Recovery Auditor Program Effective but Wasteful

Federal efforts to reduce the numbers of improperly paid Medicare claims has resulted in some success but comes at the expense of diverting scarce resources from patient care to audit defense. A balance must be struck between protecting Medicare from fraud and abuse and the burden placed on honest providers to respond to the necessary audits to ensure that outcome. That is the takeaway from a June 25 Senate Finance Committee hearing that examined the efforts of recovery audit contractors (RACs) to stem improper payments in the Medicare program. The hearings were presided over by Sens. Orrin Hatch (R-Utah) and Max Baucus (D-Mont.), chairman of the Finance Committee, and included the testimony of two different providers and a representative of one of the RACs. Hatch noted that according to Centers for Medicare and Medicaid Services (CMS) estimates, improper payments for Medicare amount to more than $44 billion. CMS’s use of private contractors like the RACs has resulted in returning hundreds of millions of dollars to the Medicare program and returned approximately $100 million in overpayments to providers in 2012 alone. Even though RACs have reviewed less than 1 percent of claims nationwide, their efforts can be burdensome to providers caring for sick patients, Hatch acknowledged. Baucus added that while RAC audits play a key role in recovering improper payments, it should not be necessary to overburden legitimate providers, who play by the rules, with unnecessary red tape. Baucus called for balance in RAC audits, citing the case of a small hospital in Montana—Kalispell Regional Medical Center. According to the hospital, it has spent nearly $1 million and hired three new full-time staff just to deal with audits. Kalispell Regional has won its appeals in 53 percent of cases, say hospital officials. Provider’s Testimony Susie Draper, vice president of business ethics and compliance for Intermountain Health Care (IHC, Salt Lake City) testified about IHC’s experience with RAC audits. Draper described how IHC had prepared for the implementation of the RAC program and what benefits it believed the health system had gained as a result of that preparation and implementation once the audits began. Draper included specific data about the audits, including number of claims requested, and reviewed and the outcome, including net Medicare gain or loss. According to Draper, resources spent on responding to RAC audits could have been used for patient care and quality projects. According to her testimony, IHC added 22 full-time employees primarily in the appeals unit. She said IHC data showed that after RAC reviews of approximately $120 million in claims, Medicare recovered a net of about $16,000 after tallying underpayments and overpayments. Jennifer Carmody from Billings Clinic in Montana discussed the same kinds of issues and problems as Draper expressed. She also highlighted the number of claims that are hung up somewhere in the appeals process awaiting final decision. According to Carmody, Billings has been successful in 84 percent of its appeals. Carmody’s estimate of the impact of the burden for the clinic is approximately 8,600 work hours and approximately $240,000 per year to manage audits and appeals, not including the $45,000 a month the clinic pays an outside contractor to help with medical necessity reviews. Carmody urged CMS to remedy the adversarial nature of the RAC program and its auditors. She also called on CMS to issue clear and concise guidelines that are not subject to multiple interpretations, limit the number of record requests RACs are allowed to make, stop RAC auditing of claims that have a low error rate over time, and provide sufficient oversight to ensure RAC and other government contractors meet their deadlines throughout the appeals process. CGI Testimony Robert Rolf, a vice president of CGI Federal Inc. provided testimony at the hearing about CGI’s experience as a RAC contractor. Through a series of generalized statements, Rolf described those aspects of the RAC program designed to ensure accuracy and enhance communication between the RACs and the providers they audit. One interesting section of Rolf’s testimony touched on the issue of accuracy of the claim reviews. He stated that in the latest set of cumulative annual data published by CMS, all four recovery auditors received accuracy scores of greater than 90 percent. On the surface this would appear to conflict with the testimony of the two providers; however when G2 Intelligence looked at the report Rolf was citing, the accuracy scores have less to do with claims overturned on appeal and more to do with the accuracy of the interpretation of the specific information on a claim against a regulation or program policy. That same report includes a table that shows that 43.6 percent of appealed claims were overturned. RACs Are Not Going Away It is unlikely that any immediate changes will occur to the RAC program as a result of these hearings. Hatch noted that CMS is currently reviewing bids for new contracts for the RACs for the coming years and said he would like to see CMS take more consideration concerning the balance between program integrity issues and the administrative burdens that are placed on honest providers. Hatch added that even though the RAC program is an important component of recovering improper payments, Congress is responsible for making sure it is being administered as intended by Congress. To that end, CMS must work to continually improve the program based on input from both providers and RACs, seeking that balance. Laboratories and other health care providers should realize RACs are now part of their daily operations and develop programs that help them efficiently and effectively deal with the program and the administrative burden resulting from its audits. The existence of RACs is changing provider behavior and the cost of dealing with them is being absorbed to the detriment of other provider concerns like patient care, quality and efficiency, and overall improvement in the health care system. Unfortunately, whether or not the balance sheet ultimately shows that the RAC program is actually recovering enough money to justify its existence is almost moot—they likely will just add to the cost of health care with little real benefit to patients. The Takeaway: While recovery audit contractors may provide little real benefit to the Medicare program, laboratories and other health care providers must develop programs to effectively deal with RAC audits.