Four Congressman have introduced bipartisan legislation that could potentially rein in Medicare audit contractors and provide a degree of protection to hospitals undergoing investigation for Medicare fraud.
The Medicare Audit Improvement Act was introduced last month by Rep. Sam Graves (R-Mo.) and co-sponsored by Reps. Adam Schiff (D-Calif.), Todd Akin (R-Mo.), and Billy Long (R-Mo.). The bill – H.R. 6575 – takes a multi-faceted approach to imposing operational and transparency guidelines on Medicare contractors, including Recovery Audit Contractors (RACs).
The RAC program began as a demonstration project in 2005 in three states. After collecting over $1 billion during the three-year project, it was implemented permanently and in all states in 2008. Since then, the program has been the subject of debate and consternation among the health care industry. Specifically, many object to the conflict of interest inherent in the RAC program. Auditors are paid on a contingency fee basis and receive a percentage of the improper payments they identify and collect. They therefore have an incentive to boost their fees by focusing on claims with a high rate of error. Additionally, RACs place serious demands on hospital staff and administration during the audit process. H.R. 6575 is seen as a response to these issues.
H.R. 6575 does a number of things. First, it limits the number of documentation requests a Medicare contractor can make during a recovery audit. Contractors are limited to the lesser of 2% of all claims the provider made in the year, or 500 requests during any 45-day period, whichever is less.
Second, the bill levies penalties against RACs if they fail to comply with guidelines meant to improve the audit operation. For example, they must complete the audit by a pre-determined deadline and must communicate with a hospital in a timely fashion when a claim has been denied. The bill would also require RACs to pay a fee to the hospital if a claim denial is overturned on appeal. Perhaps most significant is the requirement that a “widespread payment error rate” must be present before a RAC may conduct a medical necessity audit. The bill sets that rate at 40% or greater.
Third, H.R. 6575 requires greater transparency from RACs. They would be forced to publish on the CMS website the number of audits conducted, the number of denials issued, and the rate at which those denials are overturned on appeal in a given year.
Finally, the bill requires physician validation of any denial based on medical necessity. If a non-physician contractor employee determines that a claim was not medically necessary, a third-party physician must review and concur with that denial before it is valid.
H.R. 6575 takes measures to dial back the power that has been given to Medicare contractors. The bill’s fate in Congress is uncertain, but given its bipartisan nature, its support from powerful organizations like the American Hospital Association, and its promise to lower health care costs and ease the burden on hospitals, it may have a legitimate chance of passage.
Mathew Klein is a Northern Kentucky attorney practicing at Dressman Benzinger LaVelle psc.
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