Health Law News From Arnold & Porter Kaye Scholer

Proposed legislation may offer some relief from the threat of recovery audit contractors

From international law firm Arnold & Porter LLP comes a timely column that provides views on current regulatory and legislative topics that weigh on the minds of today’s physicians and health care executives.

For any physician practice (or any other provider, for that matter) that has been a target of the Recovery Audit Contractor (RAC) program, proposed legislation introduced by Congressman Sam Graves, R-Mo., offers some hope, or at least a modicum of relief. RACs operate under a contract with the Medicare program to identify potential overpayments as well as underpayments. Despite widespread criticism of the overly aggressive position taken by the RACs in identifying alleged overpayments — driven, no doubt, by the fact that RACs are paid a “bounty,” ie, a percentage of their recoveries — the RAC program has survived largely because it has returned significant funds to the Medicare program: more than $3 billion in FY 2013 alone. While the criticism has led to some reforms (such as requiring RACs to return any monies paid as a result of overpayments identified but later reversed on appeal), the bounty system has continued to encourage aggressive behavior on the part of the RACs and criticism on the part of the provider community.

Alan E. Reider

Responding to this criticism, on April 30, Congressman Graves introduced a bill entitled the “Medicare Audit Improvement Act of 2015.” The purpose of the bill is to reform the practice of RACs under the Medicare program, including the elimination of the contingency fee payment system under which RACs currently operate. Furthermore, under the proposed legislation, payment to a RAC would be reduced when the RAC has a “complex audit denial overturn rate” that is in excess of 0.1 (ie, 10%). Such a provision would bring accountability to the RAC program, which has been sadly missing for many years.

As noted above, this legislation has only recently been introduced, and there is no assurance that it will move forward through a process that has proven incapable of passing much meaningful legislation over the past several years. Nevertheless, if the provider community rallies to support this legislation, there should be little opposition to its passage, other than from the RACs themselves.

Alan E. Reider, JD, MPH, a partner at Arnold & Porter LLP, can be reached at Alan.Reider@aporter.com.

From international law firm Arnold & Porter LLP comes a timely column that provides views on current regulatory and legislative topics that weigh on the minds of today’s physicians and health care executives.

For any physician practice (or any other provider, for that matter) that has been a target of the Recovery Audit Contractor (RAC) program, proposed legislation introduced by Congressman Sam Graves, R-Mo., offers some hope, or at least a modicum of relief. RACs operate under a contract with the Medicare program to identify potential overpayments as well as underpayments. Despite widespread criticism of the overly aggressive position taken by the RACs in identifying alleged overpayments — driven, no doubt, by the fact that RACs are paid a “bounty,” ie, a percentage of their recoveries — the RAC program has survived largely because it has returned significant funds to the Medicare program: more than $3 billion in FY 2013 alone. While the criticism has led to some reforms (such as requiring RACs to return any monies paid as a result of overpayments identified but later reversed on appeal), the bounty system has continued to encourage aggressive behavior on the part of the RACs and criticism on the part of the provider community.

Alan E. Reider

Responding to this criticism, on April 30, Congressman Graves introduced a bill entitled the “Medicare Audit Improvement Act of 2015.” The purpose of the bill is to reform the practice of RACs under the Medicare program, including the elimination of the contingency fee payment system under which RACs currently operate. Furthermore, under the proposed legislation, payment to a RAC would be reduced when the RAC has a “complex audit denial overturn rate” that is in excess of 0.1 (ie, 10%). Such a provision would bring accountability to the RAC program, which has been sadly missing for many years.

As noted above, this legislation has only recently been introduced, and there is no assurance that it will move forward through a process that has proven incapable of passing much meaningful legislation over the past several years. Nevertheless, if the provider community rallies to support this legislation, there should be little opposition to its passage, other than from the RACs themselves.

Alan E. Reider, JD, MPH, a partner at Arnold & Porter LLP, can be reached at Alan.Reider@aporter.com.

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