It was encouraging to see a letter from 111 members of Congress on February 10th related to the heavily flawed Recovery Audit Contracting process to Health and Human Services Secretary Sebelius. The letter details the huge administrative burden that has been imposed on hospitals based on a flawed incentivized arrangement for Recovery Audit Contractors. The RACs are paid a commission on the dollar amount of claims up to three years after services have been rendered. Their commission ranges from 9% to 12.5% of the claims that they deny. They pretty much deny every claim and once the appeal gets to the Administrative Law Judge (ALJ) level, the appeals are overturned since there are no incentives for the ALJ. The problem is that the average ALJ can process 1000 appeals per year. With the number of judges hearing appeals at 65 across the US, it would take a 77 years to get through the current backlog.
Last month, CMS announced that it will now take up to 3 years to get a decision at the ALJ level. The law states that a decision is required in 90 days. The problem is that CMS can recoup funds at the first two appeal levels before the ALJ appeal. So, CMS keeps their money, RACs receive their commission and hospitals that have provided the care are not paid for the care that has already been delivered. What is important to note is that we have only lost one appeal at the ALJ level. We are providing the appropriate care to our patients and that has not been lost on the administrative law judges. Under any other circumstance, the RAC process would be shut down and its operators and beneficiaries would be charged with fraud. But, because it's the federal government, it is allowed.
Another interesting tidbit, yesterday CMS held a forum in DC to provide information on the RAC process. Our Compliance Officer and General Counsel attended. The gist of their message: here are the things that you hospitals can do to bring improvement to the process. They are finally looking to automate the process since it has been a mail process since inception. They expect to be fully automated by 2016. Where have we heard that before?