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“…hospitals continue to be frustrated with the RACs’ considerable inaccuracy in determining whether the hospital received any overpayments. They also are overwhelmed by the significant overlap and duplication of efforts among the RACs and CMS’s other contractors. For example, RACs, MACs and ZPICs are all charged with reviewing hospital Medicare claims, and hospitals may be required to respond to simultaneous audits of the same claims or to duplicative record requests. These redundant audits drain time, funding and attention that could more effectively be focused on patient care.”

This quotation from the American Hospital Association’s Oct. 24, 2012 letter to Daniel Levinson, Inspector General (IG) of the Department of Health & Human Services, clearly identifies the nightmare that has become reality for healthcare facilities. The letter, signed by the AHA’s executive vice president Richard Pollack, urges the IG to halt the “inappropriate denials of payment by RACs” and to expand upon a RAC-focused project identified in the Office of Inspector General (OIG) 2013 work plan.

Specifically, the Work Plan for Fiscal Year 2013 indicates that the OIG will review the extent that RACs identified improper payments and vulnerabilities and the effectiveness of CMS’s oversight of audits in 2010 and 2011. It is this task that Pollock addresses, recommending that the OIG also “pay particular attention to the extent to which RAC determinations result in inappropriate denials of payment for services that are [medically] necessary and reasonable” for patient care.

Drawing data from its own research—the RACTrac quarterly survey that currently includes responses from more than 2,000 hospitals, the AHA makes three major points in the letter:

  • RACs are often wrong but not penalized for their numerous inaccuracies.
  • Burdens of responding to RAC requests are significant for hospitals.
  • Provider education continues to be limited.

Appeals Reveal Real Story

Ultimately, reports the RACTrac data, 75 percent of appealed decisions are reversed—an eye-opener that may be explained by, as AHA puts it, “thestrong financial incentives” that auditors have to deny claims. RACs currently receive between 9 percent and 12.5 percent of the overpayments they identify. “The more claims the RAC denies, the more the RAC is paid,” writes AHA.

What’s more, RACs are not penalized when they make inaccurate determinations and continue to review and deny similar claims. As a result, hospitals are forced to “continually engage the same cumbersome and expensive appeals process on a claim-by-claim basis.”

Bearing the Burden

Two-thirds of the medical records reviewed did notcontain improper payments, according to the RACTrac Survey responses. Even CMS acknowledged that RACs do not find improper payments in most of the records requested. Nonetheless, the AHA points out that the agency recently doubled the number of medical records that RACs may request.

These facts add up to an increased administrative burden for hospitals and the need to hire more staff to manage the record requests and the audit process. More than half of the RACTrac Survey respondents also reported a significant financial burden as a result of the duplicative audits.

Educate Providers

AHA data suggest that resources devoted to provider education are extremely limited and, when provided, often inadequate. In fact, 58 percent of survey respondents reported that they have not received any education from CMS or their RACs related to avoiding payment errors.

As stated in the AHA letter, “Reducing improper payments before they occur would do much to improve all program integrity efforts, and reinvestment of a portion of auditor recoveries into provider education and payment system fixes should be encouraged.”

Toe the Line

Clearly, the RAC process needs to be improved, and Pollock, on behalf of hospitals nationwide, lists several steps that could be taken to do so, including the following.

  • Require auditors to improve their accuracy or face financial penalties.
  • Prohibit RACs from issuing medical-necessity denials that invalidate the medical judgment of a trained healthcare professional and force hospitals into the costly and complex Medicare appeals process.
  • Direct CMS to establish a process for re-billing RAC denials for medically necessary and reasonable care provided in the wrong setting, and, to prevent any new beneficiary liability, waive requirements for deductibles, co-pays and benefits.
  • Limit the number of allowable requests for medical records.
  • Ensure that auditors target legitimate payment mistakes.
  • Direct CMS to streamline audit programs by merging all improper payment audits into one program.

About the Author

Janis Oppelt is the editor at MedLearn Publishing®, Panacea Healthcare Solutions Inc., St. Paul, MN

Contact the Author


To comment on this article please go to editor@racmonitor.com

Region D RAC Posts Pre-payment Review Issue


Janis Oppelt

Janis Oppelt was the former editorial director for MedLearn Publishing.

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