AMA Urges CMS to Make Changes to the RAC Program

In a letter dated December 3, 2014, the American Medical Association (“AMA”) urged the Centers for Medicare and Medicaid Services (“CMS”) to resolve the two-year backlog of Medicare and Medicaid appeals. The AMA noted that while it appreciated the recent efforts of the Office of Medicare Hearings and Appeals (“OMHA”) to address the issue, the problem does not lie with the OMHA. Rather, the fundamental issue driving the appeals backlog lies within the RAC program.

In fiscal year 2013, more than 60 percent of RAC determinations appealed by physicians were overturned. That same year, the OHMA experienced a 506% increase in appealed RAC claims compared to fiscal year 2012. In light of these statistics, the AMA commented that “this [data] demonstrates that the RAC program must be reformed in order to resolve this backlog.”

The AMA also highlighted problems with the RAC contingency fee structure which encourages RACs to find overpayments “with little regard for the accuracy of their findings.” Currently, RACs are paid approximately 9.0-12.5 percent for denied claims and must only pay back the contingency fee if a claim is later overturned. According to the AMA, this structure provides little incentive for RACs to ensure that they limit their audits.

Additionally, the AMA pointed out the significant cost of RAC appeals. Based on research conducted by the AMA, the total cost of appeals in fiscal year 2012 was approximately $455,468. The AMA added that physicians spend significant financial resources on compliance efforts to ensure compliance with payment rules and regulations. In fact, the AMA found that physicians spend approximately $1,622 per year on probe audits, internal and external chart reviews, and legal and educational expenses.

Accordingly, the AMA strongly urged CMS to consider the following changes to the RAC program:

• RACs should be subject to financial penalties for inaccurate audit findings and physicians should receive interest when they win on appeal of a RAC audit • Physicians should be permitted to rebill for recouped claims for a year following recoupment
• CMS should provide an optional appeals settlement to physicians similar to that provided to hospitals for short-term care • CMS should retain the current medical record request limits and allow medical record reimbursement for physicians • RAC audits of physicians should be performed by a physician of the same specialty or sub-specialty licensed in the same jurisdiction
For more information, or for questions regarding RAC audits and appeals, please contact Abby Pendleton, Esq. or Jessica Gustafson, Esq. at (248) 996 – 8510 or via email at or

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