Congressman introduces bill to reform Medicare auditing program

Rep. Samuel Graves (R-Mo.) introduced legislation Oct. 16 to reform the Medicare Recovery Audit Contractor (RAC) program, which the American Hospital Association (AHA) has criticized for “wasting hospital resources and contributing to growing health care costs.”

The bill, titled the Medicare Audit Improvement Act of 2012, would amend the Social Security Act to “improve operations of recovery auditors under the Medicare integrity program, to increase transparency and accuracy in audits conducted by contractors.”

If passed into law, the legislation would impose fees upon recovery audit contractors who deny claims that are later overturned on appeal. Contractors also would face financial penalties for failing to meet program requirements, such as meeting deadlines established by the Department of Health and Human Services (HHS).

The bill proposes that claims denied due to medical necessity receive physician validation, according to a process to be developed by HHS, and would ease rules restricting hospitals to resubmit claims that have been denied. It would also limit contactors’ additional documentation requests to 2 percent of all claims or to 500 during a 45-day period, and require public posting of individual contractor’s audits, including quantity, type, amount denied, appeals filed and appeals resulting in reversal.

The AHA issued a response strongly supporting the bill the same day it was introduced. “No one questions the need for auditors to identify billing errors; but the flood of new auditing programs, along with confusing and conflicting regulations, is drowning hospitals with a deluge of redundant audits, unmanageable medical record requests and inappropriate payment denials,” read a letter to Graves authored by AHA executive vice president Rick J. Pollack, PhD.

“Hospitals are experiencing a significant number of inappropriate denials amounting to hundreds of thousands of dollars in unjust recoupment payments for medically necessary care,” Pollack continued. “According to AHA data, hospitals are successfully overturning RAC denials 75 percent of the time. The Medicare Audit Improvement Act of 2012 provides much need guidance for medical necessity audits, keeping auditors out of making medical decisions that should be between patients and their physicians.”

The RAC program was established as a pilot by the Medicare Modernization Act of 2003, made permanent by the Tax Relief and Health Care Act of 2008 and extended to Medicaid by the 2010 Patient Protection and Affordable Care Act. The Medicare Audit Improvement Act of 2012 has not yet been referred to committee, but specifies an effective date of Jan.1, 2013 or later if passed.