January 5, 2015

Does your practice have any Medicare appeals pending?  If you have appealed a decision within the last several years, be prepared to wait a long time for a ruling.  The backlog of provider appeals has grown so that the system is heavily overloaded, causing at least a two-year delay for appeals to be heard at the Administrative Law Judge (ALJ) level.  One of the key contributing factors is the RAC program.  The number of appeal from RAC determinations has grown exponentially since the program began in 2011.  In 2013 alone, there was a 506 percent increase in appealed RA program claims over fiscal year 2012, versus a 77 percent increase in appealed claims not related to the RA program during that same period of time.

The RACs are paid a hefty commission of approximately 9.0-12.5 percent for denied claims.  They may keep this bounty unless the claim denial is later overturned on appeal.  There is little incentive for the RACs to limit their audits.  “Due to this payment structure and the lack of financial repercussions, RACs are conducting burdensome fishing expeditions that are inaccurate and often overturned on appeal,” the American Medical Association (AMA) stated in a letter to CMS Administrator Marilyn B. Tavenner dated December 3, 2014.  In fact, more than 60 percent of RAC decisions pertaining to Medicare Part B and durable medical equipment combined were overturned on appeal according to the most recent data available from CMS.  The cost of these errors and appeals to providers is significant:  the AMA cited recent survey results showing that the average cost to appeal a RAC audit was approximately $110 per claim.  “In contrast, the average value of the claim being audited was only $86, suggesting that in many cases, even if the physician wins on appeal, they will face a net loss.”

Because of this burden on physicians and the current lack of incentives for the RACs to improve their accuracy, the AMA urged that CMS undertake the following changes to the RAC program:

1. RACs should be subject to financial penalties for inaccurate audit findings and physicians should receive interest when they win on appeal of a RAC audit.
2. Physicians should be permitted to rebill for recouped claims for a year following recoupment.
3. RAC audits of physicians should be performed by a physician of the same specialty or subspecialty licensed in the same jurisdiction.
4. CMS should retain the current medical record request limits and allow medical record reimbursement for physicians.
5. CMS should provide an optional appeals settlement to physicians similar to that provided to hospitals for short-term care.  (CMS offered in late August to pay hospitals 68 percent of inpatient-status claims that remained unresolved, in exchange for the withdrawal of all outstanding RAC appeals.  Two weeks after this offer was made, four providers had applied.)

Some of the recommendations in the above list might have saved anesthesiologists in RAC Region D (Alaska, Arizona, California, Hawaii, Iowa, Idaho, Kansas, Missouri, Montana, North Dakota, Nebraska, Nevada, Oregon, South Dakota, Utah,  Washington and Wyoming) a good deal of time and money had they been implemented by 2009.  Anesthesiologists who were practicing in Region D will recall that Health Data Insights (HDI), their RAC, implemented an automated review based on a faulty interpretation of the Medicare rules for billing evaluation and management (E/M) services in before and after a surgical anesthesia service.  After numerous discussions with ASA, HDI discontinued the automated reviews in March 2010 and agreed to reverse its recoupment orders.

Physicians are not the only parties troubled by the RACs and their performance.  Hospitals currently appeal about half of all RAC claims denials and, like physicians, are finding that it can take two to three years before an appeal is heard.  The American Hospital Association (AHA), two hospitals and a hospital system sued the U.S. Department of Health and Human Services earlier this year in an attempt to clear the backlog.  Last month, however, the U.S. District Court for the District of Columbia dismissed the AHA complaint, finding that the delays were not a threat to patient safety and declining to intervene in a situation where an agency is manifestly underfunded.

The RACs returned about $3.75 billion of incorrect payments made to hospitals and doctors in fiscal 2013, which ended last September, according to CMS' annual RAC report to Congress.  Thus it is not surprising that the four private companies that run Medicare's RAC program will have their contracts extended through 2015.  CGI Federal, Connolly, HDI and Performant Recovery will be able to audit hospitals, doctors and other providers for improper Medicare payments through Dec. 31, 2015, CMS said in a contract award notice posted on December 24, 2014.  Additionally, the RACs will be authorized to perform administrative and transitional activities through April 30, 2017.

The only encouraging news is that CMS named a “Provider Relations Coordinator” in June 2014 to help increase program transparency and offer more efficient resolutions to providers affected by the medical review process.  CMS stated: “Although providers should continue to take questions about specific claims directly to the Recovery Auditor or Medicare Administrative Contractor (MAC) who conducted the review, providers can raise larger process issues to Coordinator.  For example, if a provider believes that a Recovery Auditor is failing to comply with the documentation request limits or has a pattern of not issuing review results letters in a timely manner, CMS would encourage the provider to contact the Provider Relations Coordinator.”  Physicians and others may contact the Coordinator, Latesha Walker, at RAC@cms.hhs.gov.

With best wishes,

Tony Mira
President and CEO