Healthcare News & Insights

Congress demands CMS reforms RAC program

If the Medicare Recovery Audit Contractor (RAC) program is a thorn in your hospital’s side, there’s good news. Congress is demanding the RAC program be reformed.

176869786On Feb. 10th, Congress sent Kathleen Sebelius, Health and Human Services (HHS) secretary, a letter signed by 111 members of the U.S. House of Representatives, expressing their concerns regarding the RAC program, and the problems facing Medicare beneficiaries and providers of Medicare inpatient services, hospitals and health systems.

The letter emphasized the paramount importance of providing Medicare beneficiaries with the services they deserve, but that there are operational problems within the RAC program that prevent that and nothing has been done about it by the Centers for Medicare & Medicaid Services (CMS).

Problems abound

RACs are tasked with the job of evaluating the accuracy of Medicare payments to providers. While this is a good idea to keep providers and facilities honest, the program unfortunately doesn’t keep the auditors honest.

First off, RACs are allowed to audit medical records and claims three years after services have been provided.

And secondly, RACs are paid a commission on the dollar amount of the claims they deny, which ranges between 9% and 12.5%. This gives auditors a big fat incentive to deny claims, even if the claims are correct.

The letter from Congress mentioned a November 2012 Office of Inspector General report that found 72% of hospital Medicare Part A appeals that have reached the third level of the Medicare appeals process are overturned in favor of the hospital. This means the RACs are denying claims that are correct just to garner a bigger paycheck.

To get these denied claims overturned, hospitals have to spend valuable time and resources to appeal them in order to get reimbursed for the Medicare services they provided.  This has placed an huge and unfair administrative burden on hospitals.

The letter also highlighted how Medicare beneficiaries suffer when their inpatient stay is inaccurately denied by a RAC, noting, “They pay higher out-of-pocket expenses under Medicare Part B and are sometimes held financially responsible for the post-acute care services they require. This is not the way the Medicare program was intended to operate.”

Problem’s existed for years

This isn’t a new problem. So why is Congress finally taking action?

HHS’s Office of Medicare Hearings and Appeals (OMHA) recently announced that it was suspending assignment of claim appeals to an Administrative Law Judge (ALJ) for at least the next two years. It said the halt was required due to “a dramatic increase in the number of decisions being appealed to OMHA.” According to the notice, OMHA revealed that from 2010 to 2013, its claim and entitlement workload increased by 184% and it’s accumulated a backlog of 460,000 claims for services and entitlement in just under two years.

What’s even more shocking is that OMHA only has 65 ALJs, who already have 375,000 claims to handle at this time.

In the letter from Congress, it was strongly recommended that CMS dedicate additional resources to help resolve OMHA’s backlog issue in order for the claims appeal process to resume.

Congress also said CMS needs to implement reforms to ensure that auditors are charged with identifying real claim coding medical documentation errors, as well as provide a more transparent process through which providers can be informed of errors so as to avoid them in the future.

And finally, the letter stated that “an alternative arrangement with auditors should be considered by Congress and CMS in order to ensure RACS are not improperly incentivized to deny claims for profit and to ensure they focus on prevention of errors.” The suggestion for a different payment system was to pay RACs a retainer, as many other government contractors are paid.

The letter ended with Congress urging CMS to take immediate action before further problems with the RAC auditing program arise.

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