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RAC Reform Movement Gains Some Traction

Joe Cantlupe, for HealthLeaders Media, March 28, 2013

For some physicians and the hospitals where they work, an audit by a Recovery Audit Contractor may be a wreck waiting to happen—through no fault of their own.

The 391-bed Munson Medical Center, in Traverse City, MI, might feel that way. It failed to receive millions of dollars from Medicare following RAC audits for services provided to patients even though the care was deemed in advance to be reasonable and medically necessary.

RACs, which are paid a percentage of the money they recover from hospitals and other providers, have been determining, as in the Munson case, that many procedures billed as inpatient hospital care under Medicare Part A should instead have been delivered as outpatient procedures under Medicare Part B.

There were literally "hundreds of times" between 2007 and 2012 that Medicare demanded repayment from Munson for patient care the government agency believed should have been performed and billed as outpatient, according to court papers in a lawsuit the American Hospital Association (AHA) filed against Centers for Medicare & Medicaid Services (CMS).

All told, the RAC denials required Munson to repay Medicare $6.4 million.

Munson appealed. In court papers, the medical center noted that it had paid plenty to deal with the RAC audits. It hired a coordinator to oversee the appeals process, two billing employees—one full-time and one part-time—two registered nurses, and spent more than $165,000 on technology upgrades to track the status of RAC records, requests, and audits and appeals.

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