At a recent roundtable, the Senate Special Committee on Aging criticized the Medicare claims review process, suggesting it unfairly burdened providers and failed to improve program integrity. The senators blamed the current payment system for the auditors and suggested moving from an arrangement that currently incentivizes recovery of overpayments to one thatincentivizes reducing improper provider payment rates over time.

Recovery Audit Contractors (“RACs”) are responsible for auditing claims submitted to Medicare in order to monitor and recover improper payments made to providers. The RACs are compensated based on their recoveries of improper payments. The Committee decried the current payment arrangement, finding it could provide “an incentive to keep improper payment rates high,” echoing sentiments previously voiced by long-term care providers. The Committee also found that the Centers for Medicare & Medicaid Services (“CMS”) has increased the number of audits, further burdening provider facilities with requests. Some facilities receive so many audit requests that they have had to hire employees to deal solely with the RACs. Even more troubling, the Committee noted that as the number of CMS audits increase, the rate of improper payments increase as well, instead of decreasing due to the heightened scrutiny on providers.

Based on these criticisms, the Committee recommended that the RACs instead be compensated through an incentive-based arrangement that tracks the auditors’ effectiveness at reducing the rate of improper payments over time. This type of arrangement would shift the auditors’ focus from recovering large amounts of money from providers, currently estimated at more than $8 billion returned to the Medicare Trust Fund, to decreasing the amount of improper payments by working with providers to ensure accuracy in their billing practices.

The change in focus would be especially timely, as the RACs returned a record $100 million inunderpayments from CMS to providers in the third quarter of 2014. In the same period, the auditors collected $471.5 million for CMS. This number represents a 22% decline in the amount of overpayments returned by RACs in part because the auditors are not conducting post-payment reviews as new auditor contracts with CMS are still pending. Hall Render will continue to monitor this issue and any changes as they develop.

To access the complete Special Committee Report, please click here.

To access the CMS numbers for RAC recovery in the third quarter of 2014, please click here.

Patrick C. Walsh