Health Care Providers Brace for Medicare Audits

‘Bounty Hunters’

The program began in California, Florida and New York in 2005, and then expanded to Arizona, Massachusetts and South Carolina in 2007. It was authorized under the Medicare Prescription Drug Improvement and Modernization Act of 2003.  CMS has published the schedule for introduction of the RAC program in the rest of the country. “Health care systems are really struggling with preparing for this because they know it’s just a nightmare. During the demonstration program, it was very broad in that RACs were given all the data and told to go out and find errors,” said Steve Lokensgard, a health care lawyer and special counsel to Faegre & Benson in Minneapolis, who previously worked as chief compliance officer to Allina Hospitals and Clinics.

RACs work on a contingency fee basis, receiving between 9 and 12.5 percent of improper payments they discover, so there is a big incentive to find billing errors.  Massachusetts is among the states with higher fees – 12.45 percent. “They’re bounty hunters on behalf of the Medicare program,” said Jessica L. Gustafson, a partner at The Health Law Partners in Southfield, Mich., who co-chairs the firm’s Medicare and RAC practice group. She noted that of the misbilling identified by RACs during the demonstration phase, 96 percent was for overpayments and only 4 percent was for underpayments by Medicare.

Next: Two Types of Audits