The $4 billion in taxpayer money recouped from physicians for Medicare and Medicaid improper payments is the highest amount since the program began in 2003.  Over the past 6 years, the U.S. government has stepped up its efforts to recover funds from over billing and fraud by health care providers, and it appears that 2011 will be another record year.  Is your practice prepared for the possibility of a RAC Audit?

Who Can Be Audited?

Any type of medical practice or health care provider can be subject to a RAC Audit.  The Centers for Medicare and Medicaid Services (CMS) contract with private entities, Recovery Audit Contractors (RAC), to perform audits searching for overpayments made to physicians and then collect the money. The contractors are also looking for underpayments, but they are paid a percentage of the funds recovered and returned to CMS.  As the government focuses on cutting costs and reforming healthcare, the RAC program has become more and more aggressive.

Although the main concern of the program is to find errors in coding, billing, or payment rules, a RAC Audit in itself doesn’t mean that fraud has been committed.  Many of the over payments are the result of simple mistakes in billing.  The billing codes that are used by Medicare and Medicaid are complicated and often confusing.  A mistake made by health care providers can mean severe fines and penalties, and where an auditor finds a possibility of fraud they are required to notify law enforcement agencies within the state.

Which States are Targets?

The RAC program was initially created by Congress as a demonstration in only 3 states, but because of its success, as of 2010 it has been mandated in all 50 states.  According to the Department of Health and Human Services Inspector General’s Office, the states with the highest amount of recovered funds in 2010 were New York, Texas, Florida, California, and Ohio.  But they are working assertively in all states.  Medicaid fraud recoveries reached $20 million in Missouri, the state with the highest ratio of money collected to money spent.  With the promise of millions of dollars, there can be no doubt that the government will become more forceful, and the RAC contractors will become more insistent on finding improper payments.  But are the findings always correct?

Physicians Can Challenge RAC Audits

One of the most frustrating issues concerning RAC Audits is that in many cases mistakes are made by the auditors.  When this happens it is extremely difficult and time consuming to correct the mistake and make things right, but physicians have successfully challenged RAC Audits.  For example, a physician office in California was reviewed in 2009 to determine the appropriateness of Medicare payments.  The audit alleged that the doctor was “over-utilizing” certain procedure codes and calculated that they had overpaid the doctor $751,000, which would have to be paid back.  After fighting the claim for over 2 years, and going through a process of appeals and appearances in court, the review findings were dismissed and it was determined that Medicare actually owed the physician money.  This would be considered a victory if it weren’t for the time lost and the $150,000 in attorney fees spent out of the physician’s own pocket.  There are plenty of examples like this one all over the country, and health care providers need to protect themselves from potential problems.

Our Medefense Plus Policies Protect Against RAC Audits and More

The Keane Insurance Group offers an insurance policy to protect physicians against RAC Audits and other governmental proceedings.  Our Medefense Plus policy covers legal expenses, fines, and penalties arising from actual or alleged billing errors.  Coverage extends to allegations made by governmental agencies and their contractors.  Liability limits can be written as low as $100,000 and up to $1M and above.  The policies can be obtained by individual physicians as well as groups.

The Medefense Plus policy also covers defense expenses and fines relating to HIPAA violations, STARK, and EMTALA proceedings.  The coverage can be extended also to Cyber Liability such as breach of privacy, identity theft, and loss of printed or electronic data.  Contact your Keane representative if you have questions or if you’d like a quote and application.