OIG Says RACs And CMS Could Be Identifying Even More Fraud

By Greg Bengel, contributing writer

OIG criticizes RAC program and CMS, concluding that CMS must do more to evaluate the effectiveness of the program and take action regarding improper payments

The Medicare RAC program has been very unpopular as of late with providers, many of whom feel that RACs burden legitimate providers and audit claims that are medically necessary. Health IT Outcomes recently reported on one provider who went as far as to label RACs “bounty hunters.” Now, the program is catching more heat, this time from the Office of the Inspector General. This time, though, it’s for a different reason.

According to a recent report from OIG, RACs may not be catching all over-paid claims, and as a result are allowing many improper payments to persist. This may come as a surprise to providers who feel the contractors, who corrected $939.3 million in improper payments in 2011 alone according to a CMS report, are overly aggressive with their auditing. 

Fierce Health Finance reports that the OIG “found problems with CMS' action - or inaction - regarding improper payment vulnerabilities and referrals for potential fraud, as well as with RAC performance evaluations.”

According to the OIG report, “OIG has identified vulnerabilities in CMS’ oversight of its contractors. Given the critical role of identifying improper payments, effective oversight of RAC performance is important.”

MedPage Today goes into more detail. In 2010 and 2011, RACs labeled half of all the claims they reviewed as being improper, but CMS did not appraise the success or value of RACs’ actions. OIG feels that for this reason, RACs may have done very little to change provider behavior. OIG also says that CMS has not evaluated all the metrics in RACs’ contracts or taken any action on referrals for possible fraud.

The report states, “Specifically, CMS did not evaluate RACs on the extent that they identified improper payments. Further, four of the eight performance evaluations that we reviewed did not describe RACs' ability, accuracy, or effectiveness in identifying improper payments.”

In 2010 and 2011, RACs identified $1.3 billion in improper payments, but CMS took action on only 28 of 46 areas that result in more than $500,000 in improper payments. Fierce Health Finance points out that by June of 2012, the remaining 18 areas that CMS still had not taken action on totaled $31 million in improper payments.

What suggestions does OIG have to fix the problem? Health Leaders Media bullet points the suggestions. The report advises the following remediation:

• “Assess the vulnerabilities pending corrective action and develop timeframes for addressing them to make sure they are resolved in a timely manner.
• Improve education to ensure that RACs refer all appropriate cases of potential fraud by providing specific examples of fraud that should be referred and regularly communicating with RACs to share information about fraudulent coding or billing schemes.
• Take appropriate and timely action on RAC referrals of potential fraud.
• Develop evaluation metrics to improve RAC performance and to ensure that RACs are evaluated on contract requirements. "Metrics should include accuracy targets for RAC of improper payments or similar measures (e.g., effectiveness ratings)."