Hospitals Complain to Senate About RAC Practices

Healthcare providers took advantage of an opportunity to complain about Medicare recovery audit contractors (RACs) and their practices at a hearing Tuesday before the Senate Finance Committee.

Representatives from hospitals testified that RAC auditors are creating unintended consequences, such as:

Increasing out-of-pocket costs to patients. As Medicare Recovery Audit Contractors crack down on hospitals for allegedly filing improper claims for inpatient stays, many providers are responding proactively by submitting claims for observation status. This in turn places a burden on the patient who must pay higher copays and other out-of-pocket expenses. “These changes are confusing and upsetting to patients who don’t understand why they were in a hospital bed but still considered an outpatient,” testified Jennifer J. Carmody, director of reimbursement services for the Billings (Mont.) Clinic.

Increasing expense to hospitals. The RAC audit program requires hospitals to divert resources from patient care to processing and defending RAC denials. Suzie Draper, vice president of business ethics and compliance at Intermountain Healthcare in Utah, testified that her organization has 22 full-time employees.

Penalizing hospitals for making patients healthy. “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,” Draper said. “Providers who have worked diligently to improve patient outcomes so that patients improve rapidly are essentially penalized for their efforts to improve patient care and shorten length of stay.”

Representing RACs, Robert Rolf, vice president of CGI Federal Inc., testified that his firm is paid based upon what it recovers, and if a denial is overturned, those commissions must be returned to the government. “Contrary to some assertions, the contingency approach does not encourage the pursuit of questionable recoveries or discourage the pursuit of underpayments,” he said.

“There is a lot of unrecovered money still out there and RACs are an important component in the effort to get some of that money back where it belongs,” Senator Orrin Hatch (R-Utah) said. “But we need to make sure they are going about it the right way.”

Read the full story by Kaiser Health News/Washington Post here.