OIG: Despite Flaws, Medicare RACs Work

Hospitals and health systems have criticized Medicare's recovery auditors, often known as RACs, but a report from the HHS Office of Inspector General says RACs are doing a good job of finding improper payments to providers.

The OIG evaluated RAC data on 2.6 million claims from 292,000 providers, and it determined in fiscal years 2010 and 2011, RACs identified $1.3 billion in improper payments from Medicare. Of that amount, only $903 million were recouped from or returned to providers, and $768 million were considered to be overpayments due to incorrect billing or providing care in the wrong setting. Most of the overpayments, 88 percent, went to hospitals and health systems. The agency said its numbers differed slightly from CMS' reported figures to Congress due to how it analyzed the data.

Further, the OIG said of the 1.07 million claims from hospitals and providers that had overpayments, providers appealed only 6 percent. In addition, only 44 percent of appeals were overturned in favor of the providers. These numbers vary widely from the American Hospital Association, which tracks RAC figures through its own quarterly survey. Last month, the AHA said hospitals appealed 40 percent of all RAC denials and won 70 percent of their appeals in the second quarter of this year, mirroring past results from the self-reported survey.

However, the OIG said CMS did not do enough to make sure improper payments and potential fraud could be prevented in the future. According to the report, CMS identified 46 "vulnerabilities" that led to improper payments. The OIG defined a vulnerability as a specific issue that resulted in more than $500,000 in over- or underpayments to providers. When CMS spots a vulnerability, it is supposed to take corrective actions to prevent it from happening again. The OIG said CMS did not evaluate the effectiveness of its corrective actions on vulnerabilities, as it should.

The results of the report fly against the lobbying efforts of the AHA and other provider organizations. For the past several years, the AHA has said most Medicare RAC denials do not contain an overpayment. Hospitals have also criticized the RAC program for being an administrative burden and driving up costs.

Both the House and Senate have proposed Medicare RAC reform bills. Under the Medicare Audit Improvement Act, Medicare RAC record requests would be capped to 2 percent of hospital claims, among other measures.

CMS has routinely defended the RAC program, saying in April that RACs have recouped $4.5 billion in overpayments from providers since October 2009, when the program became fully operational.

More Articles on Medicare RACs:
AHA: Medicare RAC Requests Up 47% Over the Past 6 Months
Hospitals Testify on Medicare RACs to Senate Finance Committee
AHA Advocates for 3 Changes to RAC Program

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