGI Federal.

11% maximum for automated audits;

11% maximum for complex audits

July 1, 2013 to

June 30, 2016

Program suspended. HCPF issued

several RFPs for RAC services without

success. CMS approved suspension of

the program for this period.

HCPF initially offered maximum fees

of 7% for automated audits and 10%

for complex audits. In a later RFP, it

increased these to 11% and 14.5%

respectively.

2015

HCPF requested and was approved by

CMS to pay a maximum 18% RAC fee.

Issued new RFP for RAC services.

13.5% maximum for automated

audits; 17% maximum for complex

audits

July 1, 2016 to

June 30, 2021

HCPF contracted with HMS.

13.5% maximum for automated

audits; 17% maximum for complex

audits

October 15, 2020

HCPF changed the fee structure and

amount, effective for automated audits

that began on or after October 15,

2020.

18% for automated and complex

audits

March 12, 2021 HCPF issued an RFP for RAC services.

Shall not exceed the maximum

percentage rate of 18% of recovered

overpayments.

July 1, 2021 to

present

HCPF executes a new contract with

HMS.

18% for automated and complex

audits

Source: BerryDunn analysis of RFPs, contracts, and SPAs.

1 – The 2011 contract was for a 1-year term with an option to extend annually for 4 years. HCPF exercised this

option through June 30, 2013.

2 – The 2016 contract was for a 1-year term with an option to extend annually for 5 years. HCPF exercised this

option through June 30, 2021.

3 - The 2021 contract was for a 1-year term with an option to extend annually for 5 years. To date, HCPF has

exercised this option through June 30, 2024.

4 – In the periods HCPF paid a tiered rate, it had a base rate for automated audits and a base rate for complex

audits, with added fees being available for both types if the contractor met or exceeded performance goals. The

maximum rates cited in the exhibit combine the base rates with the performance rates. HCPF told us it has

historically paid the maximums because contractors consistently met their goals.

5 – The 18% is paid for both automated and complex audits and is a guaranteed rate, rather than a maximum

available based on the contractor’s performance.

We collected information on the contingency fees in the other 17 states that had RAC programs

as of December 2023 and found two states (besides Colorado) had CMS approval to pay their

RACs contingency fees above the federal maximum of 12.5% to identify overpayments. Fees

above the federal maximum may indicate that the federal maximum was viewed as insufficient

in these states to retain qualified RACs. At the same time, 15 states pay fees to identify

overpayments that are at or below 12.5%, meaning they have not seen the need for a

Evaluation of the Colorado Recovery Audit Contractor Program

contingency fee above the federal maximum to retain a RAC contractor. In 10 of these 15

states, RAC services are provided by HMS, the same vendor that contracts with HCPF.

The rates each state pays its RAC to identify overpayments are shown in Exhibit 27.

Exhibit 27: Medicaid RAC Vendor Contingency Fees by State

State

RAC Vendor Fee for

Overpayments

RAC Vendor

Colorado

18%

Health Management Systems, Inc.

Hawaii

17.5%

Myers and Stauffer, LLC

West Virginia

Above the federal maximum.

Exact fee not provided.

Health Management Systems, Inc.

Arizona

California

Connecticut

Illinois

Nevada

New Mexico

North Carolina

South Carolina Federal maximum

Health Management Systems, Inc.

Georgia

Minnesota Federal maximum

Myers and Stauffer, LLC

New York

Federal maximum

Performant Financial Corporation

Mississippi Federal maximum

LaunchPoint Ventures dba

Discovery Health Partners

Indiana Federal maximum

Family & Social Services

Administration Audit Service

Texas

9 to 12.5% depending on the type

of review (automated or complex) Health Management Systems, Inc.

Oregon

12%

Health Management Systems, Inc.

Source: BerryDunn analysis of Medicaid RAC Vendor contingency fees by other states

1 – The federal maximum is 12.5% for all claims except those for durable medical equipment, which is 17.5%.

2 – We were unable to obtain the exact fee paid by West Virginia but it has a State Plan Amendment effective

January 1, 2022 that allows it to use a RAC contingency fee that exceeds the federal maximum of 12.5%.

HCPF stated that Colorado’s RAC program is a more complex, intensive, and robust program,

and the length of audit and the number and quality of resources required for audits are in

excess of what most states require for their RAC programs. In addition, HCPF stated that more

services and staffing, plus a lengthy administrative appeals process requires a higher fee.

Further, according to HCPF, Colorado has a higher appeals rate due to the formal appeal

structure. Since the contract requires the RAC contractor to fulfill duties for appeals, this is

reflected in the higher contingency fee. CMS rules state that the “potential length of a State’s

administrative appeals process may have an impact on the methodology or structure of the

payment agreement between a State and a Medicaid RAC.”

Over the last seven years, HCPF reported that the Colorado RAC program has recovered

approximately $77.6 million in improper payments made to providers. Our research found that

some states’ RAC programs have a narrow focus, auditing only a few service types, and some

Evaluation of the Colorado Recovery Audit Contractor Program

100

also conduct only automated audits. For example, some states’ RAC programs review only a

subset of Medicaid claims – such as dental claims– and some states conduct only automated

reviews. As discussed in Chapter 4, we were unable to collect information from other states on

the overpayment amounts identified through their RAC audits.

Compensating for Underpayments Identified

Federal regulations require state Medicaid RAC programs to include the identification of

underpayments to providers. Specifically, 42 CFR § 455.506 (a) states that “Medicaid RACs will

review claims submitted by providers … to identify underpayments” and, according to 42 CFR

455.510(c), “States must determine the fee paid to a Medicaid RAC to identify underpayments.

States must adequately incentivize the detection of underpayments.” However, states may be

exempted from federal requirements that are not allowed in state law. HCPF’s approved SPA

exempts HCPF from the requirement to pay the RAC to identify provider underpayments. Based

on our evaluation, HCPF is adhering to the SPA and does not provide any compensation to the

RAC to identify underpayments. None of the RAC contracts has included payment to the RAC

to identify provider underpayments. However, paying the RAC to identify underpayments so

they can be corrected is a means by which HCPF could offer provider support and help offset

the burden of audits.

For comparison purposes, we researched how other states compensate their RACs to identify

underpayments to providers. We were unable to collect information from five states but Exhibit

28 shows that at least 12 other states pay their RACs to audit for provider underpayments.

Exhibit 28: Medicaid RAC Fees to Identify Underpayments

STATE

FEE

California

10.5%

Colorado

Connecticut

12.5%

Georgia

Hourly Fee

Hawaii

Hourly Fee

Illinois

12.5%

Indiana

12.5%

Minnesota

12.5%

New Mexico

12.5%

New York

5.25%

North Carolina

$30 Flat Fee

Oregon

Flat Fee

South Carolina

11.5%

HCPF requested an exception from CMS for paying its RAC to identify underpayments based

on state statute (Section 25.5-4-301(3)(b), C.R.S), but without any legal analysis, such as

guidance from the Attorney General’s Office, on whether this is prohibited by statute. A plain

reading of the statute does not clearly preclude compensating a contractor to identify improper

Evaluation of the Colorado Recovery Audit Contractor Program

101

underpayments to providers. Specifically, Section 25.5-4-301(3)(b), C.R.S., states: “The state

department is authorized to engage the services of a qualified agent … for the purpose of

conducting a review or audit of a provider to assist in determining whether there has been an

overpayment to a provider and the amount of that overpayment. … The state department is

further authorized to enter into a contract with a qualified agent for the purpose of conducting a

review or an audit of a provider that provides that the compensation of the contracting agent

shall be contingent and based upon a percentage of the amount of the recovery collected from

the provider.” Although the statute provides specific authority to HCPF to execute a

contingency-based contract to identify overpayments, it does not provide guidance with respect

to whether HCPF can pay a contractor to identify underpayments.

