[lightbox link=”https://columbusohmedicalbilling.com/wp-content/uploads/2015/01/RAC-Recovery-Chart-20131.jpg” thumb=”https://columbusohmedicalbilling.com/wp-content/uploads/2015/01/RAC-Recovery-Chart-20131-300×284.jpg” width=”300″ align=”left” title=”RAC-Recovery-Chart-20131″ frame=”true” icon=”image”]The Medicare Recovery Audit Contractor (RAC) program identified $3.75 billion in improper payments in 2013, according to CMS’ annual RAC report to Congress. That represents an increase over 2012, when the RAC program recovered approximately $2.4 billion. That, in turn, was an increase over 2011, when the RAC program recovered less than $1 billion.

You can see the trend here—RACs are aggressively looking for monies to recover.

The Recovery Audit Contractor (RAC) program was created through the Medicare Modernization Act of 2003 (MMA) to identify and recover improper Medicare payments paid to healthcare providers under fee-for-service (FFS) Medicare plans.

For 2013, the bulk of improper payments were overpayments ($3.65 billion), according to CMS’ report, but the RAC program also identified $102.4 million in underpayments to providers in 2013.

CMS also reported that providers initially appealed only 30.7% of claims found to be have been overpaid, and that’s not surprising when you consider that only 9.3% of RAC claims overall were overturned on appeal in 2013. Providers may suspect that appeals will not be successful, and decide not to dedicate scarce time and resources to those efforts.

In some cases, practices have spent thousands of dollars in time and attorney fees to combat false RAC overpayment claims. A fairly well known example is this North Carolina practice that successfully battled an audit contractor—at a cost of $300,000 and thousands of hours of staff time.

The program has been criticized by physicians as overly aggressive, stemming from the fact that RAC contractors are paid on a contingency basis, earning a percentage of the improper payments they identify and correct.

Congress has pushed HHS to address long-standing provider concerns that the Recovery Audit Contractor (“RAC”) program, which operates on a contingency basis, has created incentives for RACs to be overly aggressive.

In fact, some medical associations have been lobbying for changes to the program. “Recovery audit contractors have run amok and act more like bounty hunters than impartial judges,” said Rick Pollack, executive vice president of the American Hospital Association, in a May interview.

Providers received a short reprieve when CMS put RAC audits on hold in February while it finished procuring new contracts, but the program was restarted in early August.

What does this mean to your practice?

What all of the anxiety over RACs means to you is that it’s more important than ever to be careful with your coding and billing.

As we noted in a recent blog post, 55% of claims for E/M services were incorrectly coded and/or lacking documentation in 2010, resulting in $6.7 billion in improper Medicare payments.

That report found that of the 55%, 42% of E/M service claims in 2010 were incorrectly coded, which included both upcoding and downcoding (i.e., billing at levels higher and lower than warranted, respectively), and 19 percent were lacking documentation. That means a large percentage of the “errors” identified by CMS involved billing for E/M codes that were lower than the level of service actually provided.

Why do providers and billers downcode? Because they’re worried about audits, or don’t fully understand which code is appropriate for the encounter.

Either way, what this tells us is that providers need electronic medical records software and medical billing software that help them code correctly—but also optimally. Every practice wants to—and should—do everything it can to both:

  1. Avoid being the target of a RAC audit
  2. Stop leaving money on the table through downcoding or coding errors

If you are in any doubt about whether your coding is correct and optimized, you should evaluate your options. Now that RAC audits have been restarted for 2014, and your practice is facing possible CMS penalties in 2015 and beyond, you should insure that you’re billing for every dollar you deserve, and yet are protected from the nightmare of an audit.