Recovery Audits Targeted by House Bill, AHA Suit

Recover auditors are under fire.

On October 16, Representative Sam Graves (R-MO) introduced a bill that essentially aims to reform Recovery Auditors (RA) through various financial penalties and program limitations.

Two weeks later, the American Hospital Association and four health system filed suit in the U.S. District Court in Washington, DC, against the U.S. Department of Health and Human Services (HHS) for unfair Medicare practices pertaining to the Recovery Auditor program.

The plaintiffs, which include Missouri Baptist Sullivan Hospital (Sullivan, MO), Munson Medical Center (Traverse City, MI), Lancaster General Hospital (Lancaster, PA), and Trinity Health Corporation (Livonia, MI) claim that the Medicare program has been "refusing to pay hospitals for hundreds of millions of dollars' worth of care provided to patients, even though all agree that the care provided was reasonable and medically necessary as the Medicare Act requires."

They further allege that the government's refusal to pay is harming hospitals and patients, violates the Medicare Act, and is unlawful. They want the court to overrule HHS' policy and order the department to reimburse hospitals that have been denied payment.

Facilities need to constantly balance quality of care and financial concerns when dealing with Recovery Auditors, suggests Jonathan G. Wiik, director of admissions and case management at Boulder Community Hospital in Boulder, CO.

"It is a danger to our patients in that we are spending resources on bureaucratic and administrative costs versus clinical costs," Wiik says. "However, we will deliver the care necessary to our patient in the highest quality form regardless of the funding mechanism; you can't let the governmental administrative costs reduce the quality of care given."

"That said, we need to receive every dollar in which we are legally entitled to ensure that we keep our doors open operationally by balancing these two things the best we can."

In a press release issued November 1, the AHA states specifically that it is contesting HHS's denial of reimbursement for reasonable and medically necessary cases that the government believes should have been provided in an outpatient facility or department instead of the inpatient section of the hospital.

"When a patient needs treatment, the first step is for a doctor to decide whether to admit the person to the hospital or to provide care in an outpatient facility. The decision is often complicated for Medicare patients because of advanced age and the presence of other ailments, such as diabetes or high blood pressure, which makes the physician's decision as to where best to treat them more difficult," the AHA states in the letter.

As a result, RAs are reviewing and denying cases from hospitals and physicians years after the care was provided without ever seeing or talking to the patient. Not surprisingly, the press release states that hospitals appeal these "questionable decisions," they prevail at least 75% of the time.

Something is terribly wrong with the RA program when the appeals success rate is that high on the providers side, says Debbie Mackaman, a regulatory specialist for HCPro, Inc., in Danvers, MA.

"By the time providers appeal and win, they have often times exceeded the actual reimbursement that was originally recouped by the RA," she says. "There is a cry across the country that the providers have to get control of the skyrocketing healthcare costs, but when you look at the administrative burdens placed on them—and some of those programs are not being adequately policed, like the RAs—how can this happen?"

While the administrative and financial burden that the appeals process can put on a hospital is strenuous, appeal is a necessary step, suggests Wiik.

"Our counsel, our RAC committee, our regulatory and compliance department, and our physician advisor all agree that we do not want to send the message that Medicare, Connolly, or other RACs are right in determining that these are really outpatient claims. That sets a precedent that you can never come back from, and that scares us."

Herein lies another problem for providers: When the RA determines that the patient should have been an outpatient, hospitals must return the reimbursement for inpatient services. The hospitals then receive little to no money back for the "outpatient" services provided, even though the RA does not dispute that the hospital provided reasonable and necessary care. According to the AHA, that practice is inherently flawed.

"What the federal government is doing is wrong, unfair, and a clear violation of federal law," Rich Umbdenstock, president and CEO of the AHA, stated in the AHA letter. "Doctors and nurses provide the best care possible using their medical judgment and training. Allowing government auditors to second-guess these difficult medical decisions about where to best treat a patient years later based on a cold record and then refuse to pay for that care is indefensible."

While this is arguably the biggest RA-related news to surface in the past few weeks, it's not the news worth only noting.  The AHA is also urging the Office of the Inspector General to examine the inaccuracies of the Recovery Auditors.

In a letter issued October 24 to HHS Inspector General Daniel Levinson, AHA Executive Vice President Rick Pollack recommends halting inappropriate payment denials by RAs, streamlining CMS' integrity programs to eliminate duplicative audits, and investing in provider education and payment system fixes to prevent payment mistakes.

Pollack cites AHA RACTrac data, which verifies that hospitals reported appealing more than 40% of all Recovery Auditor denials with a 75% success rate in the appeals process. He urged the OIG to review of the effectiveness of the auditors and CMS-related oversight efforts and to pay particular attention to how often RA determinations result in inappropriate denials of payment for medically necessary and reasonable services, not only on whether RAs identify improper payments and refer potential fraud cases to law enforcement.

Mackaman agrees, adding that an OIG review of the RAs is appropriate.

"Currently the OIG is reviewing the Medicare and Medicaid contractors, so why not the RAs, who are in effect a contractor under CMS—both reviewing pre-and post-payments?" she says. "Any entity that is charged with paying, auditing, or recovering Medicare funds should be scrutinized for how well they are complying with the program's regulations.

"Without being under the watchful eye of the OIG, we enter into a ‘wild west' state where the providers and Medicare contractors are under review but the RAs can do as they please, only to be challenged by providers [willing to appeal], which is very costly endeavor even when the providers are winning 75% of the appeals."

With the pressure now put onto the federal government and the RAs, it is unclear what their next move will be, but certainly these efforts have garnered national attention. If nothing else, the totality of the AHA's actions has highlighted the fact that RAs cause significant administrative and financial strain on facilities—whose main objective is to provide quality patient care—and that some modification of the existing programs would only benefit providers, says Mackaman.

"Healthcare is probably the only business I am aware of that is getting paid less today with more overhead costs to operate an increase in business while still managing to keep  their doors open," she says. "Under the current system, we are dealing with a house of cards and the RAs are adding to that tremulous structure."