Impact of the Payment Model

According to information HCPF provided, the contingency fee paid to HMS is 100% covered by

federal funds; therefore, the level of the contingency fee has no direct impact on state funds.

Therefore, if the State is paying a vendor contingency fee that is higher than necessary this

would reduce the net amount recovered from overpayments and subsequently returned to the

federal government but would not affect state funds. If HCPF instituted a tiered rate, it would

likely result in some savings to the federal government. For example, if HCPF had $50 million of

overpayments recovered and used a 14% rate for automated reviews and maintained the 18%

rate for complex reviews, we estimate the RAC payment would have been about $600,000, or

7%, lower than the $9 million it would have paid under the current flat rate of 18%. This

represents a potential savings to the federal government.

With respect to not compensating the RAC to identify underpayments, if such compensation is

allowable under state law, HCPF is missing opportunities to both improve the accuracy of

Medicaid payments overall, by identifying and correcting underpayments as well as

overpayments, and to improve relationships with providers, some of whom indicated in their

responses to our provider survey that they view the RAC program as punitive rather than

educational or geared toward improvement.

Policy Consideration for HCPF - The Department of Health Care Policy & Financing (HCPF)

should consider evaluating the current RAC contingency fee amount and structure for identifying

overpayments, including reviewing fees in other states, evaluating its needed services, and

lowering the fee when feasible to ensure the compensation is reasonable but not excessive.

HCPF should also consider seeking legal guidance, such as through the Attorney General’s

Office, on its authority to pay a contractor to find underpayments and, if legally allowable,

establish a payment in accordance with federal regulations.

Response

Department of Health Care Policy & Financing

The Department partially agrees with this recommendation. While we can review the national

trends of RAC contingency-based contracts, our fees must reflect the contractual processes

and the audit work associated with the HMS contract. Other state agreements are not fully

parallel to the Colorado Medicaid RAC program. Further, the federal government (CMS)

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pays the fees associated with the RAC program, not the state. CMS approves the

appropriateness of the payment, as well as the RAC audit programs, thereby signing off on

the appropriateness of the fee they are willing to pay for those programs. We are already

working to make a national “workgroup” of RAC contract managers and program staff to help

build those relationships and sharing of information. Through this process, we hope to share

best practices, audit program features, outcomes, and fees. Regarding overpayments, HCPF

will work through the adoption of policy changes in accordance with the evaluation

recommendations, including learnings from other states that hold providers more

accountable to properly complying with the RAC program. This will include self-auditing -

which is a CMS provider guideline. That would give providers the opportunity to self-identify

underpayments as well as overpayments. HCPF will also pursue the opportunity to identify

underpayments more effectively, in addition to the above self-audit process.

Evaluation of the Colorado Recovery Audit Contractor Program

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Chapter 4: How Colorado’s Recovery Audit

Contractor Program Compares with Those in

Other States

Although the federal requirement for state Medicaid agencies to establish Recovery Audit

Contractor (RAC) programs generally applies to all states, states may request that the Centers

for Medicare & Medicaid Services (CMS) exempt them from the requirement. As of December

2023, the following 18 states had active programs in place.

Exhibit 29: States with RAC Programs as of December 2023

# RAC State

Arizona 10 Mississippi

California 11 Nevada

Colorado 12 New Mexico

Connecticut 13 New York

Georgia 14 North Carolina

Hawaii 15 Oregon

Illinois 16 South Carolina

Indiana 17 Texas

Minnesota 18 West Virginia

Source: BerryDunn research on state Medicaid RAC

programs.

Federal regulations allow states considerable flexibility in designing their RAC programs. Some

program elements, such as the lookback period, must receive approval from CMS for the state

to deviate from federal standards. Other program elements can be tailored by the state without

CMS approval, such as the types of services to be included in audited claims (e.g., dental,

mental health).

Statute required this evaluation to collect a variety of information on RAC programs in other

states. Some information on other states is discussed in Chapters 2 and 3 of the report, such as

the payment structure, contingency fee rates, and lookback period other states have established

for their RAC programs. This chapter includes the limited statistical information we were able to

collect from other states and detailed exhibits illustrating the scope and outcomes of RAC audits

in Colorado over the last five years.

Statistics from Other States

To gather information from other states with RAC programs, we reviewed State Plan

Amendments, reviewed information available on the websites of each of the Medicaid agencies

for the 17 other state RAC programs; reviewed information on the websites of each of the RAC

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organizations that are under contract with states; and requested information from a subset of

eight state programs, including information related to their RAC program design, policies and

procedures, and the statistics referenced above. We also interviewed five of these eight states

for a better understanding of their programs.

In selecting the subset of eight states to contact as part of this evaluation, we considered the

RAC vendor in each state, the lookback periods, and the contingency payment structure. The

selection process was discussed with the Department of Health Care Policy & Financing

(HCPF) prior to reaching out to the states individually.

We initially contacted each of the eight states by email to explain the reason for the contact,

describe the data we sought, and provide the statutory requirements underlying the requests.

About half of the states responded to our initial emails, but for the other states, we sent multiple

follow-up emails and/or called to try to speak to someone directly to solicit the highest number of

responses. Ultimately, we were able to interview five states and obtain very limited statistics

from one of the five. The following is a list of the states we contacted and the results of our

efforts:

• South Carolina – initial email, interviewed, limited data provided.

• Georgia – initial email, interviewed, no data provided.

• Oregon – initial email, follow-up email, interviewed, no data provided.

• New York – initial email to multiple contacts, interviewed, follow-up email sent to

interview contact requesting statistics, no response received.

• Texas – initial email to multiple contacts, called, interviewed, no data provided.

• New Mexico – initial email, follow-up email, called, no response received.

• North Carolina – initial email, follow-up email, emailed Health Management Systems,

Inc. (HMS) contact, no response received.

• West Virginia – initial email, follow-up email, called, no response received.

Initially, we requested all of the statistics the statute asked for, including the proportion and

dollar value of claims subject to audit, the proportion of claims that resulted in RAC recoveries,

and the number of claims appealed in the past five years. The states that responded to this

request all indicated they could not or would not provide this information to us. We then reduced

the request to include any period of time less than five years but got the same response. Finally,

we asked if states could provide any of the statistics we were seeking, including high-level

summary statistics, such as those they may compile for their own reporting. Only one state,

South Carolina, agreed to provide limited statistics related to their RAC program. Other states

told us they would not provide the data due to concerns over the sensitivity of the data and/or

the time and resources it would take to collect the information. In addition, some states never

replied to our emails or calls. Since there were several limitations to the data provided by South

Carolina, it was not comparable to the data provided by Colorado. A key difference between

South Carolina and Colorado is that South Carolina had only two approved audit scenarios and

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conducted only complex audits; Colorado has over 30 approved audit scenarios and conducts

both automated and complex audits. Also, South Carolina started conducting RAC audits in

2022 and paused them in January 2023, so the data provided was for only one year.

Colorado RAC Statistics

We analyzed data from HCPF to quantify RAC audits conducted in Colorado in Fiscal Years

2018 through 2023. Colorado state Fiscal Years run from July 1 through June 30 each year.

The primary goal was to compile statistics from Colorado that could be compared with the same

data from other states. Although we were unable to obtain comparable data from other states,

the exhibits in this section provide the results of our analysis of Colorado data.

Statute specifically directed this evaluation to examine the following statistics for Colorado’s

RAC program, and, to the extent feasible, disaggregate them [Section 25.5-4-301(3.7)(a)(IV),

C.R.S]. This section presents our analysis for each of these required data points:

1. Statistic #1 – the number, proportion, and value of claims audited, relative to total

potential claims subject to the RAC program.

