Healthcare Revenue Cycle Management, ICD-10, Claims Reimbursement, Medicare, Medicaid

Policy & Regulation News

AMA Calls for Massive Overhaul of RAC Program

By Ryan Mcaskill

In a letter to CMS administrator Marilyn Tavenner, AMA laid out a plan to realign the Recovery Audit Contractor program.

- With healthcare evolving, the rules and regulations that govern practices need to follow suit. Failure to do this creates problems that make operations more complex and do not align with more modern approaches. One such system is the Recovery Audit Contractor (RAC) program, which the American Medical Association (AMA) has just called to be overhauled.

The RAC program was created through the Medicare Modernization Act of 2003 to help identify and recover improper Medicare payments paid to healthcare providers under fee-for-service Medicare plans. It has since became a required permanent state program by the United Stated Department of Health and Human Services.

In a letter addressed to Centers for Medicare and Medicaid Services (CMS) administrator Marilyn Tavenner, James Madara, MD, the executive vice president and CEO of AMA calls for CMS to act on the two-year backlog of Medicare and Medicaid appeals. While the efforts of the Office of Medicare Hearings and Appeals (OMHA) are appreciated, the letter says the problem creating the backlog is not OMHA but the RAC program.

“The AMA does not support improper billing, but the RAC auditors are often wrong and their bounty-hunter like tactics have caused physician practices undue hardship and expense,” said AMA President Robert Wah, MD. “As CMS awards new contracts in the RAC program, it must consider putting an end to policies that cause burdens for physicians and encourage RAC auditors to incorrectly deny claims.”

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  • Currently, RAC auditors are paid a sizable commission for denied claims. If one is overturned, the RAC is required to return the contingency fee. However, there is no repercussions for inaccuracies, so there is little incentive for RACs to limit their audits. As a result, inaccurate audits, inappropriate claims denials and appeals continue to grow. There was a 506 percent increase in appealed claims between 2012 and 2013, causing a significant backlog.

    Wah added that the appeals process is an additional burden facing physicians who are already struggling to meet a growing list of regulatory requirements.

    “Filing an appeal takes time away from patient care and often costs physicians more money than they recoup when a denial is overturned. It also causes uncertainty that can affect a physician’s ability to improve the quality of care and implement innovative new delivery models” said Wah

    To rectify the problem, AMA laid out several proposed changes to the program. These include:

    • RACs should be subject to financial penalties for inaccurate findings and physicians should receive interest when they win an appeal.

    • Physicians should be permitted to rebill for recouped claims for a year following recoupment.

    • CMS should provide an optional appeals settlement to physicians similar to that provided to hospitals for short-term care.

    • CMS should retain the current medical record request limits and allow medical record reimbursement for physicians.

    • RAC audits of physicians should be performed by a physician of the same specialty or subspecialty licensed in the same jurisdictions.


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