The defective, unchecked authority, and devastating impact on providers is so palpable, it is difficult to comprehend why CMS has chosen to expand the authority and discretion of CMS contractors to deny claims from providers. Effective on March 6, this change affects Medicare administrative contractors (MAC), recovery audit contractors (RAC), and zone program integrity contractors (ZPIC), as all now have greater discretionary authority to deny claims related to other denials stemming from prepayment or post-payment review. CMS emphasized that related claim denials are possible for other healthcare services. These may include skilled nursing facility care, home healthcare, hospice services and medical equipment rental, the article noted.
A spike in appeal requests may follow automatic denial of related claims, compounding the problem of an already-overloaded Medicare appeals system. The Office of Medicare Hearings and Appeals had a backlog of at lease 350,000 pending beneficiary appeal requests as of January. Efforts to reduce this led the government to announce a long-term suspension of work on provider appeals. This means it simply won’t act on new request for appeal hearings filed by hospitals, physicians, or other providers. CMS blames the sequester and an unprecedented increase in appeal requests. This “unprecedented” increase must be coming from somewhere. It is either due to the massive increase in denial of claims, high success in getting them overturned, or both. CMS expects that the suspension of hearing rights will last about two years. No appeals filed after April 1, 2013 will be assigned to an ALJ. This effectively allows CMS to suspend appeal rights, but the collection efforts continue, interest mounts on debts, and the contractors are immune while those adversely affected are denied due process and arguably other legal rights. This backlog can be devastating for many providers. If a provider has chosen to appeal, it is because the amount is substantial, and for some it can cripple their practice.
This website has a page devoted to RACs, but they are not the only culprits. RACs are responsible for identifying and correcting Medicare overpayments (and supposedly “underpayments” as well). I have yet to meet a provider who received extra money from these contracting companies because they felt he/she was underpaid for the service rendered. About 111 members of Congress wrote a letter to HHS Secretary Kathleen Sebelius, questioning the RAC payment model, citing sobering numbers as to their accuracy and credibility. RACs receive a 9-12% commission on denied claims and are paid without regard to accuracy or the resolution of any appeal of the RAC's findings. This means that even if they get reversed, the RACs keep the money. This is not just a hypothetical. Between 2010-2011, hospitals appealed about 25% of all RAC denials, and of those appealed, 71% of them got reversed. Despite those numbers, these contractors still manage to rake in billions of dollars for CMS every year.
Despite all this, it appears that the government does not think that these contractors are doing enough. The Government Accountability Office (GAO) blamed CMS and its RACs for allowing improper payments to continue. The GAO even recommended that CMS improve its oversight over ZPICs, devoting their work mostly to anti-fraud measures and being given arguably even more authority than RACs and MACs due to their fieldwork.
It is remarkable that despite the backlogs, the statistics, and the suspension of due process that demonstrate the dysfunction of this relatively new system of curbing claims abuse, their authority, discretion, and earnings continue to grow. It becomes even more difficult to challenge as these “private” companies continue to get rubber stamps from the Federal government.