AHA urges CMS to penalize poor performing recovery audit contractors

In a letter to CMS Administrator Seema Verma sent Tuesday, the American Hospital Association urged CMS to "hold Medicare Recovery Audit Contractors accountable."

The Medicare Recovery Audit Contractor program's mission is to correct improper Medicare payments by identifying and collecting over- and underpayments. The program's auditors are paid a contingency fee for denying hospital claims. They receive the financial reward even when denials are later found to be in error.

Healthcare providers have the option to appeal recovery auditors' findings, and HHS' Office of Medicare Hearings and Appeals administers hearings concerning denied Medicare claims. Claim denials that reach the third of five possible levels of the appeals process are brought before administrative law judges, who issue decisions regarding coverage determinations.

In its letter to CMS, the AHA advocated for penalizing auditors who have high overturn rates at the administrative law judge level. 

"The AHA urges the administration to revise the RAC contracts to incorporate a financial penalty for poor performance by RACs, as measured by administrative law judge appeal overturn rates," the letter stated.

This isn't the first time the AHA has pressed for changes to the RAC program. In 2014, the AHA sued HHS over the Medicare appeals backlog and a federal judge granted the AHA's motion for summary judgment in the case last year. The judge ordered HHS to incrementally reduce the backlog of appeals pending before OMHA over the next four years, reducing the backlog by 30 percent by the end of 2017; 60 percent by the end of 2018; 90 percent by the end of 2019; and to completely eliminate the backlog by Dec. 31, 2020.

In March, HHS said in a court filing that it will not be able to meet the deadlines imposed by the court for clearing the appeals backlog. HHS appealed the order to clear the backlog, and an appellate court heard oral arguments in the case in May.

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