A Call for RAC Reform

Running around crucifying healthcare providers for sloppy documentation is fool’s gold.

The Recovery Audit Contractor (RAC) audit industry over time has degenerated into a framework that abuses healthcare providers with endless trivia regarding documentation, but rarely catches real fraud. These audits have spawned a giant industry of coding experts, trainers, software systems, consultants, lecturers, lawyers, statisticians, and others – all feeding off providers. It should be reformed.

A favorite anecdote related to the topic involved a 90-year-old lady in Florida. She had two broken ribs, a hip replacement, incontinence, and other problems, including cancer. What did the auditors say? A hospital bed and walker were not medically necessary.

There are thousands of stories like this, but little real fraud. Just documentation and interpretation of made-up rules (“Local Coverage Determinations”), many of which are ambiguously worded, and in any case interpreted inconsistently – and always with a rabid bias against the provider.

And I’m not going to say anything about the statistical work. I’ve been looking at extrapolations since 2001. In all that time, my team has never seen even one single statistical sample and extrapolation that followed the Program Integrity Manual. The fact is that most auditors argue that they don’t even need to. Make up data; OK, sample expensive items more than less expensive ones. Hide all of your formulas, and don’t explain how you did the work; no Problem.

Then we have the unannounced “raids” and veiled threats. Real dog-and-pony shows.

Get back to the basics. It’s the fraud, stupid.

Let’s Look at Some Real Fraud
This entire grotesque RAC system is sheltered by the transparent argument that it is intended to catch fraud. Remember what Medicare fraud really is. Example: an unlicensed person pretending to be an MD and writing out prescriptions; claiming to have sent out hundreds of wheelchairs to patients, but neither the wheelchairs nor the patients actually exist; billing for services never delivered; stealing identities and submitting claims for services never delivered. Fraud is real stealing, not variations of obscure subtleties in documentation.

Evidently, $400 billion in COVID-19 relief funds have been taken by Chinese and Russian crime syndicates. That’s your tax money, folks. Washington State was hit with more than $600 million in unemployment claims by a Nigerian fraud ring.

By January, California had paid out almost $10 billion in fake coronavirus unemployment claims. Some fraudsters used the name “Dianne Feinstein,” the veteran U.S. Senator from California. Some were on death row. Much was based on stolen identities. For the U.S. as a whole, by the end of last year, as much as $84 billion in federal COVID payment was estimated to be fraudulent, and another $7 billion was sent to companies that were ineligible.

Some fraudsters were repeat offenders. Dinesh Say of Coppell, Texas filed 15 applications for various businesses. He claimed to have many employees and massive payroll expenses. The applications were spread across different lenders. He pocketed $17 million, and purchased a Bentley convertible, Corvette Stingray and Porsche Macan.

Some fraudsters worked in teams. In Los Angeles, the eight-person Grigoryan ring submitted 150 fake loan applications to get $21.9 million in COVID relief funds. The money was used for buying gold coins, diamonds, luxury watches, handbags, and cryptocurrencies.

Another feeding trough was the COVID unemployment assistance program. Some individuals applied for unemployment benefits in multiple states; others used stolen identities; one rounded up identifications of prison inmates, used their names, gave them a kickback, and pocketed the rest.

The Economic Injury Disaster Loan program was another watering hole. In three months alone in 2020, at least $190 million was estimated to be paid out for fake claims.

Then there was some real medical fraud. In New York, someone was pretending to be a pharmacist. They billed out and got paid more than $3 million from Medicare and Medicaid for dispensing Oxycodone.

All of these examples are but a pinprick of the real fraud going on every day. This is where the bulk of auditing effort should be going.

But running around crucifying healthcare providers for sloppy documentation is fool’s gold. It perverts the healthcare system, adds massive unnecessary costs, and makes a mockery of the idea that the audits are looking for “fraud.”

They are not. Auditing should never have become a “for-profit” activity. It is clearly more expensive to deliver than if public servants were used to do it. Where did this crooked idea of “privatization” come from anyway? It was never a good idea, and still isn’t.

The bottom line is that the auditing industry has grown into an out-of-control monster that hinders delivery of scarce healthcare services, and vastly increases their cost. It is more interested in making a profit than in being reasonable. It demands recoupment of funds even when (and mostly when there is not) the slightest question of whether there was a real doctor, real patient, real sickness, and real delivery of healthcare services. In other words, it is not catching fraud, it is lining pockets, mostly by quibbling about pedantic minutiae of documentation.

It is time for serious reform.

Get back to basics. It’s the fraud, stupid.

Programming Note:

Listen to the live reporting of Ed Roach this coming Monday on Monitor Mondays, 10 Eastern.