02 Mar Medicare RAC Audits Fraught With Delays, High Costs and Lack of Transparency

MedicalResearch.com Interview with:
Ann M. Sheehy, M.D., M.S.
Associate Professor
Division Head, Hospital Medicine
University of Wisconsin Department of Medicine

MedicalResearch: What is the background for this study? What are the main findings?

Dr. Sheehy: Outpatient (observation) and inpatient status determinations are important for hospitalized Medicare beneficiaries. The Recovery Audit program, more commonly known as the RACs (Recovery Audit Contractors), is charged with surveillance and enforcement of such status determinations. Surveillance in the Medicare program is necessary, and Medicare fraud and abuse should not be tolerated. However, there are increasing concerns regarding RAC accuracy, auditor financial incentives, and the volume of audits and overpayment determinations auditors allege. We therefore studied Complex Medicare Part A RAC audits at 3 academic medical centers, the University of Wisconsin, the University of Utah, and Johns Hopkins, to determine the impact and trends of such audits.

There was a nearly 300% increase in RAC overpayment determinations in just 2 years at the study hospitals. Each year, the hospitals won a greater percent of contested cases, winning 68.0% of cases with decisions in 2013. Two-thirds of all favorable decisions for the hospitals occurred in the discussion period. Because discussion is not considered part of the formal appeals process, this is omitted from reports of RAC accuracy. None of the overpayment determinations contested the need for the care delivered, rather contested the billing location, outpatient or inpatient. The hospitals averaged 5 FTE each to manage the audit and appeals process. Claims still in appeals had been in process for a mean of 555 days without decisions.

MedicalResearch: What should clinicians, patients and CMS officials take away from your report?

Dr. Sheehy: This study shows that there is a need for increased transparency in the RAC system, in particular, reporting of what happens in the discussion period. Reports of RAC accuracy are not meaningful without including what happens in discussion. In addition, our data support a need for greater auditor accountability. The RAC program is generating an enormous amount of work and rework for hospitals without any repercussions for auditor error, even as the hospitals won a greater percent of contested cases each year. The appeals process must also be reformed. The study hospitals lost cases when they missed filing deadlines, yet the appeals process, now exceeding 555 days at the study hospital, meets no similar penalty when such deadlines are not met on the auditor/contractor side.

MedicalResearch: What recommendations do you have for reform of this process?

Dr. Sheehy: This study confirms a need for greater auditing transparency and accountability as outlined above.

Citation:

Observation and inpatient status: Clinical impact of the 2-midnight rule
Sheehy AM¹, Caponi B, Gangireddy S, Hamedani AG, Pothof JJ, Siegal E, Graf BK.
J Hosp Med. 2014 Apr;9(4):203-9. doi: 10.1002/jhm.2163. Epub 2014 Feb 14.

MedicalResearch.com Interview with: Ann M. Sheehy, M.D., M.S. (2015). Medicare RAC Audits Fraught With Delays, High Costs and Lack of Transparency 

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Last Updated on March 2, 2015 by Marie Benz MD FAAD