Kusserow’s Corner: Congress Calls for CMS to Fix the Medicare RAC Program

In two recent blog articles (ALJ Hearings for Medicare Claims Appeals is Broken; New Appeals Suspended for Two Years and AHA Lambasts CMS for Two Year Backlog on Claims Appeals), I reported on a growing crisis related to the Recovery Audit Contractor (RAC) Program. I first reported on the that “due to the rapid and overwhelming increase in claims appeals, …OMHA temporarily suspended the assignment of most new requests for an Administrative Law Judge hearing.” This will stay in effect for at least two years, in order to allow the Office of Medicare Hearings and Appeals (OMHA) to catch up on almost 375,000 claims already backlogged to its 65 administrative law judges (ALJs). This decision is having a huge affect on providers who had a Medicare Contractor disallow claims paid. This means that the money may be withheld until the appeal process decides whether it should be returned to the provider, or not.

Soon following this decision, I reported that the American Hospital Association weighed in and noted that this is not a new problem and prior to OMHA’s suspension of appeals assignments, the ALJs were not adhering to their statutory deadline. They stated that “Excessive inappropriate denials by Medicare Recovery Audit Contractors (RACs) are a direct driver of the ALJ backlog. Hospitals have been put in an untenable position in which the nearly unfettered ability of RACs to churn out erroneous denials forces them to pursue appeals in order to receive payment for medically necessary care, while the inability of OMHA to manage the appeals process within the timeframes required by the Social Security Act holds that payment hostage.”

In response to the huge outcry from the provider community, OMHA announced it would be hosting a Medicare Appellant Forum on February 12, 2013 to provide further information and explain initiative underway to redress the problem and to provide information on measure being taken to increase efficiency of the operation.

I predicted that the problem would draw Congressional attention. Just two days in advance of this meeting, a bipartisan group of 111 House members signed a letter to HHS Secretary Sebelius, calling for a fix of the Medicare fee-for-service RAC, including strengthening oversight and reducing the RAC appeals backlog. They cited the OIG report of November 2012 that noted 72 percent of Part A appeals that reach the ALJ are decided in favor of the provider and against the RAC. They took particular note of the OMHA backlog and suspension of assignment of new cases to ALJs while they try to catch up. The lawmakers call for reforms. They stated that the RAC program lacks sufficient oversight from the CMS, resulting in heavy administrative burdens for hospitals that must defend legitimate claims that are denied and higher costs for Medicare beneficiaries whose inpatient stays are improperly denied by RACs. They believe steps are needed to ensuring the RAC process is fair and effective and strongly urged that CMS:

  • dedicate more resources to help resolve the backlog issue;
  • consider an alternative payment arrangement with RACs to remove improper incentives; and
  • adopt the commonsense reports supported by 184 bipartisan Members of Congress included in the Medicare Audit Improvement Act of 2013.

On the Senate side, the Appropriations Committee has expressed concerns about both the growing backlog of cases at OMHA and the high rate of claims overturned, and urged CMS to work with providers at the early stages of the audit process so that only a small number of cases are ultimately appealed and the loss of provider time, energy, and resources due to incorrect audit results are limited. They also recommended additional funding for OMHA to hire more ALJ teams and increase its capacity to process its rising caseload.

The OHMA forum will have a lot to talk about.

Richard P. Kusserow served as DHHS Inspector General for 11 years. He currently is CEO of Strategic Management Services, LLC (SM), a firm that has assisted more than 3,000 organizations and entities with compliance related matters. The SM sister company, CRC, provides a wide range of compliance tools including sanction-screening.

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Copyright © 2014 Strategic Management Services, LLC. Published with permission.