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RACs recouped $3B for Medicare in 2013

Medicare's recovery auditors returned more than $3 billion into the program's coffers last year, a new government report shows. And providers that appealed those audits won less than 1 in 5 tries. While the RAC trade group cheered the report, it isn't quelling provider criticism of the RAC program. Indeed, one provider group attorney Monday criticized the report for using what she terms “fuzzy math.”

In total, Medicare's recovery auditor contractors, or RACs, found $3.75 billion of incorrect payments made to hospitals and doctors in fiscal 2013, which ended last September, according to the CMS' annual RAC report to Congress (PDF). Of that total, $3.65 billion was related to overpayments. RACs recover Medicare payments from providers if allegedly unnecessary care was provided, codes were incorrectly marked down or there is not enough medical documentation on a claim.

RACs receive anywhere from 9% to 12.5% of the improper payments they find. Accounting for those fees, situations in which providers were underpaid, and some costs associated with the appeals process, the CMS said the auditing program resulted in $3 billion going back into Medicare's trust fund. Additionally, the government said only 18.1% of all claims that providers took to Medicare's appeals process were overturned in favor of the provider.

The American Coalition for Healthcare Claims Integrity, the RAC trade group and lobbying arm, said in a statement the report “reinforces the success of the RAC program and the critical role these contractors play in our nation's healthcare system.”

But the healthcare industry, particularly hospitals, often has argued those figures are distorted. Hospitals have a lot at stake when it comes to RAC audits, considering about 96% of all overpayments are found in inpatient hospital claims.

The American Hospital Association publishes quarterly data on RACs, which are self-reported from hospitals. The AHA said in the first quarter of 2014, hospitals appealed 50% of RAC denials and won 66% of the time—and that does not include hospitals that choose to avoid the appeals process altogether because of the time and costs involved.

Elizabeth Elias, an attorney with Hall, Render, Killian, Heath & Lyman who represents providers in RAC issues, said hospitals have generally had good success rates when appealing RAC denials based on her experience. Part of the discrepancy between the government's and hospitals' figures is how the appeals are counted.

The government explained in its report that appealed claims may be counted several times, based on each level of the appeals process and regardless of what the final decision was.

“For example, if a claim was appealed to the first level and received a decision in FY 2013, then appealed to the second level and received a decision in FY 2013, both decisions would be counted,” the CMS said.

However, the AHA reports only final decisions from Medicare's appeals courts. Mindy Hatton, the AHA's general counsel, wrote in a blog post Monday that the CMS relied on “fuzzy math” in the report and left out significant costs that hospitals absorb in fighting RAC denials.

The RAC program has many imperfections—like potentially duplicative reviews—but it's still more accurate than what hospital lobbyists claim, according to a report last year from the HHS' Office of the Inspector General.

At a minimum, the RAC report raises new questions about how the CMS created its appeals settlement for hospitals, Elias said. Hospitals have until the end of October to accept an offer in which the government would reimburse 68% of their inpatient-status claims sitting in Medicare's backlogged appeals process. In turn, providers would have to withdraw all of their appeals.

“If providers were winning only 18.1% of their RAC appeals, I'm not sure (CMS) would've offered such a favorable settlement,” Elias said.

Of the four Medicare RAC companies—Performant Recovery, CGI Federal, Connolly and HealthDataInsights—Connolly and HDI were the most aggressive in collecting overpayments from hospitals and doctors. Connolly recouped $1.22 billion last year; HDI took back $1.14 billion, the report said.

Follow Bob Herman on Twitter: @MHbherman



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