Audit Contractors Unlikely to Duplicate 2013 Medicare Recovery Haul Amid Dispute

Audit Contractors Unlikely to Duplicate 2013 Medicare Recovery Haul Amid Dispute

By Kerry Young, CQ HealthBeat Associate Editor

Recovery audit contractors successfully challenged about $3.7 billion in questionable Medicare payments in fiscal 2013, a success rate they’re unlikely to duplicate any time soon due to constraints Congress imposed on the industry.

The fiscal 2013 results marked a gain of about 60 percent, compared to the $2.3 billion recovered for Medicare in the previous year, according to an April Department of Health and Human Services inspector general’s report.

“At the end of fiscal year 2013, the Recovery Audit Contractor program was returning over $1 billion per quarter to the Medicare Trust Fund,” said Rebecca Reeves, a spokeswoman for the American Coalition for Healthcare Claims Integrity, which represents these auditing firms, in a statement. “The recent constraints place on the RAC program will dramatically reduce this pace.”

Hospitals, the main target of the contractors, have since succeeded in getting Congress to at least temporarily rein in these firms. A “doc fix” bill (PL 113-93) largely sidelined the contractors through March 2015. Intended primarily to stop a mandated cut in doctors’ pay, the measure also would delay some enforcement of a controversial two-midnight rule on hospital stays used to assess whether Medicare admissions were legitimate.

Hospitals have been fighting the policy, saying they could absorb significant losses if auditors successfully challenge decisions to admit patients for stays lasting less than two days (See CQ HealthBeat, Feb. 7, 2014 ). The American Hospital Association last week said that it filed two related lawsuits against HHS challenging the two-midnight rule. The actions contend that provisions in the Centers for Medicare & Medicaid Services’ final inpatient prospective payment rule for 2014 “burden hospitals with unlawful arbitrary standards and documentation requirements and deprive hospitals of proper Medicare reimbursement for caring for patients.”

Seeking to address disputes between the contractors and the hospitals on what constitutes an appropriate inpatient stay, CMS last year put forward a new test for deciding this question. To be considered an inpatient stay, the admitting physician must expect that the patient will need care in the hospital for a period spanning at least two midnights.

The hospital trade group contends that CMS’s own data show that many conditions, including heart attacks, concussions and even “comas without complications” and surgeries such as appendectomies and mastectomies routinely involve short stays that don’t span two midnights. The hospital group said that the two-midnight standard “defies common sense.”

“The word ‘inpatient’ simply doesn’t mean ‘a person who stays in the hospital until Day 3,’ and CMS is not at liberty to change the meaning of words to save money,” the association said in its legal filing.

Hospitals have much to lose. Medicare generally pays them more if a patient is considered admitted and thus qualifies for the federal health program’s Part A payments. Part B is in general intended for payment for outpatient care.

“(T)ypically, years later— a RAC will overrule the physician’s decision to admit the patient on the ground that, in the RAC’s opinion, the patient could have been treated in the outpatient setting, and as a result, CMS will take back the entire Part A payment amount,” the hospital association said in its legal brief, which was filed in the U.S. District Court for the District of Columbia.

While Congress may not address the rule or other health policy in the months ahead, lawmakers have shown interest in the issue. Rep. Sam Graves, R-Mo., has at least 111 Republican and 93 Democratic backers for a bill (HR 1250) that would add new requirements on the contractors. The bill, first introduced in March 2013, has been attracting support at a steady pace since, gaining eight new cosponsors last month. The measure also would also provide the hospitals with potential aid, such as a provision requiring that a physician review each claim denial of a claim for medical necessity made by an employee of the contractor who is not a physician.

But the recovery audit contractors do have support from groups such as Citizens Against Government Waste, which has blasted Graves’ bill.

“Perhaps unsurprisingly, the success of recovery auditors in particular has raised hackles among providers, particularly hospitals, whose claims constituted the vast majority (88 percent) of the overpayments identified by the RACs. Even though the hospitals were not entitled to the money in the first place, they have called RACs `bounty hunters,’ complaining that their contingency fee compensation model pushes them to be exceedingly aggressive in challenging claims,” the group said in its statement about the Graves bill.