Recently, Brian Ritchie, the Acting Deputy Inspector General for Evaluation and Inspections, testified before the Subcommittee on Energy, Healthcare and Entitlements.  The hearing, titled “:Medicare Mismanagement: Oversight of the Federal Government’s Efforts to Recapture Misspent Funds”, focused in part on the Medicare provider appeals process.  The Medicare appeals process is currently suffering from huge backlog and delays due to an increase in the number of appeals by Medicare Part A providers. The Center for Medicare & Medicaid Services (CMS), which is responsible for ensuring that Medicare makes accurate payments, contracts with Recovery Auditor Contractors (RACs). RACs receive a commission when they identify and recover/return improper Medicare payments.  Each year, it is estimated that $50 billion is improperly paid from the Medicare program.  In August of 2013, the Office of the Inspector General (OIG) published a study which revealed that in FYs 2010 and 2011, RAC audits identified improper payments of $1.3 billion, of which $768 million was recovered.  RACs and other program contractors now play a major role in the government’s efforts to curve fraud, waste and abuse.

However, in recent years, there has been a strong surge in the number of successful appeals from Recovery Auditor overpayment determinations.  This dramatic increase in appeals has caused higher administrative burdens on the entire judicial system.  It was found that two percent (2%) of providers account for one-third (1/3) of all Administrative Law Judge (ALJ) appeals, with a few providers seemingly appealing almost every reimbursement denial.  One reason for the surge is due to the high level of success Part A providers have received at the ALJ level.  The probability of receiving a favorable decision at the ALJ level by Part A providers is approximately 56% according to recent testimony.  In agency comments released by CMS dated 06/12/13, there are several likely factors which attribute to the high appeal success rate: 1) ALJ are not bound by the CMS manual and local coverage determinations; 2) ALJ interpret Medicare policy less strictly; 3) ALJ are less specialized in the Medicare program and do not have clinicians on staff; 4) there is a low cost to appeal. 

Because so many RAC determinations have been overturned, this calls into question the viability of RACs in the future.  Recent lawsuits have surfaced which challenge the appeals process, which in turn put more pressure on CMS to take corrective action.  We will see what develops from the higher scrutiny pertaining to this issue.