I just read an article published by Modern Healthcare[1], the recovery auditor contractors (RACs) recouped some $3.75 billion in overpayments made to hospitals and physicians in 2013. I am not sure how that achieves the ranks of bragging rights, but for the RAC trade group, it apparently does. And in the article, this fact is followed by an out-and-out lie, which states that only 18.1 percent of all claims that providers took to Medicare’s appeal process were overturned in their favor.

First of all, how in the heck would the government have any clue as to the disposition of claims within a 12-month window when it takes close to three years to get those claims to the ALJ level? Maybe they should have been a bit more truthful and said that, based on the disposition of appeals that were able to be adjudicated during the same calendar year as the findings, 18.1 percent were reversed on appeal. I mean, I am dumbfounded. I read that and was slack-jawed.

If this is true—that only 18.1 percent of appealed claims end up reversed in favor of the provider—then why would the Centers for Medicare & Medicaid Services (CMS) have just offered a settlement proposal that returns 68 percent of claimed overpayment amounts back to the provider? Are they lying, or are they just stupid? It has to be one of the two. And I don’t think that they are stupid. For Pete’s sake, guys, you don’t have to be a conspiracy theorist to see what is going on here. There is simply no way that everyone else is wrong about the reversal rate and the RAC trade group is right. Sorry, boys, I have a lot more faith in the American Hospital Association results, CMS’ own published results on final determinations, and even my non-scientific living-room surveys than the noise that you are putting out to the public.

Some time ago, I read a blog post in which the author quoted a CMS statistic that only 2.3 percent of overpayment findings were eventually reversed in favor of the provider on appeal. His conclusion was that the auditors must be doing a great job. Actually, it was just another lesson on how to lie with statistics. The truth was, only 2.7 percent of those findings were appealed, so in the end, of those that were appealed, 44 percent were reversed in favor of the provider. And what is going on here? Are the RACs bragging that they mess up only 18.1 percent of the time? Any idea how much that 18.1 percent cost providers? Hey, if you want to really man up and do the right thing, then how about you reimburse the providers for their costs in appealing those 18.1 percent wrongful decisions? But that’s not what the RAC program is about, is it? Imagine if you had a local judge in your community who had his or her decisions reversed by an appeals court almost one-fifth of the time. How long would that judge be on the bench? If any of you were to do your jobs correctly only 80 percent of the time, how long would you have your jobs?

It’s time for a reality check: The rate of reversal is not 18.1 percent. That’s nothing more than sleight-of-hand with the numbers. One person called it fuzzy math, but that’s an insult to fuzzy math, because at least fuzzy math has some foundation in reality. I am convinced that the real number is much closer to 80 percent, and even conservatively at 72 percent, based on the AHA data. It’s quite a coincidence that when you factor the AHA’s estimate of 72 percent with the approximately 14.2 percent cost of appealing to the ALJ level, the average reversal value is 68 percent—exactly what CMS has just proposed in its new settlement agreement.

The RAC trade group has absolutely no real or valuable data to support its claims. It’s smoke and mirrors and shameful, at best. The reason its estimate is so low is so few, if any, of the appeals actually made it to the administrative law judge level in a timely manner. And you can blame that on the RACs as well. It is precisely because the reversal rate is so high, because the RACs have done such a dismally poor job, that there is a backlog of over half a million appeals waiting for ALJ hearings and a two-year moratorium on even scheduling the hearing. They are using an abuse of due process as a way to manipulate their numbers.

If you really want to get an accurate handle on the reversal rate, wait two or three years until all of the appeals for 2013 are adjudicated, and match the findings back to the number of appeals in 2013. I guarantee you will get a much higher and more accurate number. This kind of asymmetry of information has no place in public discourse, because rather than stimulate an honest and open exchange of ideas, it obfuscates the truth.

From my perspective, it hurts the efforts of everyone affected to get compliance reform in place. I’m not asking CMS for any favors, just fairness and honesty, and that is something that has long been missing from the equation.

And that’s the world according to Frank.

About the Author

Frank Cohen is the Director of Analytics and Business Intelligence for DoctorsManagement. He is a healthcare consultant that specializes in data mining, applied statistics, practice analytics, decision support, and process improvement. Mr. Cohen is also a member of the National Society of Certified Healthcare Business Consultants (NSCHBC.ORG).

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[1] Bob Herman, “RACs recouped $3B for Medicare in 2013,” Modern Healthcare, (September 29, 2014)

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