Congress demands RAC reform

The Medicare Recovery Audit Contractor (RAC) process needs immediate reform, according to a letter to Health and Human Services Secretary Kathleen Sebelius signed by 111 members of the U.S. House of Representatives.

The representatives said in the letter that "CMS should implement reforms to ensure that auditors are charged with identifying real claim coding and medical documentation errors, as well as provide a more transparent mechanism through which providers can be informed of errors so as to avoid them in the future."

The letter further suggested that Congress and the Centers for Medicare & Medicaid Services (CMS) consider an alternative RAC payment model. The current model pays RACs a commission of between 9 percent and 12.5 percent based on the dollar amount of claims they deny. This payment incentive encourages RACs to deny even correct claims, the letter states.

"In fact, according to a November 2012 OIG [Office of Inspector General] report, 72 percent of hospital Medicare Part A appeals that have reached the third level of the Medicare appeals process are overturned in favor of the hospital," the letter states.

When RACs erroneously deny inpatient stays, the letter states, Medicare beneficiaries face higher out-of-pocket expenses under Medicare Part B and in some cases must cover the cost of post-acute care. "This is not the way the Medicare program was intended to operate," the letter says.

The letter further calls on the CMS to adopt the provisions of the Medicare Audit Improvement Act of 2013, which proposed to limit the amount of documentation RACs can request from hospitals.

"Medicare beneficiaries and those who provide them with care have an important stake in ensuring the RAC auditing process is fair and effective," the letter states. "We urge you to take immediate action before we see further problems with the RAC auditing program."

A survey of hospitals last August found medical record requests from RACs had increased 47 percent from 2012's fourth quarter. In the second quarter of 2013, complex audit denials by RACs increased 58 percent; of these, two-thirds of hospitals named medical necessity denials as the most expensive RAC requests, FierceHealthcare previously reported.

To learn more:
- read the letter (.pdf)