Last Thursday, in a hearing before the Senate Special Committee on Aging exploring the relationship between Recovery Audit Contractor (RAC) audits and an increase in claims for hospital observation stays, a bipartisan duo of senators urged the Centers for Medicare & Medicaid Services (CMS) to shift the focus of RAC audits to providers that have high levels of claims denial. CMS officials seemed to agree with the senators’ concerns, suggesting that RAC audits will increasingly target providers with higher claims denial rates.
The RAC program was created under the Medicare Modernization Act of 2003 to detect and correct improper Medicare payments. In her opening remarks, Sen. Claire McCaskill (D-MO) criticized the program for focusing its energy on “auditing the appropriateness of short-term [hospital] stays.” As a result, Sen. McCaskill stated, CMS spends more resources in the inpatient setting at the expense of others. Instead, RAC should target providers with higher denial rates, she stressed. “I’m concerned that more than half the RAC audits are for inpatient hospital admissions, when that appears to be out of sync with both the proportion of inpatient claims to total Part A and B claims, as well as out of sync with where CMS’s own contractors say there are higher improper payment rates,” she said.
Committee Chairwoman Susan Collins (R-ME) similarly urged CMS to refocus RAC audits on so-called “outliers” – providers with high rates of denied Medicare claims – “rather than applying the compliance efforts across the board.” In response, Sean Cavanaugh, deputy administrator and director of CMS, said that the agency has in fact already started to change the RAC process. “We’ve already begun with the current RAC contracts to require them to focus on providers where they find a high denial rate and to move on from providers who are consistently billing in accordance with our rules,” he said. Cavanaugh added that CMS is also considering provider feedback regarding its “two-midnight” policy – which clarifies when a patient acquires “inpatient” status under Medicare – and will respond in a proposed rule later this summer.
If implemented, the senators’ suggestions to shift the focus of the RAC process could ease a massive audit appeals backlog in CMS, which has come under fire from lawmakers and providers. At the same time, providers that have higher rates of claims denials should be aware that RAC auditors may soon come knocking.