Article on Medicare Audit Program’s Burden on Hospitals Features HLP Attorneys Abby Pendleton and Jessica Gustafson

An article in Hospitals & Health Networks (“H&HN”), the flagship publication of the American Hospital Association, quoted HLP attorneys Abby Pendleton and Jessica Gustafson on the effects of Medicare audits on hospitals.

The article, published on January 14, 2014, discusses the overwhelming burden on hospitals created by the Medicare audit program and recovery audit contractors (“RACs”). Specifically, the article notes that although hospitals are successful in over 70 percent of RAC claim denial appeals, the cost of these appeals is steep. Hospitals are often forced to devote considerable resources to dedicated RAC response teams so that they can respond to RAC record requests and meet the stringent filing deadlines.

The high success rate of hospitals on appeal is an indication that RACs are not applying the Medicare standards correctly in their audits. As Pendleton points out in the article, RACs earn a contingency fee of 9 to 12.5 percent on claim denials, and are misapplying standards and looking for any way to deny claims. Pendleton also notes that many small hospitals are not able to afford the resources required to comply with the often onerous record requests caused by RAC audits, and cannot appeal the Medicare payment denials.

The article also discusses the Medicare Audit Improvement Act of 2013, which seeks to reform the Medicare audit system. Some reforms include limiting the number of medical records that RACs can request, and penalizing RACs when hospitals are successful on appeal. But, as Gustafson states in the article, RAC audits are likely here to stay. Because RACs collect so much money from hospitals, it is unlikely that legislation will seriously limit RAC powers. But hospitals can put pressure on regulators, who can do a better job on ensuring that RACs apply the correct standards in their audits.

The article, “Whacked by RAC,” is available at

For more information on this topic, you can reach Abby Pendleton, Esq. at or Jessica Gustafson, Esq. at Pendleton and Gustafson lead the firm’s Medicare Audit and Appeals Department.

Contact Information