2. Statistic #2 – the number, proportion, and value of recoupments.

3. Statistic #3 – the number, proportion, value, and result of contested audit findings with

their disposition status.

4. Statistic # 4 – the number, proportion, and value of findings that were discussed in exit

conferences.

5. Statistic #5 – the number and proportion of providers impacted by claim audits.

6. Statistic # 6 – the number and proportion of providers that contested audit findings.

According to HCPF, it began implementation of a new claims system in 2017, which has made it

time consuming and costly to retrieve data on claims paid before 2014. As a result, HCPF told

us it did not include any claims paid before 2014 in RAC audits once it resumed the RAC

program in mid-2016 (after having suspended the program, with CMS approval, between July

2013 and June 2016). This means that, until 2021, the lookback periods were less than seven

years because, in each earlier year, the audits only included claims that were paid as far back

as 2014. HCPF also told us that it could not reasonably provide us with claims data prior to

2014; it provided us data for claims paid from January 2014 through March 2023. Due to this

limitation, in the exhibits in this chapter, data for Fiscal Years 2018, 2019, and 2020 reflect less

than the full seven-year lookback period.

Evaluation of the Colorado Recovery Audit Contractor Program

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Statistic #1 - Number, Proportion, and Value of Claims Audited in the RAC Program

Exhibit 30 provides an analysis of the number and proportion of paid claims that were audited

by Fiscal Year. For each Fiscal Year, the “Total Number of Claims Paid” column is the number

of claims that were paid within the lookback period for that year. For example, for Fiscal Year

2022, there were approximately 128 million Medicaid claims totaling approximately $30.9 billion

that had been paid within the seven-year lookback period (i.e., back to 2015) that could have

been selected for a RAC audit.

Exhibit 30: Claims Paid and Audited by Fiscal Year

Total # of

Claims Paid

Subject to

Audit (in

millions)

Total # and

Percentage of Claims

Audited

Total Dollar

Value of Claims

Paid Subject to

Audit

Total Value (in

millions) and

Percentage of

Value of Claims

Audited

2018 88.2 1,128 <0.0001% $17,860,046,861 $1.4 0.01%

2019 98.0 5,042 <0.0001% $21,024,714,261 $6.5 0.03%

2020 112.6 14,085 0.0001% $25,402,926,200 $15.5 0.06%

2021 121.2 44,190 0.0004% $28,096,351,461 $67.8 0.24%

2022 128.0 36,571 0.0003% $30,899,945,704 $70.0 0.23%

2023 136.4 381,493 0.0003% $34,562,437,183 $131.2 0.38%

Source: BerryDunn analysis of claims subject to audit and claims audited data provided by HCPF.

1 – Due to the change in HCPF’s claims system, for Fiscal Years 2018 through 2020, the lookback period was

less than 7 years. For FY 2018, it was 4 years; for FY 2019, it was 5 years; and for FY 2020, it was 6 years. This

accounts for the lower figures for number of claims paid and dollar value of claims paid than in later years.

Evaluation of the Colorado Recovery Audit Contractor Program

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Statistic #2 - Number, Proportion, and Value of Audited Claims Identified as Having

Overpayments

There are inherent differences between automated and complex audits in the proportion of

audited claims that are identified as having overpayments. Automated audits typically identify

overpayments in the majority of claims audited because they are essentially queries of all paid

claims in the lookback period to find obvious improper payments. An example of a payment that

is obviously improper is one made on a claim where the provider billed for providing a certain

service multiple times to one patient in one day, when Medicaid policies only allow a single such

service for one patient in one day. Complex audits have a lower proportion of identified

overpayments, due in large part to the fact that clinical judgment may have been involved in

both the provider’s decision about the services it needed to provide and the HMS auditor’s

determination of whether the claim is fully documented and justified. These differences are

illustrated in Exhibit 31, which includes a breakdown of all claims from automated and complex

audits that had claims identified as overpayments.

Exhibit 31: Claims Audited with Overpayments Identified by Fiscal Year

# of Automated

Audit Claims

# of Automated

Audit Claims

with Identified

Overpayments

Percentage of

Automated

Audit Claims

with Identified

Overpayments

# of Complex

Audit Claims

# of Complex

Audit Claims

with Identified

Overpayments

Percentage of

Complex Audit

Claims with

Identified

Overpayments

2018

147

147 100% 981 340 34.7%

2019

835

833

99.8%

4,207

1,681

40.0%

2020

2,286

2,280 99.7% 11,799 3,590 30.4%

2021

20,336 20,290 99.8% 23,854 9,831 41.2%

2022 19,946 19,901 99.8% 16,625 6,131 36.9%

2023

339,934

339,883

100%

41,559

19,310

46.5%

Source: BerryDunn analysis of claims subject to audit and claims audited data provided by HCPF.

1 – Due to the change in HCPF’s claims system, for Fiscal Years 2018 through 2020, the lookback period was less than 7 years.

For FY 2018, it was 4 years; for FY 2019, it was 5 years; and for FY 2020, it was 6 years. This accounts for the lower figures for

number of claims audited than in later years.

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Statistic #3 - Number, Proportion, Value, and Result of RAC Audit Findings Contested by

Providers

Providers have two methods to contest RAC audit findings – Informal Reconsiderations and

appeals – and have the option to use either method, or both. See Chapter 1 for more detail on

how appeals and Informal Reconsiderations are processed by HMS and HCPF. Exhibit 32

shows the number and proportion of claims with findings (i.e., identified overpayments) that

were contested through an Informal Reconsideration or appeal. The exhibit separates data for

automated and complex audits.

Exhibit 32: Number and Proportion of Contested Claims by Fiscal Year

Automated Audits Complex Audits

# of Claims

with

Findings

Claims with IR

Requested

Claims

Appealed

# of Claims

with

Findings

Claims with IR

Requested

Claims Appealed

# % # % # % # %

2018 147 22 14.9 0 0 340 229 67.4 157 46.2

2019 833 73 8.8 59 7.1 1,681 1,078 64.1 565 33.6

2020 2,280 86 3.8 35 1.5 3,590 2,807 78.2 1,383 38.5

2021 20,290 2,637 13.0 1,982 9.8 9,831 6,725 68.4 3,963 40.3

2022 19,901 5,966 30.0 2,667 13.4 6,131 3,868 63.1 1,791 29.2

2023 339,883 73,578 21.6 31,259

9.2 19,310 9,649 50.0 3,222 16.7

Source: BerryDunn analysis of audited claims data provided by HCPF.

1 – Due to the change in HCPF’s claims system, for Fiscal Years 2018 through 2020, the lookback period was less than 7

years. For FY 2018, it was 4 years; for FY 2019, it was 5 years; and for FY 2020, it was 6 years. This accounts for the lower

figures for number of claims with findings than in later years.

Evaluation of the Colorado Recovery Audit Contractor Program

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Exhibit 33 includes a breakdown of all automated and complex audits with audited claims for

which the provider requested an Informal Reconsideration or filed an appeal and the outcomes.

Providers can request either, or both, and are not required to request an Informal

Reconsideration before proceeding to appeal. As such, we show the Informal Reconsiderations

separate from appeals. Appeals that are not settled are either still open, were withdrawn, or

were disregarded. Disregarded appeals occur when HCPF determines that an appeal will not

need to be fully processed. For example, HCPF will disregard appeals if it is going to implement

a global settlement or rescind all claims in specific situations.

