The Centers for Medicare & Medicaid Services identified $3.75 billion in improper payments within the Medicare Recovery Audit Contractor (RAC) program, according to CMS' annual RAC report to Congress for fiscal year (FY) 2013.
The vast majority of improper payments--$3.65 billion--were overpayments, with the figure up $1.35 billion from overpayments in 2012. More than 94 percent of the identified overpayments derived from inpatient hospital claims, many of them specifically from short-stay inpatient hospital admissions later determined to be medically unnecessary.
The RAC program also identified and corrected $102.4 million in underpayments to providers in FY 2013, according to the report. RACs received more than $300 million in contingency fees last year and the program returned more than $3 billion to the Medicare trust funds by paying the contingency fees and $152.4 million in administrative costs.
CMS also found providers initially appealed 500,269 claims, 30.7 percent of the total claims with overpayment determinations. Of these,151,645 were overturned in the providers' favor, with only 9.3 percent of RAC claims overall overturned on appeal in FY 2013, according to the report.
"At 10.1 percent, the Medicare fee-for-service error rate is the highest of all federal programs," Kristin Walter, spokesperson for The American Coalition for Healthcare Claims Integrity, said in a statement. "Our coalition urges lawmakers to support the RAC program and the important role it plays in maintaining a stronger, more efficient Medicare program for the millions of retirees and disabled individuals who rely on these critical benefits each day."
A report from the Government Accountability Office in August, which analyzed RACs and three other types of contractors, found CMS does not do enough to avert duplicative reviews of provider payments, FierceHealthFinance previously reported. CMS' internal coordination process for review requirements "ha[s] not led to consistent requirements across contractor types," the report states.