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Monday, August 27, 2012

On the RAC--the recovery audit contractor informational letter and me

In 2003 the Medicare Modernization Act established the Recovery Audit Contractor (the RAC) program to evaluate Medicare overpayment. It was extended to involve all 50 states in 2006 and will eventually involve Medicaid payments as well. The government hired 4 companies to audit payments to hospitals, durable medical equipment suppliers, physicians and other providers throughout the country. Health Data Insights is responsible for the largest geographical area, including my state, Idaho.

Since 2006 we have expected visits and inquiries from various individuals involved in the audits, and eventually we expect that we will all be presented with requests for repayment of money to Medicare in settlement of what the auditors believe are overpayments. This is definitely happening but, other than various highly publicized cases of fraud, I haven't heard that this process has been particularly odious or destabilizing. Nevertheless, in Medicare's report to Congress last year ( 92.3 million dollars in "corrections" were reported for 2010. 18% of these were actually underpayments and the rest overpayments. The auditing companies were paid based on recovery, and were allowed to keep 9-12.5% of the money they recovered.

In July a letter came to me at the hospital (where I only pick up mail sporadically) which reported what the auditors felt was an overpayment. Apparently their automated system noticed that both I and another physician had billed for discharge services for a patient on the same date, and they intended to reopen the claim and send me an adjustment letter. The letter they sent me was informational only, and began a "discussion period" during which I could send information that might affect the claim. I was given a website ( at which I could find a discussion period submission form. It wasn't obvious where to find that, but it was available under the provider information tab.

I reviewed the medical records and found out that I had, in fact, taken care of the patient and discharged her on the date in question, and I printed out a screen shot of the medical records which was blurry enough that I knew it wouldn't fax. So I called the provider relations number (866) 376-2319 and actually talked to a real person. I asked her what happened, why they couldn't read just as well as I that the claim was valid, and she explained that there had, in fact, been two claims by different doctors (me and one of my partners who had taken care of the patient earlier) for the same service and that they hadn't looked at any medical records, just the automated billing. I'm a bit annoyed, but I guess it makes some sense that the burden of proof would be on the doctors who got the disputed payments. I will send them the records tomorrow. If all else fails, I will pay the disputed amount which is only a bit over $73.

Mostly doctors don't bill for hospital services, but communicate what was done to a billing office. We have pretty much no clue what happens after that, other than, in some general way, we get paid. If we work for a small group, we see a spreadsheet which shows that we made so much money from hospital work and then we eventually get money based on overhead and the various things that were paid to us for the myriad of services we provide. It's actually pretty amazing that huge orders of magnitude mistakes don't happen all the time, and so perhaps they do. I suspect that the fact that this patient's discharge was billed twice was an error of foggy wits, not of evil intention, but it is likely that such mistakes are very common and ongoing.

The most common error mentioned in the report to congress, which resulted in the greatest amount of claims adjustment was billing for medical equipment that a patient used while hospitalized. Hospitalization costs are bundled for medicare and the hospital receives the same amount of money for a certain diagnosis and level of service intensity regardless of the resources they use. If Medicare is also billed for medical equipment used during the hospitalization, this is clearly a mistake. If it is a mistake that has resulted in millions of dollars in recovered payments, my guess is that this is because of a colossal misunderstanding resulting from a ridiculously complex payment structure.

The details of medical billing are so complex that people in billing offices need to go to classes to learn how to do it and the people who provide the services (doctors etc.) are usually not aware of what is being billed. When we do see the details, it is hard to make sense of them and so most of us go no further than shaking our heads. I am completely willing to believe that a significant amount of the billing for my services could be inaccurate. It is very likely that a non-negligible portion of the work I have done in the last 25 years was never even billed, since it requires some effort on my part to report what I have done to the billing department, and on a busy day that is the least of my concerns. Even if I do report my work, there is a good chance the communications could be lost in transit or could be misunderstood or wrongly transcribed. It makes perfect sense that Medicare would hire auditors to look for mistakes. For Medicare, the RAC is a clear win, since they pay only commissions on the recovered money. For us as physicians it is scary and annoying, and if it is financially painful will probably make us more careful.

A physician I know from Canada told me that she does have to bill the government for her services, but it is incredibly easy. She just does it on the computer at the end of each week. Errors and fraud are nearly unavoidable with the system we now have, and the remedy we have chosen (RAC) is painful and time consuming. It will make overworked and disillusioned physicians approach their jobs with even less energy and enthusiasm, which is far from a desired outcome. Reform of the fee for service system is in the works, and it truly can't come soon enough.

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