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Building momentum

RAC recoveries grow as program expands


By Melanie Evans
Posted: October 10, 2011 - 12:01 am ET
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Audits that have turned up more than $680 million so far in Medicare payment errors started slowly in the first year, a new report shows. More recent data suggest auditors have grown more aggressive as the program prepares to expand.

The first report to Congress on Medicare's Recovery Audit Contractor Program, released in late September covering the federal fiscal year beginning Oct. 1, 2009, provides an overview of auditors' first year as federal officials move to broaden audits under Medicare and expand them to Medicaid, and as Congress seeks ways to further curb federal spending.

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The Patient Protection and Affordable Care Act expanded auditors' reach from Medicare fee-for-service to include Medicare managed care and prescription drug coverage. No date has been set for those audits to begin.

Medicaid audits, another of the Affordable Care Act's provisions to reduce fraud, are scheduled to start next January and recoup $2.1 billion over five years. Federal officials finalized regulations for the effort last month (Sept. 19, p. 8).

Medicare recouped more from auditors during the first quarter of fiscal 2011, which began Oct. 1, 2010, than it did the entire prior year, according to federal figures not included in the report.

Providers returned $81.2 million to Medicare between October and December last year (the first quarter of fiscal 2011) and $499.6 million during the first nine months of fiscal 2011. That's compared with $75.4 million during all of fiscal 2010, the report to Congress said.

For hospitals, tension has grown during the program's second year as auditors have increasingly reviewed bills for whether care was medically necessary, forcing providers to defend treatment decisions months after the fact, said Elizabeth Baskett, senior associate director for policy at the American Hospital Association. Payments deemed as improper for reasons of medical necessity can be significant, she said.

Auditors were not fully up and running during the first year and as auditors grew more established in 2011, the amounts grew, she said.

Baskett also questioned the report's claim that the program saw few appeals, which would suggest the Medicare auditors proved highly accurate.

Hospitals have appealed 5% of claims in 2010 and $2.6 million, or 2.5%, of audited claims were overturned, according to the report. An ongoing AHA survey, launched in January 2010, found roughly 25% of hospitals filed an audit appeal, said Baskett, who has contacted the CMS with questions about its data. She said AHA officials believe Congress should have information about the time and money spent on lengthy appeals.

Amy Nordeng, government affairs counsel for the Medical Group Management Association, also questioned appeals data. Doctors accounted for $5.4 million of the amount auditors collected (See chart) and average claims ranged from $106 to $157 in different regions. Nordeng said doctors may not find an appeal for such small claims worthwhile. She also said doctors have seen an increase in auditors' activity.

Four companies that audit Medicare fee-for-service payments, one for each of four U.S. regions, were paid a percentage of the amount Medicare recovers, roughly 9% to 12.5%.

The AHA's Baskett said hospitals have urged the CMS to use recovered payments to analyze its complex billing system and find ways to reduce mistaken payments. Hospitals, she said, also could benefit from greater transparency on common billing errors.


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