Hospitals and physicians are girding themselves for a battle over a CMS auditing program that they believe will rack up huge costs, administrative burdens and lost time with patients.
For several years, the CMS has been pilot testing the Recovery Audit Contractor program, or RAC, created by the Medicare Modernization Act of 2003, to identify and correct improper Medicare payments paid to healthcare providers in fee-for-service Medicare. The demo has been criticized at length by hospitals and members of Congress for being a bounty hunter initiative, where contractors get to keep a percentage of the improper payments they collect from providers. The demo program began in California, Florida and New York in 2005 and expanded into several other states in 2007. It ended in March, but HHS is required by law to make it a permanent, national program by Jan. 1, 2010.
Mike Holper, senior vice president of organizational integrity and audit services with 29-hospital Trinity Health, said it was a tremendous burden for one its hospitals,
436-bed St. Agnes Medical Center in Fresno, Calif., to respond to RAC requests to photocopy and mail records. Appealing payment changes or denials also takes a long time, said Holper, adding that some hospitals in California are still waiting on their final appeals results.
Last week, physicians had their say on what they dont like about the program at a hearing before the House Small Business Regulations, Healthcare and Trade Subcommittee. Physicians from small practices testified about how their businesses have been affected as well. Given the burdens placed on physicians associated with a RAC review, the ends do not justify the means, said William Dolan, a member of the American Medical Associations Board of Trustees, who testified before the subcommittee.
Dolan described instances where some physicians were hit with 50 RAC audits over the course of a few weeks, overwhelming them and requiring many to either close their offices or devote significant staff resources to gathering the requested medical records, he testified.
In describing the situation in Florida, Michael Schweitz, a rheumatologist who testified on behalf of the Alliance of Specialty Medicine, spoke of physicians hiring outside consultants and legal counsel to meet RAC requests. One group of rheumatologists had to copy and mail out 300 patient records to comply, he said.
Timothy Hill, director of the CMS financial management office, said that most of the overpayments involved hospitals, not physicians. Of the $980 million in overpayments the RACs collected, just over 1%, or $12.8 million, represented overpayments that had been made to physicians, Hill testified before the panel.
Hill indicated that some improvements and protections would be put into place when the permanent program begins in 2010, such as employing medical directors and certified coding experts to work with the contractors.
Don May, vice president of policy with the American Hospital Association, acknowledged that the agency has addressed some of the programs earlier issues. For example, RACs will no longer be able to keep their contingency fee if a denial is overturned at any level of appeal, he said.
More improvements need to be made, however, which is why the CMS should slow down on the programs national rollout and address some of the problems that remain, he added.
During its three-year run, the RAC demo identified more than $1 billion in what the contractors deemed to be improper payments, the bulk of which were overpayments to hospitals, according to the CMS. Its not surprising then that hospitals have been the programs loudest critics. Bad behavior on behalf of the RACs is why this demo has generated so much negative attention, May said.
Hospitals are used to fiscal intermediaries, quality improvement organizations and other Medicare personnel doing program-integrity efforts in their vicinities, May said. Instead of just being another group in the background, however, these contractors exhibited aggressive and unmanaged behavior throughout the demonstration, he said.
Over the next few weeks, the agency is scheduled to release a report on the demos results and approaches for its expansion. After its release, the agency plans to announce the names of four permanent RAC contractors that will be responsible for administering the program.
Staff for Rep. Lois Capps (D-Calif.), who has legislation to place a one-year national moratorium on the RAC program, is eager to see the results because we feel that the additional data on the program will strengthen our argument that the program as currently crafted is fatally flawed and definitely not ready for a national rollout, a Capps spokeswoman said.