Sen. Hatch Concerned About Limits Placed on Medicare Audits Program

BNA’s Health Care Daily Report™ sets the standard for reliable, high-intensity coverage of breaking health care news, covering all major legal, policy, industry, and consumer developments in a...

By James Swann

Nov. 13 — Senate Finance Committee Chairman Orrin Hatch (R-Utah) said he's concerned that the CMS is limiting the scope of a Medicare audit program, which could reduce the collection of improper payments.

In a letter sent Nov. 12 to the Centers for Medicare & Medicaid Services, Hatch said a Nov. 6 decision by the agency to reduce the number of additional documents recovery audit contractors (RACs) can request during an audit “appears to significantly curtail the ability of the [RACs] to operate as Congress intended them to.”

The Nov. 6 update from the CMS said the new annual additional documentation request (ADR) limit for RACs will be 0.5 percent of a facility's total number of paid Medicare claims from the previous year, compared with the current 2 percent of all paid claims.

The ADR limit refers to the number of records a RAC can request to support claims that are being audited.

Hatch said the Medicare fee-for-service program had a 12.7 percent payment error rate in fiscal year 2014, and asked the agency to send him a plan by Dec. 4 detailing how it expects to lower that number.

RAC Reaction

Kristin Walter, a spokeswoman for the Council for Medicare Integrity, a RAC trade association, told Bloomberg BNA Nov. 13 the council is glad that Congress is focusing on the level of improper payments in the Medicare program.

“With more than $46 billion [in improper payments] lost in 2014 alone, the work of recovery auditors should be supported and strengthened in order for Medicare to remain viable for the 50 million American seniors who rely on the program for care,” Walter said.

According to the CMS fiscal year 2014 RAC report, which was released Oct. 15, RACs identified and corrected 1.1 million claims, resulting in $2.57 billion in recoveries.

“These recovery levels, while appreciated, are just a drop in the bucket compared to the waste, fraud and abuse identified by the Government Accountability Office (GAO) and more must be done,” Hatch said.

The head of the GAO, Gene Dodaro, testified before the Finance Committee in October that Medicare had an estimated $60 billion in improper payments in FY 2014.

Request to CMS

Hatch's letter said that any plan the CMS sends to his office should include:

• a review to determine if lowering the additional documentation request limit was appropriate;

• an overall evaluation of the RAC program to determine if the CMS is maximizing the benefits of the contractors;

• recovery targets for the current RAC contracts as well as for future RAC contracts; and

• an explanation of whether the CMS intends to increase the scope of improper payment recoveries, and if not, why.


Hatch said he was aware that the CMS has had to alter some RAC responsibilities to account for the hospital two-midnight policy on Medicare coverage of short stays, but said more robust oversight is necessary.

“With the recent moratorium on [RAC] reviews of inpatient claims, I would not expect CMS to further limit reviews of non-inpatient claims, especially since these are the very areas that have some of the highest error rates,” Hatch said.

RACs have been prohibited from conducting inpatient status reviews, a move intended to allow hospitals to comply with the two-midnight rule.

Under the two-midnight rule, an inpatient hospital admission is considered reasonable and medically necessary—and therefore reimbursable under Medicare—if a beneficiary requires care spanning two midnights.

Inpatient status reviews, which determine if an inpatient should have been admitted or instead classified as an outpatient, are now being conducted by quality improvement organizations.

To contact the reporter on this story: James Swann in Washington at

To contact the editor responsible for this story: Janey Cohen at