CMS Recovery Audit Program Annual Report to Congress for 2013

On September 29, the Centers for Medicare and Medicaid Services (CMS) released “Recovery Auditing in Medicare for Fiscal Year 2013,” its annual report to Congress regarding the agency’s Recovery Audit Contractor (RAC) program. The report provides an overview of the amount and types of overpayments and underpayments made in the Medicare fee-for-service program that were identified by recovery audit contractors (RACs) over the course of the previous year. RACs identify and collect overpayments made to providers if there were incomplete or improper medical documents accompanying a claim, if the provider incorrectly coded a procedure, or if a provider allegedly provided care that was considered unnecessary. RACs also identify underpayments to providers.

The following are highlights from the Fiscal Year 2013 report:

  • The RAC program recovered $3.65 billion in Medicare overpayments in 2013 (as compared to $2.3 billion in Medicare overpayments in 2012).
  • RACs identified $102.4 million in Medicare underpayments for 2013.
  • RACs receive a percentage of the Medicare overpayments they recoup.  In 2013, RACs received over $300 million in these contingency fees.
  • After contingency fees and administrative costs of the RAC program, $3.03 billion was returned to the Medicare trust fund.
  • 94 percent of overpayments identified under the RAC program were for inpatient hospital claims.  These overpayments were often the result of what were considered by the RACs to be medically unnecessary short-stay admissions.
  • $1.8 million in overpayments to skilled nursing facilities were identified.
  • $74 million in overpayments to durable medical providers were identified.
  • $46 million in overpayments for outpatient providers were identified.
  • Providers filed 836,849 Medicare claim appeals.
  • Only 18.1 percent of claims appeals were overturned in favor of providers.

According to the RAC trade group association, the American Coalition for Healthcare Claims Integrity, the report proves the need for the RAC program and highlights CMS’s need to ensure proper oversight of Medicare claims. Provider and hospital groups, such as the American Hospital Association (AHA), maintain that the RAC program still has many flaws including the alleged duplication of RAC payment reviews. CMS however, says that claims reviewed by one RAC cannot be reviewed by another RAC. AHA and other provider representatives also question whether the RAC program is as sound as the report indicates. This is especially pertinent in light of CMS’s decision to move forward with an appeals settlement in which CMS would reimburse 68 percent of a provider’s outstanding claims if those providers drop all claims appeals.

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