Feud between hospitals, Medicare contractors explodes over fraud bill

The longstanding feud between hospitals and Medicare contractors is intensifying as a House bill proposes new restrictions on anti-fraud efforts in Medicare. 

Recovery audit contractors (RACs), professionals who cut mistaken or fraudulent payments from the Medicare program, are pushing back against the bipartisan Medicare Audit Improvement Act, arguing the government will forfeit billions of taxpayer dollars in improper healthcare payments if hospitals are given more leeway.

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RACs charge that the new bill from Reps. Sam Graves (R-Mo.) and Adam Schiff (D-Calif.) will severely undercut their efforts to secure Medicare’s finances at a time when improper payments are rife within the program.

A spokeswoman for the American Coalition for Healthcare Claims Integrity, a nonprofit coalition, pointed to more than $2 billion recovered for Medicare by RACs in 2012. 

“The bottom line is that recovery auditors bring accountability and transparency to the Medicare program,” said Amanda Keating. “If you want to send Medicare crashing to the ground, letting improper payments run rampant is a surefire way to do that.”

Hospitals counter that the RAC program, while valuable for its successes, creates an unreasonable administrative burden that distracts from patient care.

“It’s understandable that the government wants to make sure they’re getting what they’ve paid for, but hospitals are having a very difficult time,” said Michael Ward, senior associate director of policy with the American Hospital Association (AHA).

“It can take them two to three years to receive a final determination on a claim. We need to streamline that system,” Ward said.

The RAC program has existed in some form since 2005, when it began as a three-state demonstration project. Congress later made it national and permanent.

The program divides the country into four jurisdictions, each overseen by a private contractor that is paid based on what it recovers in improper payments.

RACs have garnered praised for their success in restoring money to Medicare’s trust fund. But hospitals have also quarreled with how contractors pursue potentially bad claims. 

A longtime area of conflict is how many RAC audits are overturned on appeal.

Surveys from the American Hospital Association have found that more than 70 percent of RAC audits are later reversed.

But the Centers for Medicare and Medicaid Services (CMS) said last year that only about 2.4 percent of all 2010 claims collected were both challenged and overturned.

Ward said Tuesday that the CMS number is “not reflective of hospitals’ experience.”

“We have a problem with that figure,” he said.

The bill codifies a rule that RACs can only audit 2 percent of a hospital’s claims.

The measure would also impose fines on RACs that don’t follow specific guidelines in the way they interact with Medicare providers.