Medicare touts audit plan's success as doctors decry "bounty hunters"

Washington -- Federal officials are singing the praises of a Medicare auditing program, heightening the chances that the government will expand it to other states. But physicians have described the initiative as an aggressive form of bounty hunting.

The Centers for Medicare & Medicaid Services in November issued its first progress report on Medicare's recovery audit contractors, or RACs. The three-year pilot project uses private auditing firms to comb through physician, hospital, nursing home and other claims to find instances in which the government paid too much.

Since it launched in the spring of 2005, the program has identified about $290 million in overpayments. Only about $18 million was related to physician services, which are in a group that also includes ambulance and laboratory services, according to CMS. Medicare already has recouped more than $60 million overall and has initiated steps to collect the rest.

CMS and at least one lawmaker said the report was strong evidence that the experiment is cost effective and working as planned.

"Congress owes it to the taxpayers to ensure that their hard-earned dollars are spent appropriately," said House Ways and Means Committee Chair Bill Thomas (R, Calif.). "For years, we have suspected that Medicare has too many overpayments. ... This demonstration program has already exposed several hundred millions of dollars in overpayments, and we've only seen the tip of the iceberg."

Thomas is retiring from Congress at the end of this year, but he still wields influence with the Bush administration and the powerful Ways and Means panel. If both lawmakers and Medicare officials see an opportunity to reduce further the number of overpayments the program makes, they could expand the pilot beyond the three states in which it operates.

On the physician side, doctors said the process so far has produced a lot of hassle for relatively little cost savings to the government. Contractors in New York and California chose to focus primarily on inpatient hospital and skilled nursing facility claims, where excessive reimbursements were found to be significantly higher. Only in Florida have the RACs investigated a significant amount of physician claims and found millions in overpayments.

For doctors who come under the contractors' scrutiny, the process of complying with the audits can be a major headache, the American Medical Association said.

"The RAC pilot projects are fatally flawed," AMA Executive Vice President and CEO Michael D. Maves, MD, MBA, wrote in a November letter to House Democrats that preceded the report's release. "The pilot projects have been incredibly arduous and have failed to address the need to educate and communicate with physicians in order to avoid billing mistakes."

The AMA House of Delegates has called for the repeal of the provision in the 2003 Medicare law that authorized the project.

Headaches over peanuts

When a physician becomes the target of an audit, he or she must spend the time and resources necessary to produce medical records and other documentation related to the claims in question. In some cases, the scope of the inquiry can reach back as far as four years. At its Interim Meeting in November, the AMA adopted a resolution calling for legislation that limits to 180 days or less the time in which Medicare or another payer can request a reimbursement refund.

If a contractor determines that a doctor received reimbursements that were too high on some claims, the firm issues a demand letter calling for repayment within a month's time.

The average amount demanded from each physician who received an overpayment notice was $135 in Florida and $216 in California, CMS said. So far, New York contractors have not investigated physician claims.

All this adds up to a lot of trouble and worry for doctors and relatively little gain for Medicare, said Troy Tippett, MD, a neurosurgeon in Pensacola, Fla., and immediate past-president of the Florida Medical Assn. Many of the legitimate overpayments are simply billing mistakes that should have been picked up by the Medicare carrier, and that could be addressed better through education rather than aggressive auditing, he said.

In some cases, doctors already might have gone through the trouble to appeal an overpayment charge by the carrier only to have to appeal the case all over again if they want to challenge the RAC's similar finding on the same claims.

"It's double jeopardy for the physicians," Dr. Tippett said. "To do it twice makes absolutely no sense at all."

As of June, contractors in California had issued 372 demand letters to physicians but had restored only about $3,000 to the Medicare trust funds, said Elizabeth McNeil, vice president of federal government relations for the California Medical Assn. The amount that practices must spend to comply with the audits was far greater than that figure, she said.

If CMS wants the program truly to be cost effective, it should focus its audits away from doctors and onto the inpatient hospital side of Medicare claims, McNeil said. The average inpatient overpayment in California is more than $75,000 and in New York is more than $160,000, CMS reported.

RACs also are supposed to be finding instances of underpayment and forwarding that information to Medicare carriers so the doctors can be correctly reimbursed. But so far, contractors have not reported a single dollar in underpayments for physician services.

Drs. Maves and Tippett, who both described the firms as "bounty hunters," noted that RACs get paid based only on how much money they return to Medicare's coffers. This creates a perverse incentive for the companies to act aggressively in finding overpayments, even those of questionable merit, at the expense of looking for underpayments, they said. The contractors have received $14.5 million for their work so far.

The positive assessment of the program by CMS and the Ways and Means chief means that physician organizations will have a very difficult time getting the government to shut down the program before it concludes its initial run in the spring of 2008, Dr. Tippett said. Physicians will continue to resist any extension of the program or expansion to other states. Instead they are calling for better education from carriers that could nip billing mistakes in the bud.

Meantime, the Florida Medical Assn. is urging physicians to fight the RAC process if they feel they are right. Florida doctors have filed nearly 1,500 appeals after getting overpayment demand letters from contractors.