Hospitals Push Back Against "RAC" Audits. They Should.

One of the Disease Management Care Blog's local hospitals has jumped into a lawsuit against Medicare. 

According to this article, the dreaded 2003 Medicare Modernization Act's RAC audits have gummed up Part B as well as Part A payments.  That's important because Part B includes physician services, which outside of hospital-physician alliances like Accountable Care Organizations, is typically completely separate. Hitting A as well as B not only represents a potential double hit to hospitals' bottom lines.

Could that give hospitals a reason to think again about hiring physicians?

Even if the DMCB is wrong about the scope of the lawsuit, the article's paragraph on this hospital's costs in dealing with the RAC audits are eye opening: 6 staff members and additional hundreds of thousands of dollars to cover medical record requests, consultants and appeals.  If other hospitals are being forced to follow suit, the cost to the health care system is considerable.

And those are Medicare administrative costs. These are borne not by the feds, but by hospitals, which must comply with thousands of pages of complex rules and regulations.  While it's mathematically true that Medicare has "low administrative costs," that's because the Agency's principal means of enforcement are cudgels like RAC audits with clawbacks with interest, penalties and other sanctions. 

While there is no shortage of hospital bad behavior, DMCB suspects most hospitals are honest and, despite that, have had no choice: add additional administrative expenses that are ultimately passed through to the patient and the nation's fisc.