Recovery Audit Contractor

Do the Math!

Just last week I spoke with a hospital Utilization Chairman from Indiana who is concerned about ZPIC and its relationship to RAC denials.

In the course of our conversation he mentioned the challenge he is facing in trying to get other physicians to get serious about RAC. He wants to alert his colleagues to the danger of assuming the RACs won’t affect them. A lackadaisical attitude toward RAC issues could expose them to ZPIC investigations, which in turn could result in serious consequences up to and including imprisonment.

Our Prediction

It has long been our belief that it’s only a matter of time until the RACs will be coming after physicians. Mainly it’s an issue of manpower and priorities. At present, they’re auditing hospitals because they represent big-ticket claims with the highest commissions. But it won’t always be that way.

Do the Math

Everybody knows that hospitals receive the lion’s share of Medicare payments. The figure we hear most often is that 17% of Medicare claims are paid to doctors. That sounds like such a small, insignificant amount doesn’t it? Only 17% – surely the RACs won’t bother to audit physicians, right?

Wrong! Think about it. Medicare’s budget is about $500 Billion dollars a year. RACs can look back 3 years. Three times $500 Billion comes to about $1.5 Trillion, and if about 17% of this is paid to physicians, that figures out to $255,000,000,000.00. Two Hundred and Fifty-Five Billion dollars is a lot of money!

Now … Just a Little More Math

Did you ever play “What If”? What if the RACs were able to recoup only say one dollar out of every 25 that was paid out to physicians? That would be four percent. Four percent of $255 Billion would come to $10,200,000,000.00. And while RAC commissions vary from 9% to over 12%, just using a conservative average of 10% would result in $1.2 Billion of commissions paid to RACs.

When the dust settles, will you as a physician be left with 24 out of every 25 dollars you were paid by Medicare? I can’t answer that – nobody knows. If you’re honest – like most doctors – I hope you do better than that.

Once you understand the magnitude of the commissions involved, how could any thinking person still believe that RACs won’t audit physicians? And if they’re going to audit you, wouldn’t it be wise to seek professional help and see what your exposure is? If you’re concerned, e-mail me and let’s discuss it.

It has long been our belief that it’s only a matter of time until the RACs will be coming after physicians. Mainly it’s an issue of manpower and priorities. At present, they’re auditing hospitals because they represent big-ticket claims with the highest commissions. But it won’t always be that way. Here’s why.

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