Yesterday the Centers for Medicare & Medicaid Services announced that it will restart the Recovery Audit Contractor (RAC) program this month, on a limited basis.  It’s been on hold since June.

Under the controversial program private contractors audit hospitals and other Medicare providers for fraudulent and erroneous Medicare billing.  Why is it controversial?  Because the auditors are paid a percentage of everything they collect.  In the view of hospitals this arrangement gives the auditors an incentive to find errors—and prevents them from being objective and unbiased.

In February over one hundred members of Congress wrote to then HHS Secretary Sebelius complaining about the program’s unfairness.  They expressed particular concern that the audits of short hospital stays often have the effect of greatly increasing the out-of-pocket costs paid by retirees.  That happens when an audit changes a patient’s status from inpatient to outpatient.

The restarted program will be limited, and CMS has assured Congress in writing that it will not include “any inpatient status reviews.”  Rather, it will focus on a small number of procedures such as spinal fusions, outpatient therapy services, durable medical equipment, prosthetics, orthotics and supplies, and cosmetic procedures.