Exhibit 33: Informal Reconsideration and Appeal Information by RAC Audit Type and Fiscal Year

Automated Audits

Informal Reconsiderations

Appeals

# of Claims

with IR

Requested

# of Claims

with Finding

Upheld

% Upheld

# of Claims

Appealed

# of

Claims

Settled

% Settled

2018

100%

N/A

2019

98.6%

33.9%

2020

93.0%

2021

2,637

2,591

98.3%

1,982

2022

5,966

5,921

99.2%

2,667

1,668

62.5%

2023

73,578

33,798

45.9%

31,259

Total

82,362

42,484

51.6%

36,002

1,688

4.7%

Complex Audits

Informal Reconsiderations

Appeals

# of Claims

with IR

Requested

# of Claims

with Finding

Upheld

% Upheld

# of Claims

Appealed

# of

Claims

Settled

% Settled

2018

229

207

90.4%

157

112

71.3%

2019

1,078

909

84.3%

565

135

23.9%

2020

2,807

2,143

76.3%

1,383

573

41.4%

2021

6,725

5,463

81.2%

3,963

726

18.3%

2022

3,868

3,118

80.6%

1,791

0.2%

2023

9,649

7,956

82.5%

3,222

0.0%

Total

24,355

19,796

81.3%

11,081

1,549

14%

Source: BerryDunn analysis of audited claims data provided by HCPF

1 – IR: Informal Reconsideration.

2 – Due to the change in HCPF’s claims system, for Fiscal Years 2018 through 2020, the lookback period was less

than 7 years. For FY 2018, it was 4 years; for FY 2019, it was 5 years; and for FY 2020, it was 6 years. This

accounts for the lower figures for number of claims paid and dollar value of claims paid than in later years.

Evaluation of the Colorado Recovery Audit Contractor Program

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Statistic # 4 – Number, Proportion, and Value of Findings Discussed in Exit Conferences

Under statute, providers may request a meeting, referred to as an exit conference, to discuss

the results once a RAC audit is completed. Exit conferences are only offered for complex audits,

and only occur upon provider request. The data shows that during our review period, providers

requested exit conferences for about 30% of claims audited.

Exhibit 34 includes information about audited claims where an exit conference was requested.

Exhibit 34: Total Claims With Exit Conferences Held by Fiscal Year

# of Complex

Claims

Audited

# of Claims

with Exit

Conferences

Percentage

of Claims

with Exit

Conferences

Dollar Value

of Claims

Audited (in

millions)

Dollar Value

of Claims

with Exit

Conferences

(in millions)

Percentage

of Value of

Claims with

Exit

Conferences

2018

981 227 23.1% $1,389,146 $240,088 17.3%

2019

4,207 799 19.0% $6,418,482 $918,798 14.3%

2020

11,799 3,349 28.4% $15,273,674 $5,163,620 33.8%

2021

23,854 7,149 30.0% $49,403,643 $14,643,856 29.6%

2022

16,625 5,911 35.6% $33,616,911 $11,536,477 34.3%

2023

41,559 11,700 28.2% $96,736,335 $27,886,569 28.8%

Total

99,025

29,135 29.4% $202,838,192

$60,389,409 29.8%

Source: BerryDunn analysis of audited claims data provided by HCPF.

1 – Due to the change in HCPF’s claims system, for Fiscal Years 2018 through 2020, the lookback period was

less than 7 years. For FY 2018, it was 4 years; for FY 2019, it was 5 years; and for FY 2020, it was 6 years. This

accounts for the lower figures for number of claims and dollar value of claims audited than in later years.

Statistics #1 through #3 - Disaggregated

Statute asked for the RAC program statistics to be disaggregated, to the extent possible, by

dates of service, audit finding date, and provider type. Audited claims are not tracked by the

date of the service, but rather by the date of payment. However, the payment date can serve as

an indicator of the time that can elapse between the date a service is provided and the date the

associated claim is audited.

Exhibits 35 through 40 provide information on the proportion of claims audited each Fiscal

Year, between 2018 and 2023, and approximately how much time passed between the payment

and the audit. For example, in Exhibit 35, which shows the RAC audits conducted in Fiscal

Year 2018, there were 43 audited claims that had been paid in 2015 (see green highlighted row

and column). Since providers have a year after providing a service to bill Medicaid (this year

being referred to as the Timely Filing Period), claims paid in 2015 include services provided as

long as a year before the payment. In other words, the 43 audited claims could have included

services that occurred as early as January 2014, if the provider waited until the end of the

Timely Filing Period to submit or adjust the claim. Thus, some of the services that had claims

paid in 2015 could have been provided as long as four years before the 2018 audit.

Evaluation of the Colorado Recovery Audit Contractor Program

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Exhibit 35 shows the number and dollar value of claims audited and eligible for audit during

Fiscal Year 2018; 0.002% of eligible claims were audited, amounting to 0.01% of the total dollar

value of claims.

Exhibit 35: Total of Individual Claims and Dollar Value Subject to 2018 RAC Audit by Fiscal Year

Years

Subject to

Audit in FY

2018

Total

Number of

Claims

Subject to

Audit (in

millions)

Total Dollar

Value of Claims

Subject to

Audit

Claims Audited By Method Dollar Value Audited By Method

Automated Complex Total Automated Complex Total

2017 13.9 $3,608,430,375

- 44

$6,196

2016 13.2 $2,624,101,527

- 47

$5,457

2015 16.4 $3,254,606,393 42 1 43 $4,249 $6,707 $10,956

2014 14.7 $2,838,089,304

980 994

$1,296 $1,382,439 $1,383,736

Total 58.3 $12,325,227,599 147 981 1,128 $17,199 $1,389,146 $1,406,345

Source: BerryDunn analysis of claims subject to audit and claims audited data provided by HCPF

1 – Due to the change in HCPF’s claims system, for Fiscal Year 2018 the lookback period was 4 years.

Exhibit 36 shows the number and dollar value of claims audited and eligible for audit during

Fiscal Year 2019. Based on the data in the exhibit, 0.007% of eligible claims were audited,

amounting to 0.038% of the total dollar value of claims.

Exhibit 36: Total of Individual Claims and Dollar Value Subject to 2019 RAC Audit by Fiscal Year

Years

Subject to

Audit in FY

2019

Number

of Claims

Subject

to Audit

(millions)

Dollar Value of

Claims Subject

to Audit

Claims Audited By Method Dollar Value Audited By Method

Automated Complex Total Automated Complex Total

2018 18 $4,660,060,331 68 - 68 $6,696 $- $6,696

2017 13.9 $3,608,430,375 200 - 200 $20,173 $- $20,173

2016 13.2 $2,624,101,527 273 444 717 $34,083 $765,654 $799,737

2015 16.4 $3,254,606,393 199 2,698 2,897 $21,778 $4,136,693 $4,158,472

2014 14.7 $2,838,089,304 95 1,065 1,160 $9,101 $1,516,134 $1,525,236

Total 76.2 $16,985,287,930 835 4,207 5,042 $91,832 $6,418,482 $6,510,314

Source: BerryDunn analysis of claims subject to audit and claims audited data provided by HCPF

1 – Due to the change in HCPF’s claims system, for Fiscal Year 2019 the lookback period was 5 years.

Exhibit 37 shows the number and dollar value of claims audited and eligible for audit during

Fiscal Year 2020. Based on the data in the exhibit, 0.01% of eligible claims were audited,

amounting to 0.07% of the total dollar value of claims.

