Medicare RAC audits under Senate scrutiny

Washington Frustrations over the paperwork burdens placed on hospitals and physicians by private recovery audit contractors working for the federal government have caught the attention of lawmakers in Washington.

Members of the Senate Finance Committee are recommending changes to the Medicare RAC program, which has uncovered $1.4 billion in improper payments during the current fiscal year beginning Oct. 1, 2012, and returned $4.8 billion in incorrect pay since 2010. Hospitals and physicians complain that they are being forced to shift more time and resources away from patients and toward RAC demands.

“Ensuring Medicare pays accurately is a difficult and complex job, but different audit contractors have been layered over one another throughout the years,” said Finance Committee Chair Max Baucus (D, Mont.). “While some overlap may be necessary, Congress and Medicare should work to simplify the way audit contractors interact with providers. These audits can’t overburden legitimate providers who play by the rules. We need balance.”

The American Medical Association agreed with members of the committee from both sides of the aisle who have suggested reforms to the RAC program, said AMA President Ardis Dee Hoven, MD.

“The AMA has shared with the committee specific recommendations to reform the RAC program, including greater oversight of RAC contractors and penalties for incorrect overpayment determinations,” Dr. Hoven said. “We support increased safeguards and education for physicians regarding payment errors to reduce improper payments. The AMA believes RACs should use physicians from the same medical specialty to conduct reviews, and we urge CMS to reduce duplicative program integrity audits to decrease the burden for physicians. We look forward to continuing to work with the committee to address this important issue.”

Complaints of overbroad reviews

During a June 25 hearing, facilities caring for Medicare beneficiaries reported that they found that auditors have brought little to the program outside of the increased administrative burdens.

For example, RACs began auditing the Billings Clinic in Montana in 2010, said Jennifer Carmody, the clinic’s director of reimbursement services. About 6,000 records have been requested for more than $45 million — representing 14% of the clinic’s total Medicare payments. Seven of 10 records reviewed by the RAC had zero errors, leaving about $8 million in claims that have been tied up in the RAC process.

Nearly $3.3 million in overpayment determinations are being appealed by the clinic. The facility has been successful on 84% of its appeals by winning 308 cases and losing 57 through 2012.

“Unfavorable findings by the RAC have generally been related to situations where the RAC feels that a procedure or stay should have been considered outpatient, but Billings Clinic considered it to meet inpatient criteria,” she said. “When we couple this RAC activity with all of the other entities currently reviewing our patient billing, the combined audit activity becomes overwhelming.”

Hospitals and physicians are subject to other audits by contractors working for Medicare, Medicaid and commercial payers. The Billings Clinic spends $240,000 a year to manage audits and appeals and spends $500,000 per year on its own contractor to conduct medical necessity reviews.

Administrators at Intermountain Healthcare have had similar experiences, said Suzie Draper, vice president of business ethics and compliance at the Salt Lake City-based system. The health system has hired the equivalent of 22 full-time workers to resolve more than 17,000 claims for Medicare services, of which 6,000 are being appealed.

Auditing Intermountain Healthcare has resulted in little payoff for the Medicare program, Draper said. Medicare has recovered a net total of only $16,000 after auditing contractors uncovered nearly $1.9 million in Medicare underpayments.

But the Intermountain figures are unique, said Robert Rolf, vice president of CGI Federal Inc. of Fairfax, Va., one of the RACs reviewing Medicare claims.

“If across the program all providers had the experience that Ms. Draper did, we wouldn’t have recovered $4.8 billion and we would not still be in business,” Rolf said, adding that RACs would not continue to review particular issues if no overpayments were found in those areas. RACs are compensated based on the amount of improper payments they uncover.

Baucus recommended that Medicare use incentives that shift the contractors’ focus to high-risk health professionals and facilities as well as high-risk services. At the same time, he said, physicians and hospitals in compliance with the rules should be rewarded, and Medicare officials should increase education about billing rules as well as revamp the appeals process to lessen the burden on those being audited.