Healthcare Business News

RAC appeals data sought

85% overturned in favor of providers, AHA says

By Jessica Zigmond
Posted: May 2, 2011 - 12:01 am ET

The American Hospital Association said last week that it is pleased the CMS has released data on what it has recouped in improper Medicare payments, but would still like to see information about the appeals process in the agency's recovery audit contractor program.

On April 26, the CMS issued the first of what it expects will be quarterly reports on the Medicare fee-for-service recovery audit program since it became a permanent national program last year. Designed to weed out fraud and abuse, the RAC program relies on four contractors—Diversified Collection Services, CGI Inc., Connolly Inc. and HealthDataInsights—to identify improper payments on claims to Medicare beneficiaries in four geographic regions of the country.

The report last week showed that from October 2009 until March 2011, the program had identified and recouped a total of $313.2 million in improper payments, with more than half of that amount—162 million—collected in the first quarter of this year alone. This amount represents payments from all providers, not only hospitals, according to the CMS. Common issues for overpayments included improper coding and billing for bundled services separately.

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Meanwhile, about $52.6 million in underpayments were returned to providers in that period, including $22.6 million between January and March of this year. Some providers, however, have yet to receive those funds.

Elizabeth Baskett, senior associate director for policy at the AHA, said the association monitors this and other issues related to the RAC program in AHA's RACTRAC, an online tool that provides information and surveys hospital members about the program.

“In that process, they share issues and a common concern that has been raised is that they have underpayments identified and have yet to receive repayment,” she said.

Meanwhile, Baskett said the AHA would like more information on the appeals process, in which providers challenge the findings. Through RACTRAC, the AHA collected data from 1,852 hospitals through December and found that of the claims that completed the appeals process, 85% were overturned in favor of the provider.

“We're appreciative to have an idea with what the recoupments look like,” Baskett said. “We're disappointed that there's not information about the appeals. And we wonder if that dollar amount includes the amount in the appeals process.”

When asked about this issue, a CMS official responded in an e-mail that the overpayment amounts may “possibly” be included in the figures' report. That's because appeals that have not completed the appeals process but have been collected are included in the total, while those appeals that have finished the appeals process are not included because they have already been paid back to the provider.

“We do not know from this snapshot how much/many are currently in the appeal process,” the official said in the e-mail. The agency will include information about the appeals process in its annual report to Congress.

Another important issue for the AHA is the contingency fee for contractors. According to the CMS, the fee ranges from 9% to 12.5%, and a contractor receives the fee after collection. If a decision is overturned on appeal, the fee is paid back to the CMS. Contractors also receive a fee for identifying underpayments, so the total amount they have received so far ranges between $32 million and $45 million, according to the official at the CMS.

“That has always been a big concern for us,” Baskett said. “We saw that the contingency fee drove a lot of inappropriate denials,” she said, referring to the demonstration program. “That is something we're watching closely in the permanent program.”

The RAC program developed from a demonstration project between 2005 and 2008 that resulted more than $900 million in overpayments returned to the Medicare Trust Fund and nearly $38 million in underpayments that were returned to healthcare providers.

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