RAC report to Congress disputes accusations of poor accuracy

Without mentioning critics by name, the annual report to Congress on the Medicare Recovery Audit Contractor (RAC) program released this week makes a point of showing measures of its accuracy and its steps to reduce the burden on healthcare providers.

The RAC program is the Centers for Medicare and Medicaid Services (CMS) program for finding incorrect Medicare claims that either underpaid or overpaid the provider. Most (more than 90 percent) of the claims that concern overpayments relate to inpatient stays that should have been outpatient services, and this hits hospitals’ bottom lines.

Between 2011 and 2012, the period covered by the report, the four RACs denied $2.4 billion in payments to Medicare providers, and of that amount, nearly $2.2 billion was for inpatient claims.

The American Hospital Association, the leading organization representing hospitals, points to a 2012 report by the Department of Health and Human Services (HHS) Office of Inspector General (OIG) that found that 72 percent of the time, hospitals that appealed an inpatient claims denial had the RAC’s initial decision overturned on appeal. Because of this high error rate, hospitals must spend a lot of time and effort appealing claims and there is now a two-year backlog in claims appeals that has gotten so bad that some Medicare beneficiaries, who get priority in reviews of claim appeals, are starting to see the effects.

However, in its report to Congress on the RAC program, CMS notes that its data show that RACs are actually pretty accurate. Along with improvements such as requiring RACs to have a medical director on staff and collaborate more closely with the Medicare Administrative Contractors (MACs), CMS now also uses a Recovery Audit Validation Contractor (RVC). The RVC is a an independent entity that employs policy experts and clinicians to give CMS an unbiased review of how accurate the RACs are based on a monthly random sample of claims on which the RAC has made an improper payment determination.

According to the report, in 2012, the RACs had a cumulative a cumulative accuracy score of 92 percent or higher. The most accurate RAC was HDI, with a 97.2 percent accuracy rating. The least accurate was Connolly with a 92.5 percent accuracy rating.

Critics of the RAC program also point out that RACs are paid based on a percentage of the money they succeed in having returned to the government, which creates an incentive to be more aggressive in auditing. However, the report to Congress notes that RACs actually must return the contingency fee if an improper payment determination is overturned at any level of appeal.