State’s Medicare Providers Brace For Trial By The RAC

In olden days, the rack was considered a favored instrument of torture. Coming soon to Massachusetts will be a modern RAC, which may carry a similar dire significance to the state’s many hospitals and other healthcare providers.

RAC is the acronym for Recovery Audit Contractors who operate under a Federally-mandated program to identify Medicare reimbursement overpayments.

On surface, this seems eminently worthwhile. Medicare, which is taxpayer supported, should be monitored. Healthcare providers, however, say that, in practice, RAC is far from even-handed.

The program already has been used on a trial basis in California, New York and Florida. Massachusetts is next on the list.

According to local healthcare sources, this is how the program works. RAC writes the hospital or other provider, even a Hospice or rehab center, that it plans to conduct what is called a “chart audit.” Now, they can’t study thousands of charts, so they pull a sampling, say 500 charts. If, among the 500, they find 50 cases of Medicare overpayments they figure 10 percent of all payments had to be too high and they do some quick multiplication.

This amount, as was explained at a recent meeting of the To Your Good Health, A Health Care Newsletter, Advisory Board, can be staggering. And it must be paid immediately!

Now comes the interesting part. The auditors, many of them reported to be former FBI agents with no medical background, get a 20 percent commission off the top. There is an appeals process, but if the government loses, the auditors still get to keep their 20 percent commission…or bounty as one official described it. So far no appeal is known to have been successful.

Besides, there are relatively few appeals. Institutions often find it is not worth the cost in attorney’s fees and staff time and effort to mount a case.

The perceived incentive, of course, is for the auditors to “pick as many nits, look for as many undotted i’s and uncrossed t’s” as possible without fear of losing their commission or facing a penalty should the appeal be upheld.

A recent trial run by one local provider reportedly has shown there’s a lot to be worried about.

The figure in the three states was said to be a billion dollars in overpayments. The fear is that some providers may be forced to close down or sell themselves to a larger entity that can come up with the alleged overpayment cash on the spot.