RACs are paid a percentage of the money they recover from hospitals and other providers, and commonly determine that procedures billed as inpatient hospital care under Medicare Part A should instead have been delivered as an outpatient procedure under Medicare Part B.
'Hindsight is 20/20'
Auditors have the unfair advantage of looking at cases after the patient has been released, Testman says, while physicians have to make realtime decisions about care. "If a physician orders a test and admits a patient based on looking at the clinical data that the patient is presenting, and someone comes along after the fact, then the physician is being second guessed all the time. Hindsight is 20/20."
Testman says she expects the problem will only get worse because "auditors are becoming more and more aggressive with their denials."
The cost of managing RAC audits is considerable. To deal with RAC cases, MemorialCare has added an FTE to coordinate and track appeals. The system also pays fees for lawyers and medical experts for each case that makes it far enough into the appeals process to reach an administrative law judge for a final decision. On top of these expenses, there is the lost cash flow for rightful payments that are held up for years.
"Our overturn level is significant… We are winning the appeals, but even if they ultimately pay you back, there is a cost to them keeping your money for years," says Testman.