Medicare RAC Program a Burden, Providers Tell Senate Committee

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By James Swann  


The Medicare Recovery Audit Contractor program creates an excessive administrative burden and results in the denial of legitimate claims, two representatives from separate health care organizations told a Senate Finance Committee hearing June 25.

Jennifer J. Carmody, director of reimbursement services for the Billings Clinic in Montana, testified that her clinic has had to devote increasing levels of administrative resources to handle RAC issues.

“Billings Clinic currently estimates that it spends roughly 8,600 work hours and approximately $240,000 per year for internal staff to manage audits and appeals,” Carmody said. “That is in addition to the $45,000 per month (or over $500,000 per year) that Billings pays an outside contractor … to help with medical necessity reviews,” she said.

Carmody outlined several steps that Congress and the Centers for Medicare & Medicaid Services could take to improve the RAC program, including:

• issuing clear and concise guidelines on coding and other billing criteria;

• limiting the number of medical records RACs can request;

• stopping RACs from continuing to audit claims that have historically low error rates; and

• making the RAC process less adversarial, allowing health care organizations to devote more money to compliance and physician education.


Carmody also said RACs need to do better at informing providers of what they want.

The Medicare RAC program is designed to detect and recover improper Medicare payments.

Medical record requests occur during complex reviews, which are based on human review of medical records related to a claim. RACs also conduct automated reviews, which do not require a person to review medical records.

Inpatient Versus Outpatient

Suzie Draper, vice president of business ethics and compliance at Intermountain Healthcare in Salt Lake City, also testified on the administrative burdens of RACs. She said CMS needs to give providers greater clarity on the scope of RACs, including on how they handle situations where a patient is admitted as an inpatient even though he or she could also be classified as an outpatient.

For example, “if a patient's condition indicates to a physician that an inpatient admission is called for, but the patient subsequently improves more quickly than the original expected length of stay, the RAC will in hindsight determine that the physician's original assessment was incorrect,” she said.

Draper also said Intermountain has added 22 full-time employees to handle RAC requests. She also said that processing more than 16,000 medical records requested by RACs has placed a large burden on Intermountain's health information management team.

Beyond RAC requests, Draper said Intermountain has received identical requests from other government auditors and that Intermountain has “also experienced the RAC requesting the same records for review for the same issue more than once, even though this is not allowed according to the RAC Statement of Work.”

Reaction From Senators

Finance Committee Chairman Max Baucus (D-Mont.) said that while he supported the idea of auditing Medicare providers, he was concerned about the burden RACs have placed on providers.

He said CMS should give its contractors incentive to focus on the riskiest providers and services, improve provider education, and make the RAC appeal process more efficient.

“While some overlap may be necessary, Congress should work to simplify the way the contractors interact with providers,” Baucus said.

Ranking member Orrin G. Hatch (R-Utah) also said he was concerned by the increasing burdens. He said he has heard from providers that occasionally “RAC audits seem arbitrary and that the people conducting these reviews do not fully understand Medicare requirements or acceptable medical practice.”

Hatch said he was in favor of limiting the amount of medical records RACs can request from providers, as well as allowing providers to send electronic copies of medical records.


Testimony from the hearing is at

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