Evaluation of the Colorado Recovery Audit Contractor Program

112

Exhibit 37: Total of Individual Claims and Dollar Value Subject to 2020 RAC Audit by Fiscal Year

Years

Subject to

Audit in

FY 2020

Number of

Claims

Subject to

Audit

(millions)

Dollar Value of

Claims Subject

to Audit

Claims Audited By Method Dollar Value Audited By Method

Automated Complex Total Automated Complex Total

2019 24.7 $6,218,993,927

53 218 271 $7,329 $331,682 $339,011

2018 18 $4,660,060,331

254 705 959 $34,205 $946,797 $981,002

2017 13.9 $3,608,430,375

479 1,963 2,442 $70,527 $2,657,129 $2,727,656

2016 13.2 $2,624,101,527

735 8,889 9,624 $90,781 $11,276,065 $11,366,846

2015 16.4 $3,254,606,393

605 23 628 $56,570 $62,001 $118,572

2014 14.7 $2,838,089,304

160 1 161 $21,898

$21,898

Total 101 23,204,281,857

2,286 11,799

14,085 $281,310 $15,273,674 $15,554,985

Source: BerryDunn analysis of claims subject to audit and claims audited data provided by HCPF

1 – Due to the change in HCPF’s claims system, for Fiscal Year 2020 the lookback period was 6 years.

Exhibit 38 shows the number and dollar value of claims audited and eligible for audit during

Fiscal Year 2021. Based on the data in the exhibit, 0.04% of eligible claims were audited,

amounting to 0.24% of the total dollar value of claims.

Exhibit 38: Total of Individual Claims and Dollar Value Subject to 2021 RAC Audit by Fiscal Year

Years

Subject

to Audit

in FY

2021

Number of

Claims

Subject to

Audit

(millions)

Dollar Value of

Claims Subject to

Audit

Claims Audited By Method Dollar Value Audited By Method

Automated Complex Total Automated Complex Total

2021

21.6

$5,641,683,547

4 $ 3,457

$ 3,457

2020 20.2 $4,892,069,604 1,417 3,581 4,998 $3,881,200 $7,075,728 $10,956,928

2019 24.7 $6,218,993,927

3,806 8,289 12,095 $7,499,651 $21,395,122 $28,894,773

2018 18 $4,660,060,331 3,045 3,289 6,334 $4,234,196 $5,868,331 $10,102,527

2017 13.9 $3,608,430,375

3,135 4,690 7,825 $1,234,046 $8,824,776 $10,058,822

2016 13.2 $2,624,101,527

5,296 3,989 9,285 $1,114,448 $6,209,515 $7,323,963

2015 16.4 $3,254,606,393

3,433 16 3,449 $423,355 $30,172 $453,527

2014 14.7 $2,838,089,304

200

200 $45,625 $- $45,625

Total 121.2 28,096,351,461

20,336 23,854 44,190 $18,435,979 $49,403,643

$67,839,622

Source: BerryDunn analysis of claims subject to audit and claims audited data provided by HCPF.

1 - The total number and dollar value of claims subject to audit only includes the Fiscal Years within the seven-year lookback

period. Claim amounts and dollar values in red are not included in the totals.

Exhibit 39 shows the number and dollar value of claims audited and eligible for audit during

Fiscal Year 2022. Based on the data in the exhibit, 0.03% of eligible claims were audited,

amounting to 0.23% of the total dollar value of claims.

Evaluation of the Colorado Recovery Audit Contractor Program 113

Exhibit 39: Total of Individual Claims and Dollar Value Subject to 2022 RAC Audit by Fiscal Year

Years

Subject

to Audit

in FY

2022

Number of

Claims

Subject to

Audit

(millions)

Dollar Value of

Claims Subject to

Audit

Claims Audited By Method Dollar Value Audited By Method

Automated Complex Total Automated Complex Total

2022

24.7

$6,917,097,872

13 - 13 $8,444 $- $8,444

2021 21.6 $5,641,683,547 1,528 9,566 11,094 $455,107 $20,803,534 $21,258,641

2020 20.2 $4,892,069,604 4,458 5,663 10,121 $9,577,369 $9,862,365 $19,439,734

2019 24.7 $6,218,993,927 3,761 864 4,625 $14,336,696 $1,853,222 $16,189,917

2018 18 $4,660,060,331 3,510 58 3,568 $7,259,113 $141,083 $7,400,196

2017 13.9 $3,608,430,375 3,022 136 3,158 $2,959,538 $269,685 $3,229,223

2016 13.2 $2,624,101,527 2,646 334 2,980 $1,474,008 $680,359 $2,154,366

2015 16.4 $3,254,606,393 1,005 4 1,009 $349,185 $6,664 $355,849

2014

14.7

$2,838,089,304

3 - 3 $6,615 $- $6,615

Total 128 $30,899,945,704 19,946 16,625 36,571 $36,426,075 $33,616,911 $70,042,986

Source: BerryDunn analysis of claims subject to audit and claims audited data provided by HCPF

1 - The total number and dollar value of claims subject to audit only includes the Fiscal Years within the seven-year lookback

period. Claim amounts and dollar values in red are not included in the totals.

2 - Providers for three claims paid in June 2014 were sent letters notifying them of the claim audit in July 2022, which is outside of

the seven-year lookback period.

Exhibit 40 shows the number and dollar value of claims audited and eligible for audit during the

2023 RAC Fiscal Year. Based on the data in the exhibit, 0.28% of eligible claims were audited,

amounting to 0.38% of the total dollar value of claims.

Exhibit 40: Total of Individual Claims and Dollar Value Subject to 2023 RAC Audit by Fiscal Year

Years

Subject

to Audit

in FY

2023

Number of

Claims

Subject to

Audit

(millions)

Dollar Value of

Claims Subject

to Audit

Claims Audited By Method Dollar Value Audited By Method

Automated Complex Total Automated Complex Total

2023

1.4

$465,176,589.45

220 - 220 $262,522 $- $262,522

2022 24.7 $6,917,097,872 7,042 20,930 27,972 $4,103,000 $47,963,626 $52,066,627

2021 21.6 $5,641,683,547 13,150 16,855 30,005 $2,229,704 $38,386,085 $40,615,789

2020 20.2 $4,892,069,604 31,008 673 31,681 $6,316,392 $2,548,157 $8,864,550

2019 24.7 $6,218,993,927 43,929 1,072 45,001 $4,387,700 $2,934,205 $7,321,905

2018 18 $4,660,060,331 127,250 824 128,074 $8,500,679 $2,171,016 $10,671,695

2017 13.9 $3,608,430,375 102,348 713 103,061 $6,800,935 $1,581,332 $8,382,266

2016 13.2 $2,624,101,527 14,987 492 15,479 $1,907,724 $1,151,913 $3,059,638

Total 136.4 $34,562,437,183 339,934 41,559 381,493 $34,508,656 $96,736,335 $131,244,992

Source: BerryDunn analysis of claims subject to audit and claims audited data provided by HCPF

1 - The total number and dollar value of claims subject to audit only includes the Fiscal Years within the seven-year lookback

period. Claim amounts and dollar values in red are not included in the totals.

2 - The FY 2023 data includes January – June 2023.

Evaluation of the Colorado Recovery Audit Contractor Program

114

Statistic # 5 - Number and Proportion of Providers Affected by RAC Audits

Exhibits 41 through 44 include information on the number and types of providers that

underwent RAC audits between 2018 and 2023.

Exhibit 41 quantifies the number of unique providers by provider NPI per Fiscal Year that had

claims that were audited. This data is disaggregated by automated and complex audit types.

The provider count is unique within each RAC Fiscal Year; however, the same providers may be

included in multiple Fiscal Year’s and within both audit types (automated and complex) for each

Fiscal Year.

Exhibit 41: Total of Providers Audited by Fiscal Year

# of Providers With

Automated Audit Claims

# of Providers With

Complex Audit

Claims

Total # of Providers Audited

2018 17 39 56

2019 145 136 281

2020 185 344 526

2021 866 204 1,068

2022 472 146 569

2023 1,934 607 2,316

Source: BerryDunn analysis of audited claims data provided by HCPF.

