The current process governing Medicare’s recovery audit contractors (RACs) is harmful to small providers, according to Rep. Charles Gonzalez (D-Tex.), Chairman of the House Committee on Small Business, Subcommittee on Regulations, Health Care, and Trade. Testifying at a May 14, 2008, Subcommittee hearing, Gonzales noted that RACs get a part of every overpayment they recover.
“These contingency fees…have led to aggressive and, in some cases, improper pursuit of recoveries,” he said, adding that the system encourages auditors to focus on recovering overpayments to Medicare providers rather than on correcting all improper payments.
Timothy Hill, Director of CMS' Office of Financial Management, said the system will be improved when the program becomes permanent.
RAC demonstration project. The Medicare Modernization Act of 2003 included a provision directing HHS to conduct a three-year demonstration program using RACs to detect and correct improper payments, primarily from coding errors, in Parts A and B of the Medicare program.
The Tax Relief and Health Care Act of 2006 made the RAC program permanent and mandated nationwide expansion of the program by no later than January 1, 2010. CMS has begun the expansion process by initiating a full and open competition for four permanent RACs to perform audits nationwide.
Permanent RAC process. All permanent RACs will be required to employ a physician medical director and certified coding experts, Hill said. The permanent RACs will have to pay back their fees if they lose at any level of an appeal, he added. In addition, permanent RACs will be able to review claims in the current fiscal year and look back for improper payments for up to three years, Hill explained. “CMS will place a much greater emphasis on provider education and training as part of the RAC program,” he noted.
Criticism of the process. Gonzalez criticized the RAC process, saying, “It is clear the contractors are almost exclusively focusing on correcting overpayments.” He noted that of the $371 million in improper payments detected in 2007, 96 percent constituted overpayments collected from providers. Four percent involved underpayments reimbursed to providers. “It is hard to believe that this number represents the true proportion of underpayments,” he said.
Dr. Karen Smith, a family physician and owner of a solo private practice in Raeford, North Carolina, testified on behalf of the American Academy of Family Physicians. She said that a RAC audit has left her practice financially drained. She explained that the unannounced audit disrupted care and led to a denial of claims for a number of patients that exceeded the actual number treated by her office. The RAC, which, according to Smith, acted in an aggressive manner, also cited a lack of documentation regarding documents that the practice had provided in electronic format.
CCH Washington Bureau, May 16, 2008.
Visit our News Library to read more news stories.
