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RAC Audits: How to Deal with Concurrent, Overpayment Accusations in Multiple Jurisdictions

You are a Medicare health care provider. You perform health care services across the country. Maybe you are a durable medical equipment (DME) provider with a website that allows patients to order physician-prescribed, DME supplies from all 50 states. Maybe you perform telemedicine to multiple states. Maybe you are a large health care provider with offices in multiple states.

Regardless, imagine that you receive 25, 35, or 45 notifications of alleged overpayments from 5 separate “jurisdictions” (the 5th being Region 5 (DME/HHH – Performant Recovery, Inc.). You get one notice dated January 1, 2018, for $65,000 from Region 1. January 2, 2018, you receive a notice of alleged overpayment from Region 2 in the amount of $210.35. January 3, 2018, is a big day. You receive notices of alleged overpayments in the amounts of $5 million from Region 4, $120,000 from Region 3, and two other Region 1 notices in the amount of $345.00 and $65,000. This continues for three weeks. In the end, you have 20 different notices of alleged overpayments from 5 different regions, and you are terrified and confused. But you know you need legal representation.


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Do you appeal all the notices? Even the notice for $345.00? Obviously, the cost of attorneys’ fees to appeal the $345.00 will way outweigh the amount of the alleged overpayment.

Here are my two cents:

Appeal everything – and this is why – it is a compelling argument of harassment/undue burden/complete confusion to a judge to demonstrate the fact that you received 20 different notices of overpayment from 5 different MACs. I mean, you need a freaking XL spreadsheet to keep track of your notices. Never mind that an appeal in Medicare takes 5 levels and each appeal will be at a separate and distinct status than the others. Judges are humans, and humans understand chaos and the fact that humans have a hard time with chaos. For example, I have contractors in my house. It is chaos. I cannot handle it.

While 20 distinct notices of alleged overpayment is tedious, it is worth it once you get to the third level, before an unbiased administrative law judge (ALJ), when you can consolidate the separate appeals to show the judge the madness.

Legally, the MACs cannot withhold or recoup funds while you appeal, although this is not always followed. In the case that the MACs recoup/withhold during your appeal, if it will cause irreparable harm to your company, then you need to get an injunction in court to suspend the recoupment/withhold.

According to multiple sources, the appeal success rate at the first and second levels are low, approximately 20%. This is to be expected since the first level is before the entity that determined that you owe money and the second level is not much better. The third level, however, is before an impartial ALJ. The success rate at that level is upwards of 75-80%. In the gambling game of life, those are good odds.


RAC Audits: “The Big Bad Wolf” Is Coming to Medicare Advantage…Soon! Beware!

Recovery Audit Contractors (RACs) have been prevalent in traditional Medicare and Medicaid for years now. However, RACs have not knocked on the doors of providers who accept Medicare Advantage yet, despite the Affordable Care Act (ACA) requiring them to do so by 2010. Are RACs going to target Medicare Advantage? Keep reading…

RACs are like the Big Bad Wolf in the “Three Little Pigs.” “Little pig, little pig, let me in!” “Not by the hair of my chinny chin chin!” “Then I’ll huff and puff and blow your house down!”


According to the Center for Medicare and Medicaid Services (CMS), “the Recovery Audit Program’s mission is to identify and correct Medicare improper payments through the efficient detection and collection of overpayments made on claims of health care services provided to Medicare beneficiaries, and the identification of underpayments to providers so that the CMS can implement actions that will prevent future improper payments in all 50 states.”

But the above explanation fails to paint the whole picture.

RACs are compensated by contingency fees. In other words, the more claims they find noncompliant, the more money they are paid. Plus, RACs extrapolate their findings. If a RAC finds $6000 in noncompliant claims, then they extrapolate that number across a universe (usually three years) and come up with some exorbitant number. See blog and blog. The financial incentives create overzealous auditors.

What type of providers accept Medicare Advantage? Advantage providers include optical providers, some durable medical equipment (DME), dentists, nutritionists, and some providers of wellness programs. The Medicare Advantage recipients usually pay a premium. Approximately 15.8 million people rely on Medicare Advantage policies.

CMS has been looking to implement the RAC program on Medicare Advantage for months…if not years. Now, it appears, that the RAC program will be leashed on Medicare Advantage very soon.

“And I’ll blow your house down!!”

CMS released a request for information in December 2015 on how to incorporate RACs into Medicare Advantage, but made little progress until recently.

My “sources” (ha – like I am a journalist) have informed me that the RAC program will soon be released on the Medicare Advantage providers. So be forewarned!!

Don’t be:


Caught with your pants down!

Medicare RAC Audits Are Spreading in 2016

By now, however unwanted, health care providers are intimately acquainted with RAC audits. If you are one of the lucky providers who has not had the pleasure of undergoing a RAC audit and accept Medicare/caid, then you should go buy lottery tickets.

For Medicare providers, the RAC audits have been targeted to only Parts A and B. However, the Center for Medicare and Medicaid Services (CMS) proposes to expand the RAC audits to Medicare Advantage. CMS has published the proposal and seeks comments by February 1, 2016.

I am reminded of the Bubonic Plague from the 14th century.

As these Medicare audits continue to spread nationwide, to more CPT codes, and to more health care services, providers are warned to wash your hands. It is the best way to prevent acquiring a Medicare audit.

