Study: Deferral of provider payment for RAC appeals could save CMS more than $10 million

A study recently released from Dobson Devanzo & Associates suggests that a proposed change in the timeline for the submission of provider payment for RAC audit appeals could protect providers’ resources while saving CMS more than $10 million in interest payments.

The proposed change in legislation is part of a policy being formed by the American Orthotic & Prosthetic Association (AOPA) that recommends a delay in recoupment for RAC audits until after the administrative law judge (ALJ) hearing and determination.

“The appeals system at the ALJ level is totally broken,” Allen Dobson, president of Dobson Devanzo and co-author of the study, said during a telephone news conference on the study results. “It is a hugely, hugely inefficient system.”

Charles Dankmeyer, AOPA president, noted during the conference call that with CMS receiving 15,000 new appeals each week, the backlog of reimbursement cases could be as high as 1.5 million. While appeals are meant to be resolved within 90 days, Dankmeyer said they are taking 3 years or longer for O&P practices that must struggle with their resources on hold.

“Legitimate Medicare audits are a necessary part of the federal government discharging its responsibility to protect federal moneys and to fight fraud and abuse. However, the current RAC system has flaws, starting with the fact that RAC auditors are incentivized to maximize their assertions of provider errors in order to collect a bounty of up to 13% for every dollar [collected from audit].”

The study, commissioned by the AOPA, focused on O&P RAC audits that reach level 3 appeals – the last step before the appeal is taken before an ALJ – as well as the potential savings for CMS if all Part B services were included in the policy.

According to an AOPA news release, closed appeals for O&P services have a success rate of 51.9%; therefore, the proposed policy would cut in half the amount of reimbursements CMS is currently paying providers with interest. The study found that CMS is paying back almost a third of its total recouped funds in the form of interest payments to successful appeals. The delay in the review process significantly increases the amount of interest CMS must pay.

By applying current figures to the backlog of RAC appeals, Dobson Devanzo found CMS could save approximately $7.57 million in interest for O&P services or $12.37 in interest for all Part B services in the appeal system by delaying recoupment of funds until the ALJ hearing level of the appeals process. Additionally, providers with successful appeals would not have their resources withheld by CMS while undergoing the appeals process. – by Amanda Alexander


Disclosures: Dobson and Dankmeyer report no relevant financial disclosures.

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