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Medicare RAC recoveries down 22% due to program cuts

By Jennifer Bresnick

The ongoing suspension of Medicare Recovery Audit Contractors’ (RACs) ability to monitor and audit claims has produced a 22% decline in funds recovered by the program, says a new report from CMS.  In the third quarter of fiscal year (FY) 2014, the RAC program corrected $572 million in improper Medicare payments, including $100.4 million in underpayments that were returned to providers.

The RAC program has faced significant pushback from the powerful American Hospital Association (AHA), which is concerned about the handling of claims audits and the power of the program to sap reimbursements from providers’ pockets.  While CMS argues that audits are necessary to keep wild overspending and erroneous Medicare payments in check, the AHA does not see the same value in the program.  Citing a 47% increase in audit activity in 2012, which costs some providers more than $100,000 per quarter to manage, the AHA has continually urged an RAC cutback.

The majority of RAC authority to investigate short inpatient claims, the most significant source of incorrect payments, was cut in October of 2013 and continues until March 31, 2015.  These claims represent 91% of all improper payments, says the American Coalition for Healthcare Claims Integrity (ACHCI).  RAC advocates estimate the suspension could cost Medicare between $2 billion and $5 billion in missed recoveries, and the most recent data does indeed show a continued slump in recouped payments now lasting nine months.

“When oversight stops, Medicare suffers,” said Becky Reeves, spokesperson for ACHCI in a statement. “We owe it to the taxpayers who have paid into this program and the millions of seniors who rely on this program to keep Medicare strong, solvent and waste-free.”

While the RAC program has been lauded as one of CMS’ most successful cost-trimming endeavors, the AHA would like to see significant reforms to the appeals process.  Writing to CMS Administrator Marilyn Tavenner in January, AHA Executive Vice President Rick Pollack urged the agency to change the way it handles appeals hearings, which are currently backlogged for as long as two years due to a thirty-fold increase in claims denials.

“It is clear that the RAC program and the resulting volume of inappropriate claim denials are putting significant strain on the appeals process,” Pollack says. “And hospitals are bearing the financial burden with over a billion dollars caught in a broken appeals process that takes several years to issue a final determination.”





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