CMS pays out $1.3 billion to settle disputed RAC claims

The Centers for Medicare & Medicaid Services (CMS) is proceeding with its plan to settle disputed recovery audit contractor (RAC) clawbacks with hospitals, paying 1,900 inpatient facilities a total of $1.3 billion as of the start of this month, the agency announced.

The payouts represent settlements of some 300,000 disputed claims from acute care medical centers and critical access hospitals, according to CMS.

The RAC program began with a bang some six years ago, with the intention of weeding out suspicious claims providers submitted to the Medicare and Medicaid programs. In fiscal 2013 alone, the program clawed back more than $2 billion in overpayments. However, hospital finance executives chafed over what they saw as overreach by the RACs and began appealing clawbacks in significant numbers, overwhelming the system's ability to absorb such appeals.

CMS offered a settlement of clawed back short-stay hospital claims last year, after appeals of RAC clawbacks clogged the federal administrative law system, particularly the Office of Medicare Hearings and Appeals (OMHA). It offered a settlement of 68 cents on the dollar to as many as 800,000 claims under dispute, although the sum that has been paid so far exceeds initial estimates that ran into the hundreds of millions of dollars.

The money paid out has drawn fire from Citizens Against Government Waste, a non-partisan watchdog organization. "The lack of transparency in the hospital settlement process should be a cause of major concern to taxpayers, members of Congress, and Medicare beneficiaries," CAGW President Tom Schatz said in a statement. "Furthermore, the suspension of RAC audits, coupled with this settlement, means that a portion of the $9.7 billion in improper payments that have been recovered by RACs for the Trust Fund over the last several years has now been sent back to the very providers who systematically flooded the OMHA with appeals over denied claims."

To learn more:
- read the CMS statement
- check out the statement from Citizens Against Government Waste