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Anthony Cirillo

AHA Implores OIG to Ratchet Up RAC Scrutiny

By January 14, 2013

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In an letter to Daniel R. Levinson, Inspector General, last fall, Richard J. Pollack, Executive Vice President of the American Hospital Association (AHA) urged the OIG to continue to ratchet up its pressure on recovery auditors (RACs), asking federal regulators to halt all inappropriate denials of payments made by RACs and to streamline all existing integrity programs.

Pollack noted that "The differences between the types of contractors are not material for present purposes; they all essentially function as auditors."

He continued: "These programs auditing payment accuracy are well intentioned; no one questions the need for auditors to identify billing mistakes. But hospitals continued 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."

He urged that the OIG's review of the effectiveness of the RACs and CMS-related oversight efforts 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 the care of patients, not solely on whether these contractors are identifying improper payments and referring potential fraud cases to law enforcement.

Data collected by the AHA shows that 75 percent of appealed RAC decisions are ultimately reversed and that has been consistent across quarterly reporting periods.

These data are not surprising because the RACs have a strong financial incentive to deny claims. RACs are paid on a contingent basis for collecting overpayments. The more claims the RAC denies, the more the RAC is paid.

The AHA believes that the RAC audit process would be improve significantly if auditors were required to improve their accuracy or face financial penalties.

The AHA contends that RAC audit activities in combination with the myriad other government auditors and programs divert hospital resources from patient care and contribute to the growing cost of providing health care. The AHA believes that the RAC audit process would be streamlined by limiting the number of allowable requests for medical records. In addition, auditors should target legitimate payment mistakes. Finally, CMS needs to ensure that all auditing programs are fair to all parties and should require that auditors strictly adhere to program requirements for timely responses. Ultimately, CMS should streamline audit programs by channeling all improper payment audits into one program and eliminating all other auditing programs.

There is no denying scrutiny will continue as hospitals and health systems become more complex. That is justified. I do agree that there seems to be competing and conflicting audit bodies and that incentives may be misaligned. This will continue to be a work in progress. But for the discussion to continue long term care providers need to voice their opinions too. Don't let your hospital colleagues do all the heavy lifting.

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