CMS created the Recovery Audit Contractors program as part of an effort to reduce improper Medicare payments by contracting independent auditors to detect and collect overpayments. The auditors are also charged with identifying underpayments although during the RAC demonstration phase about 25 times more overpayments were collected than underpayments paid ($980 million vs. $37.8 million).
The demonstration project, which ended its three-year process in March 2008, is the best body of evidence we have to project what the permanent program will be like. The permanent program continues to roll out across the country, with the goal of having all four RAC regions, each responsible for a quarter of the country, fully operational by 2010. Hospitals and other healthcare organizations interested in preserving their Medicare revenue—including already billed and collected funds—would do well to study the demonstration and learn as much as they can to prepare for a future where RAC audits will soon become an unavoidable reality.
Following are some of the insights my organization gained working with several hospitals affected by the demonstration project to the tune of hundreds of millions of dollars. In our work appealing those retroactive denials, we were able to achieve 93% successful overturn rate at the fiscal intermediary level. While we learned a great deal about successful appeal and prevention strategies, we also found the appeals process to be fairly opaque and arbitrary—a situation we hope will be remedied over time as CMS works out the kinks in the permanent phase.
As a part of our work for a large academic teaching hospital in New England we pursued about $4.2 million worth of appeals on a set of 72 claims. Our experience with this group of appeals highlights some of the odd and seemingly arbitrary aspects of RAC denials and appeals:
A few interesting points to note from this and other similar cases:
So, what can you do to protect your organization from RAC auditors and be best prepared if and when they do come knocking?
Be forewarned: Assessing your risk is an important first step to understanding how big of a problem RAC could be for you. Review historic claims against RAC findings to get a ballpark estimate of how your organization would fare in an audit.