Whether one is a supporter or not, however, it is time to familiarize ourselves with the Patient Protection and Affordable Care Act, as it will have substantial impact on healthcare providers, patients, employers and taxpayers as it is implemented during the next eight years.


Of particular concern to healthcare providers is the act’s mandated expansion of the RAC program to Medicaid. By no later than December 31, 2010, states must establish programs to contract with one or more recovery audit contractors for the purpose of identifying underpayments and overpayments and recouping Medicaid overpayments. Payments will be made to contractors only on amounts recovered and will be issued on a contingent basis. Individual states may specify the contractor contingency fees for overpayments and underpayments.


The only bright side to RAC expansion to Medicaid is that each state must have an appeal process in place and coordinate recovery efforts with “other contractors or entities performing audits,” plus federal and state law enforcement agencies.


The expansion of the RAC program to Medicaid is not unexpected given the GAO’s recent estimate of $18.6 billion per year in “improper payments” and the apparent lack of meaningful financial return from the MIC audits conducted through the Medicaid Integrity Program.(1) The MIC contactors are not paid on contingency. I anticipate that the RAC Medicaid contractors will be far more aggressive in their audit efforts given the fact they are paid on contingency.


Furthermore, the act mandates expansion of the RAC program to Medicare Parts C and D. Recovery audit contractors are required to be under contract to ensure that every Medicare Advantage plan under part C and every prescription drug plan under part D has an anti-fraud plan in place. The anti-fraud plans must be reviewed along with the prescription drug plans’ estimates of enrollment of high-cost beneficiaries compared to actual numbers of such beneficiaries.

Healthcare providers truly need to tighten their belts as the cost savings and deficit reductions anticipated to emerge as a result of the act will, in my opinion, come in large part from providers though reduced reimbursement and takebacks. As we know, the GAO has described our nation’s long-term fiscal outlook as “unsustainable,” and the GAO has pointed to alleged “improper payments” in the Medicare and Medicaid programs as a major culprit.(2) However, many of the so-called “improper payments” are not improper at all. Rather, many denials involve allegations of lacking medical necessity made hastily by after-the-fact reviewers (often without proper qualifications) with the benefit of the 20/20 hindsight of Monday morning quarterbacks.The high overturn rate in the Medicare appeals process is a testament to the inappropriateness of many of these denials. Sadly, I believe all of these new fiscal pressures ultimately will result in a reduction of the quality of available healthcare despite the promises of those who somehow think we can get more by spending less. Meanwhile, healthcare providers are advised to make sure they are doing everything possible to prepare for an onslaught of audits and pre- and post-payment denials.


About the Author

Linda Fotheringill, Esq, is a founding member of Washington West LLC, and is a nationally recognized expert on denial and appeals management. Ms. Fotheringill successfully assists hospitals across the country overturning “hopeless” denials and generating millions of dollars in otherwise lost revenue.

Contact the Author





1. Appropriations for the Medicaid Integrity Program totaled $105 million by the end of 2008 and will continue at a clip of $75 million in FY 2009 and each year thereafter. Yet government reporting on the fiscal ROI effect of MIC audit activities is sparse. According to Secretary of Health & Human Services Sebelius’s June 2009 Report to Congress on the MIPs’Fiscal Year 2008 activities, “at the end of FY 2008, preliminary findings from the test audits had identified approximately $8 million in overpayments.”


2. On April 22, 2009, the GAO released a report showing substantially increasing “improper payments,” and noted that Medicare and Medicaid comprise 50 percent of reported government-wide improper payments in fiscal year 2008. “Improper payments” reported for 2008 included:

$10.4 billion in Medicare Fee-for-Service

$6.8 billion in Medicare Advantage.

$18.6 billion in Medicaid


According to the GAO, “This Medicaid improper payment estimate represents the largest amount that any federal agency reported for a program in fiscal year 2008.” The GAO notes that “… further work remains to put in place the internal controls necessary to effectively identify and detect improper payments.”


Share This Article