RACs seek to regain reviewing privileges for Medicare claims

Recovery audit contractors are hoping a new report on the hundreds of millions they've recovered for Medicare will cause the CMS to reverse course on its decision to limit the number of claims they can review.

RACs recovered $473.92 million in improper payments in fiscal 2016, according to a report issued Monday by the CMS. That number is up from $440.69 million in fiscal year 2015.

RACs argue that they could recover more money for the Medicare trust fund if their hands were not tied by the agency. Over the last several years, the CMS has removed their ability to review inpatient status claims, such as whether a patient was on observation status or had a short stay at hospital.

The agency has also limited the number of documents RACs can request from providers as part of their reviews. Providers with a low history of denial rates are required to turn over less documentation compared to those with known to have higher denial rates.

CMS made the changes after hospital industry executives raised concerns that RACs are incentivize to deny claims, and that many of their decisions are overturned on appeal.

"This lack of oversight is taking place at a time when the program is losing approximately $40 billion per year due to preventable billing mistakes," Kristin Walter, spokesperson for the Council for Medicare Integrity, a RAC trade association said in a statement. "The vital billing oversight provided by the RAC program continues to be severely hampered by a [documentation] limit that allows 99.5% of Medicare fee-for-service claims to be paid without review."

The Council is asking Congress to broaden their ability to review claims before they are paid.

Dr. Ann Sheehy, division head of the department of medicine at the University of Wisconsin Hospital, said the report issued by the CMS doesn't do RACs any favors and said she is against them taken on additional oversight of hospital claims.

The report found that the overturn rate for Medicare Part A hospital claims was 37%, up from 22% the prior fiscal year.

"The problems with the RAC audit process remain," Sheehy said. "Appealing a claim is an enormous amount of work to prove that hospital was right all along."

The American Hospital association has found that 43% of all hospitals reported spending more than $10,000 managing the RAC process during the third quarter of 2016, 24% spent more than $25,000 and 4% spent over $100,000.

The report comes as the AHA is seeking to further limit the ability for RACs to review their claims. RACs continue to have the ability to review inpatient hospital claims for compliance reasons such as whether the correct billing code was used.

Of the overpayments collected in fiscal 2016, 63% or more than $278 million, were for inpatient hospital claims, including coding validation reviews.

The AHA told a federal court this past summer that hospital claims should be reviewed by quality improvement organizations, or QIOs, instead of RACs. The suggestion was in response to a request made by U.S. District Judge James Boasberg on how the Medicare appeals backlog could be reduced.

QIOs are the contractors that took over review of the inpatient status claims from RACs. Their staffs include health quality experts, clinicians and consumers. Physicians are often the first to review claims in these organizations and because they're practitioners, are more likely to understand clinical decisions that may have led to the denied claim.

Hospitals also like QIOs as they are much more transparent in their decision-making when they decide to flag a claim, according to Jessica Gustafson, a founder of the Health Law Partners firm in Farmington Hills, Mich.

HHS officials have told Boasberg they are against giving QIOs more hospital claims to view. QIOs have oversight of inpatient claims to help educate hospitals about various changes around the two-midnight policy. RACs focus on program integrity and protecting the Medicare trust fund.

Taking away more claim reviews from RACs will undermine those efforts, according to HHS. RACs recovered $6.2 billion for the Medicare trust funds from fiscal 2011 to 2013. QIOs have recouped $32 million since 2016.

The difference in recoveries between the two contractors isn't enough of a reason for QIOs to not take on more claims, especially since many RAC denials get overturned added Abby Pendleton, another founder of Health Law Partners.

"Just because RACs generated more savings, doesn't mean they're valid cost savings," Pendleton said.