Medicare Audit and Appeals: A Study in Utter Dysfunction


Facing a backlog of over 350,000 appeals from payment demands issued by Recovery Audit Contractors (RAC's), the Center for Medicare and Medicaid Services ("CMS") has effectively given up and announced that its Office of Hearings and Appeals will simply not act on new requests for appeal hearings filed by hospitals, physicians and other providers. CMS blames the sequester and an unprecedented increase in appeal requests. It expects that the suspension of hearing rights will last about two years and no appeals filed after April 1, 2013 will be assigned to Administrative Law Judges. This "April Fools’ Day feat" effectively allows CMS to suspend appeal rights as collection efforts nonetheless continue and interest mounts on debts that are presently immune from challenge.

RACs, the true culprits, are charged with the responsibility of identifying and correcting Medicare overpayments. The integrity and accuracy of RAC findings has raised the ire of 111 members of Congress who, in a letter to outgoing HHS Secretary Kathleen Sebelius, question the RAC payment model. RAC's receive a 9-12% commission on denied claims and are paid without regard to accuracy or the resolution of any appeal of the RAC's findings to CMS's moribund Office of Hearings and Appeals.

The RACs' unbridled financial incentive to deny claims has caused unprecedented hardship for hospitals, physicians and other providers that has escaped the attention of both Sebelius and Congress. Even though all rights of due process to challenge RAC findings have been suspended, CMS continues to: (1) impose interest on outstanding "debts" identified by the RACs and (2) offset such debts against other unrelated receivable.


DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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