1 – Due to the change in HCPF’s claims system, for Fiscal Years 2018 through 2020, the lookback period was less

than 7 years. For FY 2018, it was 4 years; for FY 2019, it was 5 years; and for FY 2020, it was 6 years. This

accounts for the lower number of providers audited than in later years.

Exhibits 42 and 43 show the same information as in Exhibit 41 but disaggregate the data by

provider type. As these exhibits show, 71.7% of automated audit claims audited in Fiscal Years

2018 through 2023 pertained to Clinical Practitioners, representing the largest share by provider

type. However, Clinical Practitioners accounted for only 17.9% of automated audit claims by

dollar value. Independent Laboratories accounted for the largest proportion of automated audit

claims by dollar value with 59.3%, while they represented only 4.7% of automated audit claims.

This indicates that the Clinical Practitioner claims were relatively low in dollar value while

Independent Laboratories claims were relatively high in dollar value.

Evaluation of the Colorado Recovery Audit Contractor Program

115

Exhibit 42: Number of Automated Audit Claims by Provider Type and RAC Fiscal Year

Provider Type

2018

2019

2020

2021

2022

2023

Total

Percent

Ambulatory Surgical Center

195

361

564

0.15%

Audiologist

0.00%

Case Manager

0.00%

Clinic – Dental

0.01%

Clinic – Practitioner

134

757

751

4,714

2,514

265,931

274,801

71.7%

Community Clinic

356

0.09%

Community Mental Health

Center

12 25 37 0.01%

Family Planning Clinic

0.00%

FQHC

358

384

0.10%

HCBS

3,146

0.82%

Home Health

605

0.16%

Hospital – General

1,021

26,462

27,487

7.17%

Hospital – Mental

0.00%

Independent Laboratory

3,930

11,460

2,742

18,132

4.73%

Non-Physician Practitioner –

Group

23 59 90 90 11,188 11,450 2.99%

Nurse Practitioner

0.00%

Nursing Facility

0.01%

Optometrist

0.01%

Osteopath

0.01%

Pharmacy

489

1,265

806

594

3,154

0.82%

Physician

105

530

801

0.21%

Podiatrist

0.01%

Psychiatric Residential

Treatment Facility

29 29 0.01%

Rehabilitation Agency

0.00%

Evaluation of the Colorado Recovery Audit Contractor Program

116

Provider Type

2018

2019

2020

2021

2022

2023

Total

Percent

Residential Child Care Facility

0.00%

Rural Health Clinic

0.01%

Speech Therapist

0.00%

Substance Use Disorder –

Clinics

4 4 0.00%

Supply

910

10,163

3,761

27,362

42,196

11.00%

X-Ray Facility

0.01%

Total

147

835

2,286

20,336

19,946

339,934

383,484

Source: BerryDunn analysis of audited claims data provided by HCPF.

1 – Due to the change in HCPF’s claims system, for Fiscal Years 2018 through 2020, the lookback period was less than 7 years. For FY 2018, it was 4 years;

for FY 2019, it was 5 years; and for FY 2020, it was 6 years. This accounts for the lower number of providers audited than in later years.

Exhibit 43: Dollar Value of Automated Audit Claims by Provider Type and Fiscal Year

Provider Type

2018

2019

2020

2021

2022

2023

Total

Percent

Ambulatory Surgical Center

$1,600

$2,326

$55,664

$133,260

$192,850

0.21%

Audiologist

$13,306

0.01%

Case Manager

$933

0.00%

Clinic – Dental

$10,278

0.01%

Clinic – Practitioner

$15,971

$83,202

$82,553

$396,811

$188,957

$15,288,616

$16,056,110

17.9%

Community Clinic

$89,322

0.10%

Community Mental Health

Center

$820 $2,992 $3,812 0.00%

Family Planning Clinic

$188

0.00%

FQHC

$1,580

$163,175

$164,755

0.18%

HCBS

$563,273

0.63%

Home Health

$159,351

0.18%

Hospital – General

$561

$408,233

$10,955,423

$11,364,217

12.66%

Hospital – Mental

$307,268

0.34%

Evaluation of the Colorado Recovery Audit Contractor Program

117

Provider Type

2018

2019

2020

2021

2022

2023

Total

Percent

Independent Laboratory

$16,829,730

$34,924,527

$1,507,467

$53,261,724

59.3%

Non-Physician Practitioner –

Group

$2,126 $6,111 $7,702 $5,345 $987,111 $1,008,396 1.12%

Nurse Practitioner

$370

$395

$185

$950

0.00%

Nursing Facility

$8,376

$62,517

$70,892

0.08%

Optometrist

$1,060

$119

$1,272

$2,450

0.00%

Osteopath

$1,228

$1,412

$106

$2,746

0.00%

Pharmacy

$59,795

$83,827

$142,640

$53,848

$340,110

0.38%

Physician

$3,920

$5,040

$10,115

$3,424

$23,747

$46,245

0.05%

Podiatrist

$983

$671

$37,172

$38,826

0.04%

Psychiatric Residential

Treatment Facility

$2,322 $2,322 0.00%

Rehabilitation Agency

$962

0.00%

Residential Child Care Facility

$921

0.00%

Rural Health Clinic

$951

$824

$1,775

0.00%

Speech Therapist

$1,128

0.00%

Substance Use Disorder –

Clinics

$440 $440 0.00%

Supply

$123,512

$1,103,057

$687,388

$4,132,919

$6,046,875

6.74%

X-Ray Facility

$8,627

0.01%

Total

$17,199

$91,832

$281,310

$18,435,979

$36,426,075

$34,508,656

$89,761,052

Source: BerryDunn analysis of audited claims data provided by HCPF.

1 – Due to the change in HCPF’s claims system, for Fiscal Years 2018 through 2020, the lookback period was less than 7 years. For FY 2018, it was 4 years;

for FY 2019, it was 5 years; and for FY 2020, it was 6 years. This accounts for the lower number of providers audited than in later years.

Exhibits 44 and 45 include the number and dollar value of complex audit claims for all provider types. As shown in Exhibit 44, over

96% of all claims that underwent a complex audit during Fiscal Years 2018 through 2023 pertained to General Hospitals,

representing the largest share by provider type. As shown in Exhibit 44, General Hospitals also accounted for almost 95% of

complex audit claims by dollar value.

Evaluation of the Colorado Recovery Audit Contractor Program

118

Exhibit 44: Number of Complex Audit Claims by Provider Type and Fiscal Year

Provider Type

2018

2019

2020

2021

2022

2023

Total

Percent

Clinic – Dental

0.00%

Clinic – Practitioner

215

254

0.26%

Community Mental Health Center

0.05%

Dialysis Center

0.01%

Family Planning Clinic

0.00%

FQHC

0.03%

HCBS

0.00%

Hospice

125

2,519

2,644

2.67%

Hospital – General

972

4,202

11,759

23,846

16,497

38,284

95,560

96.5%

Hospital – Mental

0.00%

Indian Health Services – FQHC

0.01%

Non-Physician Practitioner – Group

0.03%

Pharmacy

175

0.18%

Supply

255

0.26%

Total

981

4,207

11,799

23,854

16,625

41,559

99,025

Source: BerryDunn analysis of audited claims data provided by HCPF.

1 – Due to the change in HCPF’s claims system, for State Fiscal Years 2018 through 2020, the lookback period was less than 7 years. For SFY 2018, it was 4

years; for SFY 2019, it was 5 years; and for SFY 2020, it was 6 years. This accounts for the lower number of providers audited than in later years.

