House bill would eliminate RAC contingency fees, penalize bad auditors

Rep. Sam Graves (R-MO)
Rep. Sam Graves (R-MO)

Pending legislation would grant hospitals and other providers their wish of replacing percentage-based fees with flat fees on Medicare claims denied by recovery audit contractors.

The Medicare Audit Improvement Act of 2015, introduced by Reps. Sam Graves (R-MO) and Adam Schiff (D-CA), also would reportedly enable hospitals to re-bill some denied inpatient claims as outpatient claims and heavily penalize recovery audit contractors if a high number of their denied claims are overturned on appeal. A significant percentage of RAC claims have been reversed in the courts in recent years.

In a similar vein, the American Hospital Association makes a case to radically transform a process it calls burdensome, one that costs its members millions of dollars and hours researching and defending alleged billing problems. The AHA makes five major recommendations to transform the RAC program.

The most major proposal seeks to abolish the 9% to 12.5% contingency fees RACs receive on every denied claim; instead, the contingency fee would be replaced with a “retainer-type” fee, which the AHA claims would reduce the incentive for “overzealous auditing practices.”

The pithy AHA report, which calls RAC audit processes "inefficient — and often incorrect," was heavily criticized by Kristin Walter, a spokeswoman for the Council for Medicare Integrity, a RAC trade association. Walter accused the AHA of “distracting and twisting numbers to suit [its] agenda.” Walter called on the AHA to “join us in seeking ways to decrease the staggering rate of improper billing among America's hospitals.”

The Government Accountability Office last March reported to Congress the Medicare program will likely post $60 billion in losses from unrecovered overpayments or improper Medicare payments. A huge backlog compelled an 18-month audit moratorium on RAC audits, which ended March 31.