The RACs are back. 

On Oct. 31, the Centers for Medicare & Medicaid Services (CMS) announced that it has awarded the next round of Recovery Audit Contractor (RAC) contracts (but I think they should have used the word “rewarded” instead of “awarded” since, at least in the past, CMS has used the RAC program to reward government contractors for doing a terrible job). 

I know, I know. Here I go again!

The truth is, I am completely opposed to the RAC program for one main reason: no oversight. In the last round of contracts, RACs had, on average, something like a 60-80-percent reversal rate on appeals, particularly at the administrative law judge (ALJ) level. In fact, I would say that the RACs are mostly responsible for us now having what will likely exceed a 15-year backlog of ALJ appeal requests in the near future. 

Imagine if 60 percent of your work was considered to have been done improperly? How long would you still have your job? Imagine if a judge in your area had his or her rulings overturned on appeal two-thirds of the time? How long would they remain on the bench? It gives a whole new meaning to the expression “good enough for government work.”

As a taxpayer, I am all for curbing fraud, waste, and abuse. How about you? Who among us would not agree with that? Well, then how is it that we allowed the RAC program to go on for so long, since in and of itself, it is the epitome of government “fraud, waste, and abuse.” On the RAC announcement Web page, CMS includes the following:

“These awards continue the implementation of many of the Recovery Audit Program enhancements designed to reduce provider burden, enhance program oversight, and increase transparency in the program.”

I am bemused. How does this medically unnecessary and administratively complex government program reduce provider burden? It’s just the opposite. It has been widely accepted that the RAC program is not only ineffective and costly (e.g. increases in appeal costs around the country), but it significantly adds to provider burden. And I will accept that it is transparent when I get access to the entire RAC warehouse database so I can statistically validate their methods and findings. I also fail to see where there is any oversight, because if there was, the RAC program would have been replaced three years ago. 

There are some specified enhancements for the new round of contracts, per CMS. For example, the new lookback period is six months, not three years. The window to complete the review and notify the provider has gone from 60 days to 30 days, but we already know that the government would never enforce its own rules on its own auditors. 

Just look at the ALJ appeals program. The number of additional documentation requests (ADRs) allowed will be tied to error rate, but since the RAC error rate on determining the provider error rate has been so high, this is certainly not a reliable indicator. CMS is even going to establish a program to measure provider satisfaction with the RAC program. Really? Now that is an example of government waste. You don’t have to be an expert in predicting to know how that is going to turn out. 

CMS says that RACs won’t receive their contingency fees until after the second level of appeal is exhausted. How about mandating that they have to wait until after the ALJ hearing, since it is more likely than not that their estimated overpayment will be significantly reduced? Do we really think that the government is going to reclaim funds from the RAC some 10 or 15 years later (after the ALJ hearing)? How about we put it in escrow and see how that affects their accuracy rate? 

There is a requirement for a 95-percent accuracy rating for automated reviews. In 2014, automated reviews accounted for 2 percent of the amount recouped ($96 million) while complex reviews, wherein the RACs actually review the medial record, accounted for 93 percent of recoupments ($2.3 billion). That’s like saying someone has to drive carefully in their driveway, but not when they hit the streets. 

How about maximizing the error rate on complex reviews? I have an idea: give the RACs a baseline of a 10-percent margin of error, meaning that they can continue to make auditing mistakes on up to 10 percent of their findings. Anything over that, and they have to pay the provider $100 plus 10 percent of the claim value for every one reversed over the 10-percent error rate. 

Anyone think that would motivate them to get it right the first time? Probably not, but at least it would lessen the burden on our providers. And if they don’t maintain the 95-percent accuracy rate, guess what the penalty is? They have to reduce the number of ADRs for the audit.  

That is, without a doubt, the stupidest thing I have encountered in a very long time. That’s like telling my kids that if you don’t take out the garbage, you won’t be able to put as much in the garbage next week. Wow. That’s incentive!

In general, CMS has continued a program that by any standard was a failure. I know that there are groups that tout the success of the RAC program, but they only do so in terms of dollars. They will tell you that the RAC program returned $2 billion a year back to the trust fund, but if you look at their error rates, you can interpret that to say that they stole over $1 billion a year from healthcare providers. Since when do we give recoupment rates preference over due process?

Bottom line? Monday was Halloween, and the RACs are back, dressed as clowns. Providers beware!

And that’s the world according to Frank.

About the Author

Frank Cohen is the director of analytics and business intelligence for DoctorsManagement, a Knoxville, Tenn.-based consulting firm. Mr. Cohen specializes in data mining, applied statistics, practice analytics, decision support, and process improvement.

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