In a letter to HHS Secretary Kathleen Sebelius, 111 congressmen urged HHS to deploy additional resources to resolve the backlog of appeals of overpayments determined by Recovery Audit Contractors (RACs), to implement reforms in the RAC process, and consider alternative payment methods used to reimburse RACs. The number of appeals of RAC overpayment determinations has ballooned to such a degree that it is overwhelming the entire Medicare appeals process. In addition, this large number of appeals is resulting in a significant amount of money being paid to hospitals as reimbursement for Medicare services that are in dispute. Medicare beneficiaries are also feeling the impact, as they are often required to pay higher out-of-pocket costs for Part B services and sometimes held financially responsible for post-acute care services, according to the congressmen’s letter.

RAC Program

The RAC program was approved by Congress in the Tax Relief and Health Care Act of 2006 (P.L. 109-432). This act expanded the RAC demonstration project approved in the Medicare Modernization Act of 2003 (MMA) (P.L. 108-173) to the entire country. RACs are permitted to look back at claims that are as much as three years old and apply the same Medicare policies and rules to identify improper payments as do Medicare administrative contractors that process claims for payments. If an overpayment is identified the overpayment is recouped and the RAC retains a portion of the amount recouped as its fee. The commission amount ranges from 9 to 12 percent of the amount recouped.

Appeals Backlog

Hospitals and other providers can appeal a RAC determination that an overpayment has been made. One step in the process is to request a hearing before an administrative law judge (ALJ) appealing the overpayment determination. In a memo from Nancy Griswold, the Chief Administrative Law Judge for HHS’ Office of Medicare Hearings and Appeals (OMHA) it was stated that there was a back-log of 375,000 requests for a hearing before an ALJ. Ms. Griswold stated that “in just under two years, the OMHA backlog has grown from pending appeals involving 92,000 claims for services and entitlements to appeals involving over 460,000 claims for services and entitlements.” She went on to state that in one week her office received 15,000 requests for an appeal hearing before an ALJ.
This large number of appeals may in part be due to the fact that 70 percent of hospital appeals of Part A claims that are heard before an ALJ are overturned in favor of the hospital, according to report from the American Hospital Association (AHA). In a letter to CMS Administrator Marilyn Tavenner, the AHA claimed that $1.5 billion worth of claims are currently being appealed and a significant amount of that money would be returned to hospitals based on the success of appeals.

AHA Recommendations

In its letter the AHA recommended that: (1) CMS should not hold funds at issue in hospital disputes until the ALJ determination; (2) statutory deadlines for appeals should be enforced through the utilization of automatic default judgments; (3) CMS should address systemic issues within RACs, which lead to erroneous denials; (4) additional documentation request limits should be lowered, which would in turn decrease the number of claims reviewed; and (5) RAC deadlines should be enforced by a waiver of RAC contingency fees in any cases where a RAC misses a deadline to make a decision.

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