Bounty hunters

Westchester County Business Journal, Aug 4, 2008 by Soule, Alexander

U.S. Rep. Charles Rangel has demanded an audit of a controversial federal program that recovered nearly $1 billion in improper Medicare payments over two years in New York and five other states.

In a letter to the Government Accountability Office, Rangel and four other congressmen said hospitals and physicians complained of abuses under the Medicare Recovery Audit Program (RAC), which the U.S. Department of Health and Human Services (HHS) launched on a trial basis three years ago in New York, Florida and California.

Managed by the Centers for Medicare and Medicaid Services (CMS), the program aims to end unjustifiable requests for reimbursement from the federal Medicare system, whether for services that do not meet Medicare's criteria of medical necessity, payments that should have been picked up by another insurer, erroneously coded paperwork or duplicate claims.

The pilot program was expanded to Massachusetts, South Carolina and Arizona, and HSS is preparing to roll out the program nationally.

Medicare processes 1.2 billion claims, annually from more than 1 million hospitals and clinics. That equates to 9,500 a minute and under the flood Medicare claims processors often cut checks without scrutinizing records, according to HHS.

Under Medicare, the government disbursed $10.8 billion last year in improper payments, according to an estimate by the federal Office of Management and Budget, putting the program behind only the earned-income tax credit and Medicaid for improper payments.

The federal government aims to roll out the program in all 50 states by January 2010.

The New York and Massachusetts programs were managed by Connolly Consulting Inc., an Atlanta-based auditor with two offices in Fairfield County, Conn.

The company is one of 45 that have expressed interest in being hired as one of four regional auditors, who are awarded fees based on the amount of costs they recover.

HHS estimates the program paid 20 cents in administrative costs for each dollar collected.

Last month Rangel and his colleagues asked the Government Accountability Office to study the use of private contractors for the audits. The congressmen said they made the request following complaints in California that the contractor incorrectly denied 40 percent of the recouped inpatient rehabilitation claims it reviewed.

Under the contingency-fee structure in place for the pilot program, contractors could pocket the fees if the collection survived a first level of appeal, even if it was reduced or reversed upon subsequent review. That will not be the case in the permanent program, CMS has indicated, and the agency plans to hire an additional, independent auditor to review the work of RAC contractors.

Similarly, more than 60 percent of such RAC appeals were overturned in New York, noted the Healthcare Association of New York State. Healthcare Association analyst Kevin Krawiecki indicated the organization is pressing CMS to limit the number of medical record requests that can be made over a six-week period and to delay RAC contractors collecting fees until after the appeals process has run its course.

In all six states, HHS estimates RAC reversed 0.3 percent of the claims it examined. In 14 percent of cases, those decisions were challenged by health providers seeking payment, roughly a third successfully.