Is the RAC program the key to reducing improper payments? Only time will tell

The key to cutting down on improper payments in the healthcare industry is bringing back the Recovery Audit Contractor program, according to a recent Forbes article by Christopher Versace, editor of PowerTrend Profits and ETF PowerTrader as well as the host of PowerTalk.

During each of the last five years, government health benefit programs have paid out more than $100 billion in erroneous payments to hospitals, vendors and even dead people, according to Mr. Versace. He believes the solution to the problem is restoring Medicare RAC programs.

To support his argument, Mr. Versace looked at the numbers since the program began in 2010. The erroneous payment rate dropped to 8.5 percent in 2012, down from 10.8 percent in 2009. The program has also led to $8.2 billion in improper Medicare payments being recovered and put back into the Medicare Trust Fund, according to the report.

In 2013, CMS suspended much of the programs' post-payment auditing for an entire year and prohibited RACs from looking at retroactive claims. Mr. Versace sees this as a misstep. However, many hospitals and hospital groups supported the decision and urged HHS to reform the program.

Additionally, in February 2014, more than 100 House members sent a letter to HHS urging the agency to reform the RAC program. The RACs have "imposed a huge administrative burden on hospitals, which must spend valuable time and resources to appeal denied claims, the lawmakers wrote in the letter.

According to the American Hospital Association's RACTrac survey for the third quarter of 2014, 58 percent of hospitals reported spending more than $10,000 managing the RAC process during the third quarter of 2014. Thirty-nine percent reported spending more than $25,000 and 9 percent reported spending more than $100,000.

Based on industry concerns, CMS made a number of changes to the program that went into effect beginning with the contract awarded Dec. 30, 2014.

CMS said it "is confident that these changes will result in a more effective and efficient program, by enhanced oversight, reduced provider burden and more program transparency."

Like Mr. Versace highlighted, the RAC program has had success at lowering the rate of improper payments and restoring payments to the Medicare Trust Fund. However, for the program to be a true success it can't place an unfair burden on providers. Only time will tell if the modifications CMS made to the program will ease the provider burden while also allowing RACs to do their jobs and work on lowering the rate of improper payments in the healthcare industry.    

More articles on healthcare finance:

Tenet Q4 profit surges to $61M
CMS proposes slight decrease in Medicare Advantage payments
Scripps Q1 operating margin falls

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