Evaluation of the Colorado Recovery Audit Contractor Program

119

Exhibit 45: Dollar Value of Complex Audit Claims by Provider Type and Fiscal Year

Provider Type

2018

2019

2020

2021

2022

2023

Total

Percent

Clinic – Dental

$13,542

0.01%

Clinic – Practitioner

$3,271

$138,001

$438,798

$580,071

0.29%

Community Mental Health

Center

$49,528 $49,528 0.02%

Dialysis Center

$2,029

0.00%

Family Planning Clinic

$1,196

0.00%

FQHC

$26,191

$4,866

$7,965

$10,230

$49,252

0.02%

HCBS

$10,414

0.01%

Hospice

$242,118

$9,450,586

$9,692,704

4.78%

Hospital – General

$1,385,875

$6,392,291

$15,114,332

$49,358,881

$33,367,909

$86,472,376

$192,091,665

94.70%

Hospital – Mental

Indian Health Services –

FQHC

$2,933 $36,797 $6,884 $8,031 $54,645 0.03%

Non-Physician Practitioner

– Group

$30,550 $30,550 0.02%

Pharmacy

$77,938

0.04%

Supply

$184,658

0.09%

Total

$1,389,146

$6,418,482

$15,273,674

$49,403,643

$33,616,911

$96,736,335

$202,838,192

Source: BerryDunn analysis of audited claims data provided by HCPF

1 - The three “Hospital – Mental” complex audit claims in the data provided did not include claim values.

2 – Due to the change in HCPF’s claims system, for Fiscal Years 2018 through 2020, the lookback period was less than 7 years. For FY 2018, it was 4 years;

for FY 2019, it was 5 years; and for FY 2020, it was 6 years. This accounts for the lower number of providers audited than in later years.

Evaluation of the Colorado Recovery Audit Contractor Program

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Statistic # 6 - Number and Proportion of Providers That Contested Audit Findings

Exhibit 46 quantifies the number of unique providers (based on provider NPI) per Fiscal Year

that contested audit findings through either a request for Informal Reconsideration or an appeal.

These data are disaggregated by automated and complex audit types. The provider count is

unique within each Fiscal Year; however, the same providers may be included in multiple Fiscal

Years.

Exhibit 46: Providers Requesting Informal Reconsiderations or Filing Appeals

SFY

# of Providers That

Requested an IR -

Automated Audits

# of Providers That

Requested an IR -

Complex Audits

# of Providers That

Appealed -

Automated Audits

# of Providers That

Appealed -

Complex Audits

2018 1 18 0 10

2019 13 48 6 21

2020 16 76 1 31

2021 49 75 5 32

2022 53 64 16 35

2023 213 128 43 42

Source: BerryDunn analysis of audited claims data provided by HCPF.

Evaluation of the Colorado Recovery Audit Contractor Program

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Other State RAC Staff Qualification Requirements

Statute required that our evaluation include “An assessment of requirements imposed by other

states in regard to overall Recovery Audit Contractor staffing and qualifications of reviewers to

ensure alignment of specialty and subspecialty expertise for conducting initial audits and final

determinations.” [Section 25.5-4.301(3.7)(a)(III)(A), C.R.S.] We asked our subset of eight states

for information about the qualifications they require of their RAC staff. Only two states – Georgia

and Oregon – were willing to provide such information. Both states had requirements similar to

HCPF’s – that the RAC employ certified coders and licensed nurses to perform RAC audits as

well as licensed physicians with appropriate specialties (such as osteopathy or psychology),

when needed.

We also researched RAC programs online but could not find information on the requirements

imposed by other states in terms of the qualifications of RAC staff. For three RAC vendors, we

found information online about the kinds of staff they employ, as shown below. However, we

could not determine if all the staff types listed were required by the state’s Medicaid agency.

• Hawaii. The Hawaii RAC Program website states that its RAC, Myers and Stauffer,

employs

certified accountants, Certified Fraud Examiners, and medical coders, as well

as licensed pharmacists, clinicians, and other specialists to perform RAC audits.

• Minnesota. The webpage for the Minnesota RAC Program states its RAC, Myers and

Stauffer, employs experienced and certified coders, registered nurses, specialized

therapy professionals, and licensed physicians to perform RAC audits.

• Mississippi. The Mississippi RAC Program website states that its RAC - LaunchPoint

Ventures dba Discovery Health Partners - employs experienced physicians, certified

coders, statisticians, and credentialed clinical reviewers to perform RAC audits.

Evaluation of the Colorado Recovery Audit Contractor Program

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Appendix A – Survey of Providers

We developed a survey of Colorado Medicaid providers to get their perspectives on the RAC

program. The survey contained 28 questions with a mix of multiple choice, satisfaction ranking,

and open response. The survey respondents were given the option to provide a free response

after each multiple choice and satisfaction ranking question. There were also open response

questions at the end of the survey should respondents want to provide more information or

share their opinions. The first four questions were used to obtain general information about the

respondent, such as the provider type and location. These questions were asked to assess

whether concerns and comments were limited to certain provider types or locations of the state.

The information was also used to assess the level of satisfaction among different provider types

and areas of the state.

To reach as many of the roughly 1,627,702 providers enrolled in Medicaid as of October 2023

as possible, we used several methods to notify providers of the survey and provide them a

survey link, as follows:

• We sent the survey link by email to 4,162 providers that had undergone RAC audits

since 2018. From the emails sent, about 3,100 apparently reached the provider, while

about 1,000 were electronically rejected by the addressee’s email system. Further, 996

were opened and 2,105 were not.

• HCPF provided the survey link in a RAC webinar for providers in November 2023.

• HCPF included the survey link in emails sent to 624 providers who are signed up to

receive RAC program updates.

In analyzing the results of the survey, we assigned the following number of points for each

scaled question:

• Strongly disagree/strongly dissatisfied = 1

• Disagree/dissatisfied = 2

• Neutral = 3

• Agree/satisfied = 4

• Strongly agree/very satisfied = 5

This weighting was then multiplied by the number of responses for each question to calculate a

weighted average. Based on this method, we considered a weighted average of less than three

as an indicator of dissatisfaction, while a weighted average of three more indicating satisfaction.

In total, 115 providers responded to the survey, representing an 18.4% response rate overall,

although some did not respond to all questions. The responses to the scaled questions are

shown in the following graphs along with the number of responses to each question.

Evaluation of the Colorado Recovery Audit Contractor Program

123

Survey Question No. 1: What is your licensed provided type?

Exhibit A-1: Results of Survey Question 1

Survey Question No. 2: In what city is your primary practice located? If your practice is located

outside of Colorado, please note the state. 

Exhibit A-2: Results of Survey Question 2

0 5 10 15 20 25 30 35

Physician

Hospital – General

Home & Community Based Services (HCBS)

Home Health

Clinic – Practitioner

Optometrist

Other (please specify)

Medical Equipment and Supply

Home Care

Nurse Practitioner

Audiologist

Hospice

Independent Laboratory

Non-Physician Practitioner

Pharmacy

Podiatrist

Speech Therapist

0 5 10 15 20 25 30 35 40

Denver

Aurora

Colorado Springs

Lakewood

Pueblo

Longmont

Wheat Ridge

Arvada

Englewood

Evans

Grand Junction

Evaluation of the Colorado Recovery Audit Contractor Program

124

Survey Question No. 3: How would you classify your organization?

Exhibit A-3: Results of Survey Question 3

Survey Question No. 4: What is your position or job title at your organization?

Exhibit A-4: Results of Survey Question 4

0 5 10 15 20 25 30 35

Group office-based practice

Home health agency

Solo office-based practice

Hospital

Critical Access Hospital

Federally Qualified Health Center

Hospice

Rural Health Clinic

Rehabilitation center

0 2 4 6 8 10 12 14 16 18

Business Owner

Administrator

Director of Revenue Cycle

CEO

CFO

Physician

Practice Manager

Office Manager

President

Optometrist

Billing

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Survey Question No. 5: Which type(s) of Colorado Medicaid RAC audit has your organization

participated in?

