Hospital executives anxious about complying with Medicares Recovery Audit Contractor program may have breathed a temporary sigh of relief last week in hearing that the audit contracts had been suspended because of a protest action issued by two contractors.
However, considering that one of the protesters is PRG-Schultz International, Atlanta, one of the most controversial RAC auditors in the programs demonstration project, this latest development has the potential to create fresh anxiety among providers over which contractors will ultimately administer the RAC audits.
The wheels started turning in the suspension of the RAC programs contracts when the CMS received notice from the Government Accountability Office that Viant, headquartered in Naperville, Ill., and PRG-Schultz, two contractors that had unsuccessfully bid on the permanent program, were protesting the contracts that had been awarded to four other companies to administer the RAC audits.
For now, everyone is awaiting a decision from the GAO, which has 100 days to issue an administrative ruling on the protests, according to CMS spokesman Peter Ashkenaz. In the meantime, activities surrounding the four permanent RAC contracts have been immediately suspended, pending the outcome of the two protests, to comply with provisions required by the Competition in Contracting Act of 1984.
The recently launched RAC program allows third-party auditors hired by the CMS to keep 9.4% to 12.4% of payments they identify as improper and then collect from providers. The RAC program began on Oct. 6 in 19 states, and was supposed to be implemented in all 50 states by 2010 (Nov. 3, p. 14).
With the program indefinitely postponed, however, its not certain if the CMS will meet that national deadline.
Don May, vice president for policy with the American Hospital Association, wouldnt speculate on the motives behind the protesters actions. My guess is they want to gain one of those contracts for the permanent program, he said, adding he hadnt seen the official protest and what it was about. Its unclear what the long-term implications of this protest action will be, but one thing is certain: The program is going to experience further delays, May said.
From what the AHA understands about this suspension of activities, the CMS cant communicate through the RACs or set up education sessions with providers. However, other parts of the RAC program that are not contract-focusedadministrative issues such as limits on medical record requests, and the appeals processare unlikely to be affected by this delay. This could work to the advantage of the industry, in terms of buying more time to make further improvements on those types of operational issues, May said.
Many providers are probably relieved by this piece of news, knowing that the RAC program will be delayed at least in the short term, said Ronald Connelly, associate attorney with Powers Pyles Sutter & Verville, a healthcare law firm in Washington that represents clients on RAC issues.
Officials at five-hospital Inova Health System, headquartered in Falls Church, Va., were pleased the CMS suspended RAC activities. We believe that the RAC program will proceed eventually to full implementation and will likely be the most far-reaching payment audit process in the history of the Medicare program, said Jerry Seager, Inovas chief compliance officer, in an e-mail. For that reason, we believe it is critically important that the government select companies that are ... fully prepared to implement this program across the country in a fair and equitable manner.
If hospitals have any trepidation over the latest action, its the possibility of PRG-Schultz coming back onboard as an auditor, Connelly said.
For now, the companies arent elaborating on why they issued the protest. A Viant spokesman acknowledged that the company had unsuccessfully bid on the permanent RAC program but would not comment further.
PRG-Schultz has yet to explain its motives as well. The auditor was the designated RAC for California during the demonstration and had a reputation for denying a large portion of the Medicare inpatient rehabilitation claims it reviewed in the state.
There are a lot of hospitals in California who would be disappointed if PRG-Schultz was awarded a contract. And there are a lot of hospitals around the country that heard about what happened in California and wouldnt want them to be awarded a contract, Connelly said.
Alameda County Medical Center, Oakland, Calif., is one hospital that wouldnt. Many of PRG-Schultzs decisions on rehabilitation care, for example, were based on documentation issues, even though our review of the denied claims reflected a good standard of documentation, said Jim Sondecker, associate administrator of Fairmont Hospital and John George Psychiatric Pavilion, campuses of 290-bed Alameda County Medical Center.
The California Hospital Association declined to comment on the actions taken by PRG-Schultz and Viant.
Michael Golden, managing associate general counsel with the GAO, would not provide details of the complaint, but said that these types of protest actions usually have two possible outcomes: If the GAO rules in favor of the protesters, we would make a recommendation to correct the problem. The CMS would have 60 days to inform the GAO that it was following the corrective action. If the GAO agrees with the agency, at that point the contract could proceed, he said. The GAOs remedy is administrative; the protesters would have the option to take legal action following the GAOs ruling, if they desired, he said.
Officials from the four winning RACs did not return calls for comment by deadline.
Others in the industry thought the protest action underscores the weaknesses in a program that offers contingency fees to auditors to ferret out improper claims. There is a poetic irony in the fact CMS has been distracted from its organizational objectives by a Recovery Audit Contractor, said Thornton Kirby, president and CEO of the South Carolina Hospital Association.