Third-quarter profit and revenue fell at HMS Holdings Corp. as the company continues to wait for what the federal government will do with its Medicare auditing program.
HMS is the parent company of HealthDataInsights, which is one of four Medicare recovery audit contractors. The CMS hires Medicare RACs to review payment claims from providers for accuracy and necessity. RACs then retain a portion of any improper payments they find.
However, this past February, the CMS paused the RAC program to award new contracts and address concerns from providers, who argue the RAC process is burdensome and has led to an overwhelming backlog of payment appeals.
RACs resumed some auditing activities this August, mostly on noncontroversial areas like spinal fusions and durable medical equipment. However, RACs still cannot conduct reviews of inpatient status claims, which represent a vast majority of audits and recouped money, and the CMS still has not made headway on new RAC contracts.
The uncertainty has severely affected HMS' finances. The Irving, Texas-based company said its Medicare RAC revenue plummeted 96%, from $33 million in the third quarter of 2013 to $1.4 million in the most recent quarter. HMS' total revenue dropped 11% to $113.8 million in the quarter, while year-over-year profit sank 40% to about $7 million.
Outside of its CMS contract, HMS also provides coordination-of-benefits services and claims auditing to other healthcare entities, including state Medicaid agencies, the Veterans Health Administration and several private health insurers. It competes with companies like Xerox Corp. to help multiple payers figure out which entity is obligated to pay for certain health benefits.
HMS executives said its other core business lines expanded in the third quarter, helping to maintain a semblance of profitability.
“Our successful cost reduction efforts, combined with profitable growth in both our commercial and state government markets, have resulted in year-to-date expansion of our operating margin, excluding Medicare RAC, and put us on track to meet our full-year goal,” CFO Jeff Sherman said in a release.
Sherman, previously the CFO of Brentwood, Tenn.-based LifePoint Hospitals, joined HMS in September.
Follow Bob Herman on Twitter: @MHbherman
