Medicare revenue cycle audit contractors are continuing a public fight against the Centers for Medicare and Medicaid Services’ evolving policies for audit programs, particularly the Recovery Audit Contractor program.

In January, CMS announced it would suspend appeals to administrative law judges of RAC decisions for up to two years to reduce a huge backlog of claims. The American Coalition for Healthcare Claims Integrity, representing RACs and other health payment contractors working for government agencies, fired off a letter to members of Congress asking for reform of the administrative law judge process and to oppose further efforts to restrict the RAC program.

Now, CMS has further delayed until October enforcement of the two-midnight rule under which it would not reimburse under Part A for inpatient-level services provided to Medicare beneficiaries for treatment that does not span two midnights. CMS considers such a short stay to be payable as outpatient services. The American Hospital Association and American Medical Association argue the policy undermines medical judgment and safe care practices, does not give adequate time to revamp software systems and policies and procedures, and financially hurts providers.

In the eyes of the contractors’ association, suspending the administrative law judge process and delaying the two-midnight rule has substantially shut down the RAC program because of the hospital lobby, according to a spokesperson for the association. But in the Feb. 3 letter to members of Congress, the association implied that CMS has stopped the entire RAC program. In tandem with the two-midnight delay policy, “CMS is also continuing to suspend Medicare auditing by the Recovery Audit Contractor program,” the letter stated.

That’s not entirely accurate and the spokesperson acknowledges, “We kind of simplified the language there.” She adds that 70-80 percent of the RAC program has been suspended, so it essentially is shut down.

The American Coalition for Healthcare Claims Integrity in its letter to Congress argues that RACs audit only two percent of Medicare billings and find errors in nearly half of them, and delays in the two-midnight rule will cost the Medicare Trust Fund more than $4 billion. “Last year, Medicare lost more than $35 billion to waste, fraud and abuse. The willingness of CMS to suspend the most effective Medicare integrity initiative in U.S. history in the face of this astounding volume of waste is unconscionable.”

Consequently, the association advises Congress to immediately reinstate auditing with these guidelines:

* “For Medicare admissions prior to Oct. 1, 2013, RACs will audit according to the old rule in effect at the time of service.

* “For Medicare admissions between Oct. 1, 2013 and Sept. 30, 2014, RACs will audit according to the old and new two-midnight rule, apply the rule that favors the hospital while still identifying improper payments for the Trust Fund.

* “For Medicare admissions after Oct. 1, 2014, RACs will audit according to the new rule.”

The complete Feb. 3 letter to Congress from the contractors' association is available here. Medicare’s memo on the changes, which includes information on a National Provider Call on Feb. 27, is here.

The AHA issued the following statement after CMS extended the two-midnight moratorium:

“We are pleased that CMS has extended its enforcement moratorium on the two-midnight policy for an additional six months, as the AHA has urged.  This action clearly recognizes that there are still many unanswered questions about the policy.  At the same time, we continue to urge CMS to fix the critical flaws of the underlying policy by immediately engaging stakeholders to find a workable solution that addresses the reasonable and necessary inpatient-level services currently provided by hospitals to Medicare beneficiaries that are not expected to span two midnights.”

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