A bipartisan group of 111 members of the United States House of Representatives sent a letter to HHS Secretary Kathleen Sebelius on February 10, 2014, urging the Secretary to reform the Medicare Recovery Audit Contractor (RAC) program.  The letter noted that RACs’ compensation structure – a percentage commission of every denied claim – provides an incentive for RACs to deny claims “even when the claims are correct.”  Hospitals have been successful in appealing 72 percent of RAC denials, but the logjam of appeals at the administrative law judge level places a “huge administrative burden on hospitals.”  The letter also expressed concern about the increased out-of-pocket expenses beneficiaries incur when a paid claim under Part A is reversed to payable under Part B.

The letter asks CMS to adopt “commonsense reforms” included in the proposed Medicare Audit Improvement Act, H.R. 1250.  Specifically, the members urge HHS to invest more resources into the Office of Medicare Hearings and Appeals to adjudicate the more than 375,000 RAC claims currently under appeal.  The letter asks the Secretary to consider a flat compensation amount for RACs in order to reduce the incentives to deny claims, and to direct the RACs to “provide a more transparent mechanism through which providers can be informed of errors so as to avoid them in the future.”  The letter is available here. 

Reporter, Christopher Kenny, Washington, D.C., + 1 202 626 9253, ckenny@kslaw.com.