OIG Issues Report on Medicare Recovery Contract Auditors

In August 2013, the Department of Health and Human Services, Office of Inspector General (“OIG”) issued a report of a study regarding Medicare Recovery Audit Contractors (“RACs”) and the Centers for Medicare and Medicaid Services (“CMS”) ‘actions to address “improper payments, referrals of potential fraud, and performance.”  A copy of the August 2013 report is available here: http://oig.hhs.gov/oei/reports/oei-04-11-00680.pdf.  The report was made available on OIG’s website on September 3, 2013.

A national RAC program was established as a result of the Tax Relief and Health Care Act of 2006, (TRHCA) and was operational by October 2009 in all geographical regions of the United States.  Id. at 1.  What is unique about RACs, as compared to other Medicare contractors, is that they are paid on a contingency basis, in accordance with the TRHCA.  These fees are determined based on a percentage of improper payments recovered or returned.  Id. at 2.  

In its report, OIG noted vulnerabilities in CMS’ oversight of the RAC contractors, and stated that “[g]iven the critical role of identifying improper payments, effective oversight of these contractors’ performance is performance.”  Id. at 6.  OIG also reported that “RACs had not received formal training and guidance from CMS to help them identify fraud.”  Id. 

OIG also found that approximately 94% of claims were not appealed by Providers, but when they were, almost half were overturned in the Providers’ favor.  Id. at 11.  In addition, in Fiscal Year 2010, it was determined that 56% of overpayments appealed for all Medicare contractors were overturned by an Administrative Law Judge.  Id. 

OIG has made four recommendations to CMS, including that CMS to develop additional performance evaluation metrics “to improve RAC performance and ensure that RACs are evaluated on all contract requirements.” 

CMS’ July 12, 2013 response to the OIG Report is attached as Exhibit C to the report. 

Our attorneys have handled numerous Medicare audit appeals, including those by Medicare RAC auditors.  We have raised concerns with CMS regarding the use of RACs, particularly due to potentially questionable motives resulting from the unique contingent percentage of recoveries.  In addition, as the OIG determined, these RACs are not properly trained, and have no guidance from CMS, but they are responsible for protecting the Medicare Trust funds.

If you are a Medicare Provider and receive a request for repayment of an alleged overpayment or have any questions regarding Medicare RAC audits or the appeal process, contact healthcare attorneys Charles MacKelvie, cmackelvie@kdlegal.com or Jaya White, jwhite@kdlegal.com.