?? Medicare’s Recovery Audit Contractors (RAC) to pay??

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?? Medicare’s Recovery Audit Contractors (RAC) to pay??

March 18, 2014 –In a letter to Department of Health and Human Services (HHS) Secretary Kathleen Sebelius, Representative Jim McDermott (D-WA), ranking member of the House Ways and Means Health Subcommittee, cited his concerns for the sheer volume of backlogged appeals before the Office of Medicare Hearings and Appeals (OMHA). He praised OMHA for recognition of this problem and their transparency regarding the backlog of “nearly 357,000” appeals.  




The letter cited his understanding of Medicare policy to “move to the front of the line” beneficiary appeals. But, “first and most importantly” is that the beneficiaries were having trouble even being heard simply due to the sheer number of appeals. He stated, “As you know, while a hospital may be able to absorb losses associated with a denial of payment, beneficiaries are on fixed incomes and cannot do so.” He urged “continued vigilance and new processes established” to ensure that beneficiaries are not unduly delayed by the current backlog, by placing specific staff to collate and push beneficiary appeals to the front.



He goes on to say that he is “troubled” that Recovery Auditors (RAs) were the immediate cause of the increased workload within OMHA. Rep. McDermott further asserted “While I am aware of legislative efforts to modify the RA program, which I have not supported because I believe many of the proposed bills are quite prescriptive, there are several steps that can be taken administratively without any intervention from congress.” (Italics are mine)

The following suggestions were proposed:

Modify the RA program instead of implementing the two midnight policy:

In a previous letter written in July 2013 regarding the proposed two midnight rule, Rep. McDermott indicated “that the policy was flawed and unworkable.” This March, 18, 2014 letter goes on to say “I believe the underlying issue that is driving the need for more concrete admission standards – the RA program – be re-examined and modified.” CMS is in the process of determining how this policy and issues related to it will be addressed and has placed a “pause” on RA activity but Medicare Administrative Contractors (MACs) may still deny claims they identify as part of the “probe and educate” reviews. Reconsideration as to whether this policy is ready for even limited enforcement was requested in light of a lack of understanding of important issues and how exactly they will be addressed.

Require Enhanced Accountability for RAs:

RAs receive a percentage of all monies recouped, “(earning 9% to 12% commissions on what they recover).” [1]

Rep. McDermott addresses a financial penalty if an appeal is overturned; “I suggest that there needs to be some financial penalty associated with RA collections that are overturned on appeal. If providers are winning these appeals by large margins, which seems to be the case, this seems only fair…I also suggest that going forward, the contracts include performance standards for accuracy of collections from providers.

His suggestion included two financial penalties to consider; have the RA pay the appeal cost or a penalty percentage. His statements were firm in the belief that regardless of the type of penalty, “some penalty should be assessed.”

Ensure the Newly-imposed “Pause” Address the Problem;

McDermott expressed pleasure that CMS recognized fundamental problems with the RA program and agreed with the “pause” in document requests. He acknowledged that due to RA retrospective reviews that these claims could still be audited. He added the suggestions that the “pause” be continued until a clear plan was in place to (a) modify the RA program, (b) address the existing backlog of appeals and (c) consider limiting the lookback period on claims submitted during the pause.

Monitor the Impact of Change Request (CR) 8425 Policy on Appeals:

This policy allows contractors expanded authority to automatically deny related claims

Basically, Rep. McDermott was calling for these backlogged appeals to be eradicated soon and to address the driving forces behind the backlog – the RAs and the Two Midnight Policy.

It is my opinion, that there are many hospitals and providers that simply can’t continue to absorb the financial losses of imposed overpayment recoupment by the RA’s. There are providers facing two alternatives, neither of which will assist Medicare beneficiaries in obtaining quality medical care. The first is to simply close their doors as an alternative to spending more money in an effort to retain revenue from being recouped or they can decide not to accept patients covered by Medicare. Consider these statistics compiled by the AHA RACTRAC Survey for the 4th quarter of 2013;

  • $2.6 billion in denials were reported through the 4th quarter of 2013.
  • 68% of all hospitals reported spending more than $10,000 managing the RAC process during the fourth quarter of 2013, 50% spent more than $25,000 and 12% spent over $100,000.

  • The average dollar value of a complex denial was $5,659.

  • 50% of hospitals indicated short-stay medical necessity denials were the most costly complex denials.

  • 67% of all cumulative claims appealed are still sitting in the appeals process.

  • Of the claims that have completed the appeals process, 64% were overturned in favor of the provider. [2]

I do not think our President in 1965, the Members and Leadership of the House, the House Ways and Means Committee nor the American people would recognize Medicare today!

I reviewed the history of Medicare through vision blurred by tears, but it renewed in me the zeal to protect those for whom it was intended. I challenge you to visit the website listed below, read the history of Medicare and not be moved. I will end with this short excerpt of President Lyndon B. Johnson’s news conference announcing the approval of Medicare.

When the conference has completed its work, a great burden will be lifted from the shoulders of all Americans. Older citizens will no longer have to fear that illness will wipe out their savings, eat up their income, and destroy lifelong hope of dignity and independence. For every family with older members it will mean relief from the often–crushing responsibilities of care. For the Nation it will bring the necessary satisfaction of having fulfilled the obligations of justice to those who have given a lifetime of service and labor to their country.

This is a great day for older Americans. And it is a great day for America. For we have proved, once again, that the vitality of our democracy can shape the oldest of our values to the needs and obligations of today.”[3]

 [1] The painful new trend in Medicare: By Amanda Gengler  @Money August 7, 2012: 5:22 AM ET

[2] AHA RACTRAC Survey, 4th Quarter 2013 March 5, 2014







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