Exhibit A-5: Results of Survey Question 5

Survey Question No. 6: How would you rate your overall satisfaction with the Medicaid RAC

process? Weighted average of 2.25

Exhibit A-6: Results of Survey Question 6

Survey Question No. 7: How would you rate the clarity and transparency of the Colorado RAC

program's guidelines and regulations?

Exhibit A-7: Results of Survey Question 7

Complex Automated Both None

0 5 10 15 20 25 30 35 40 45 50

Very Disatisfied

Disatisfied

Neutral

Satisfied

Very Satisfied

0 10 20 30 40 50 60

Very Disatisfied

Dissatisfied

Neutral

Satisfied

Very Satisfied

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Survey Question No. 8: Did the Colorado Medicaid RAC (HMS) provide you with adequate

education, training, and resources to inform you regarding the auditing and appeals process?

Weighted average of 2.58

Exhibit A-8: Results of Survey Question 8

Survey Question No. 9: Were the audit selection criteria and methodologies that required your

organization’s participation in an audit clearly explained to you? Weighted average of 2.65

Exhibit A-9: Results of Survey Question 9

Survey Question No. 10: How would you rate the ease of responding to a RAC audit document

request? Please consider the clarity of the request and the process for providing the requested

information. Weighted average of 2.66

Exhibit A-10: Results of Survey Question 10

0 5 10 15 20 25 30 35

Strongly Disagree

Disagree

Neutral

Agree

Strongly Agree

0 5 10 15 20 25 30 35

Strongly Disagree

Disagree

Neutral

Agree

Strongly Agree

0 5 10 15 20 25 30 35 40

Very Disatisfied

Disatisfied

Neutral

Satisfied

Very Satisfied

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Survey Question No. 11: Has your practice filed an Informal Dispute Resolution request for the

Medicaid RAC audit?

Exhibit A-11: Results of Survey Question 11

Survey Question No. 12: How satisfied are you with the transparency and fairness of the

Colorado Medicaid RAC IDR process if you disputed audit findings?

Exhibit A-12: Results of Survey Question 12

Survey Question No. 13: Has your practice filed an appeal for the Colorado Medicaid RAC

audit?

Exhibit A-13: Results of Survey Question 13

Yes No

0 5 10 15 20 25 30 35 40 45

Very Disatisfied

Disatisfied

Neutral

Satisfied

Very Satisfied

100

Yes No

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Survey Question No. 14: Do you feel that the Colorado Medicaid RAC appeal process was

transparent, fair and user friendly?

Exhibit A-14: Results of Survey Question 14

Survey Question No. 15: What is your understanding for the number of days to send records in

response to a complex case review by the Colorado Medicaid RAC?

Exhibit A-15: Results of Survey Question 15

Survey Question No. 16: What is your understanding for the number of days to file an appeal?

Exhibit A-16: Results of Survey Question 16

0 10 20 30 40 50 60 70

Very Disatisfied

Disatisfied

Neutral

Satisfied

Very Satisfied

30 Days 45 Days 15 Days 60 Days 0 Days 90 Days

30 Days 60 Days 10 Days 90 Days 15 Days

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Survey Question No. 17: How would you rate the clarity of the Colorado RAC audit results and

demand letters? Weighted average of 2.61

Exhibit A-17: Results of Survey Question 17

Survey Question No. 18: How would you rate the timeliness of RAC audit record request and

the timeliness of an audit result and/or recovery demand?

Exhibit A-18: Results of Survey Question 18

Survey Question No. 19: Have you ever had a complex case audit opened by the Colorado

Medicaid RAC that involved claims that were previously audited?

Exhibit A-19: Results of Survey Question 19

0 5 10 15 20 25 30 35

Very Disatisfied

Disatisfied

Neutral

Satisfied

Very Satisfied

0 5 10 15 20 25 30 35 40 45 50

Very Disatisfied

Disatisfied

Neutral

Satisfied

Very Satisfied

100

120

Yes No

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Survey Question No. 20: Have you had a complex case audit by the Colorado Medicaid RAC

that involved claims for patients with dual eligibility for Medicare/Medicaid?

Exhibit A-20: Results of Survey Question 20

Survey Question No. 21: Do you feel that the Colorado RAC program fosters collaboration and

communication between providers and auditors during the audit process?

Exhibit A-21: Results of Survey Question 21

Survey Question No. 22: In your opinion, how well does the Colorado RAC program balance

its role of detecting improper payments with supporting providers in compliance efforts?

Exhibit1 A-22: Results of Survey Question 22

100

120

Yes No

0 5 10 15 20 25 30 35 40 45

Strongly Disagree

Disagree

Neutral

Agree

Strongly Agree

0 5 10 15 20 25 30 35 40 45

Very Disatisfied

Disatisfied

Neutral

Satisfied

Very Satisfied

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Survey Question No. 23: How would you describe the administrative commitment required by

your organization to respond to Colorado RAC audits?

Exhibit A-23: Results of Survey Question 23

Survey Question No. 24: The current lookback period is seven years. Does your organization

find the lookback period poses any specific challenges? 70.53% Yes vs. 29.47% No

Exhibit A-224: Results of Survey Question 24

Survey Question No. 25: Does your organization currently have a means or method to quantify

the administrative time and cost savings that would result from a possible change in the

lookback period?

Exhibit A-25: Results of Survey Question 25

0 5 10 15 20 25 30 35 40

Very Disatisfied

Disatisfied

Neutral

Satisfied

Very Satisfied

Yes No

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In interpreting the results of the survey, we considered the potential for response bias, which is

the possibility that recipients that chose to respond were motivated by a negative experience

and that recipients with a neutral or satisfactory experience would not be as motivated to

respond. We also took into account the low response rate. As such, we used the results only in

conjunction with other analyses and reviews, as described throughout the report. We did not

rely solely on survey results to conclude on any of the evaluation objectives.

We also reviewed the results of a provider survey HCPF conducted, though a third-party

vendor, in June 2023. HCPF’s survey was sent to 2,889 unique email addresses that

represented hospitals, individual providers, and small group providers. A total of 148 providers

responded, for an overall response rate of 5%. Not all providers responded to all questions. We

noted that two of the questions in HCPF’s survey were similar to questions in our survey.

Although the questions were not identical between the two surveys, we provide the questions

and responses, which show that the responses to HCPF reflected a more positive sentiment

than the responses we received.

HCPF Survey Question 1: If you believe the Colorado RAC Audit Process is acceptable,

please indicate so, or if you would like to provide additional information that would provide

feedback to enhance the Colorado RAC Program, please proceed to the following questions.

Total Responses: 148

Yes, I believe the process is working adequately and have no feedback – 72%.

I have feedback to provide and have answered the questions below – 28%.

Survey Question No. 6: How would you rate your overall satisfaction with the Medicaid RAC

process? Total Responses: 115

“very satisfied” or “satisfied” – 20%

“neutral” – 22%

“very dissatisfied” or “dissatisfied” – 58%

HCPF Survey Question 14: Do you find the information regarding Informal Reconsideration

and formal appeal rights for providers published by the Department and the Colorado RAC

vendor helpful? Total Responses: 126

Yes - 41.3%

No - 2.7%

NA/I have not accessed the Department or Colorado RAC vendor websites – 46.0%

BerryDunn Survey Question 8: Did the Colorado Medicaid RAC (HMS) provide you with

adequate education, training, and resources to inform you regarding the auditing and appeals

process? Total Responses: 114

Strongly Agree or Agree – 28.9%

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Neutral – 26.3%

Disagree or Strongly Disagree – 45.8