So far, there is no indication when the RAC audits for Medicare Advantage will begin. However, remember that RAC auditors are financially incentivized to audit and find errors. Thus, those RAC auditors will be chomping at the bit to get going.

Wouldn’t you if you were  compensated 9-13% of amount found to be owed back to the state?

More to come…

“Medicare RAC Program A BURDEN,” Providers Tell Senate Committee…Wait Until They See the Medicaid RAC Program!

“Waste neither time nor money, but make the best use of it.” Benjamin Franklin

Recently, the Senate Finance Committee met and discussed the burden of Medicare Recover Audit Contractors (RACs) audits on health care providers.  For a full video of the hearing, click here.  Chairman Baucas began the committee with Benjamin Franklin’s quote.  The implication? RACs are wasting both.

The Senate Finance Committee got it right! The Committee stated that the Medicare RAC program creates an excessive administrative burden on health care providers and results in the denial of legitimate claims. Two representatives from separate health care organizations spoke to the Senate Finance Committee hearing. Bipartisan panel leadership also expresses concern about burdens RACs place on providers. The Medicare RAC program is designed to detect and recover improper Medicare payments.

Chairman Baucas gave an example of immense administrative burden by describing the efforts of Kalispell Regional Hospital, a small regional hospital in Montana, undertaken in response to the Medicare RAC audits.  According to Chairman Baucas, Kalispell has spent over $1 million on RAC compliance, hired 3 additional staff members to exclusively concentrate on RAC audits, and devoted a total of 8 staff members to RACs.  It was estimated that 8600 hours/year of Kalispell’s internal staff is devoted to RAC audits.

Charles Pierce, the Chief Financial and Information Officer of Kalispell, complained of 3 main problems with the RAC audits:

1. Randomness,

2. Overzealousness, and

3. The fact that there is no penalty on RACs for getting the audits wrong.

Other complaints included that the RACs request the same documents over and over, the same issues are audited multiple times, and the same patients were audited multiple times. Another complaint was that the cost of appeal lies on the health care providers, not the RACs.

When the representative spoke on behalf of the RACs, Mr. Rolf, the rep stated that CMS had audited the RACs accuracy and all RACs had accuracy rates over 90%. I thought, maybe he meant CCME, not CMS.

Does this not sound like the RAC program in North Carolina for Medicaid? This Senate Finance Committee meeting may as well have been held in Raleigh, NC state and discussing Medicaid RACs.

How did these particular providers get heard by Washington? Why did Washington listen to these providers’ complaints about Medicare records?

Answer? Generally, these are hospital providers and have both more influence and money than the average individual provider in North Carolina.

In NC, the Medicaid RACs are damaging (so far) behavioral health providers, dentists, and durable medical equipment providers. The RACs are expanding now to audit short-term, inpatient hospital stays, x-rays, long-term care and laboratories.

By federal statute, the RACs are not to place undue burden on providers. Yet, both Medicare and Medicaid providers are undergoing severe administrative burden because of the RACs.

Going back to the Senate Finance Committee, the RAC rep, Mr. Rolf, also seemed to indicate that the Administrative Law Judges (ALJs) did not have the clinical knowledge to review these RAC audits. Mr. Rolf, I respectfully disagree (not that all ALJs do not have the clinical knowledge, but the inference that clinical knowledge is needed).  When we have lawsuits regarding a car wreck, do we have an accident reconstruction expert as the judge?  Plus, these RAC audits have less to do with clinical criteria and more to do with the RAC auditors simply mis-applying the administrative policies. Besides, if we are going to compare clinical knowledge, let’s compare the RAC auditors’ clinical knowledge to that of the actual provider rendering the services.

Two Senators on the Committee touched on two very important issues that I want to highlight:

Senator Enzi stated that he was concerned that the RACs are compensated by contingency fees.  Mr Rolf stated that the RACs are paid equally for overpayments AND underpayments.  I am not sure what particular RAC Mr Rolf was representing, but in NC, our RACs are paid a contingency fee for OVERpayments and a flat fee of $100 for UNDERpayments.

Senator Isakson stated, “There is a fine line between recovering payments that are clearly improper and questioning the judgment call made by a professional at a particular moment of time.” What standard are these auditors using?

Mr Rolf explained that the auditor uses, in part, “Clinical Review Judgment,” basically the medical opinion if the auditor during the review.  Hmmmmmm…so many interesting issues.

I have been asked over and over by providers, do we have recourse? How can we fight back against the Medicaid RAC harassment. Besides running for governor, winning, and conducting a complete overhaul of the Medicaid RAC system, my only suggestion is a lawsuit.  The problem with lawsuits is that lawsuits are expensive.  The Medicaid RACs are causing financial stress on providers already.  For a provider to fund a legal battle against the RACs, that provider must have excess money.

This is one reason we are trying to band a group of health care providers together to fight against the harassment.  But, as of now, we are concentrating on behavioral health care providers.  Interested? Click here to register. Or contact me directly with questions. [Warning: That was a legal advertisement. Please do not click if you are not interested in the lawsuit. Also, feel free to go to any other attorney]

But until we have changes in the Medicaid RAC audits, at least the Senate Finance Committee is investigating Medicare RACs…you got to start somewhere.