Medicare Gains $3 Billion from RACs

The Medicare Trust Fund netted over $3 billion from the Recovery Audit Contractor (RAC) Program in 2013, according to a recent report by CMS.


RACs found $3.75 billion in improper Medicare fee-for-service payments—$3.65 billion in overpayments and $102.4 in underpayments. Those amounts, plus operating and contingency fees, resulted in the $3 billion figure, significantly more than the $1.9 billion netted in 2012.


The RAC program for fee-for-service Medicare began operating September 2010. RACs also have been expanded to Medicare Parts C and D and Medicaid, although those audit programs are not as far along. (“RACs Collect $3.65 Billion in Medicare Overpayments in FY 2013, CMS Reports,” Health Lawyers Weekly, October 3, 2014)


Most of the overpayments (more than $3.4 billion) involved inpatient hospital claims and, in particular, the “short-stay” admissions where the contractors decided the services should have been provided in the outpatient setting or lacked medical necessity documentation for the inpatient setting. (“RACs Collect $3.65 Billion in Medicare Overpayments in FY 2013, CMS Reports,” Health Lawyers Weekly, October 3, 2014)


Providers initially appealed 30.7 percent of all overpayment determinations in 2013. CMS reported that 18.1 percent were decided in the provider’s favor. However, the American Hospital Association, which publishes quarterly data on RACs, reported in the first quarter of 2014 that hospitals appealed 50 percent of RAC denials and won 66 percent of the time (not including those hospitals that choose to avoid the appeals process altogether).


The discrepancy between CMS and AHA data arises from how the appeals are counted, according to experts. The government report noted that appealed claims may be counted several times, based on each level of the appeals process and regardless of what the final decision was. AHA reports only final decisions from Medicare’s appeals courts.  (“RACs recouped $3B for Medicare in 2013,” Modern Healthcare A.M., September 29, 2014)


We reported earlier this year that the escalating number of RAC appeals has created backlogs at the Office of Medicare Hearing and Appeals, and that assignment of most new requests for Administrative Law Judge hearings has been suspended for at least two years.


CMS offered an “administrative agreement” in late August for acute care or critical access hospitals that would resolve their pending patient status appeals (or waive their right to request an appeal) in exchange for a partial payment of 68 percent of the net payable amount.




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