RAC Auditor Profits

When your business revolves around what the government has created…you end up being the tail that is wagged.

HMS Holdings, one of the largest RAC auditing companies profits drop from $9.82 million to $7.04 million dollars.

Let me hear all the docs in unison: boo hoo, we feel so sorry for you!

There are not too many better business models that can be built.

The government has you scour the books, and for every mistake you find, you get a percentage of what is recovered.

This “plummet” in profits is blamed on “…challenges faced by our clients and carriers in adopting several new CMS-mandated claim transaction formats.”  Once again I know there are many docs out there feeling sorry for these guys.

Note that total revenue increased from $82.5 million to $107.3 million!

These guys are just printing money, on the back of physicians.

You better have a defense plan in place when the RACs really start coming after physicians

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.  Here’s why.

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.

Winston Creath is an independent healthcare consultant working in the compliance and revenue cycle management arenas on behalf of physicians and clinics.  He serves as President of National Business Solutions of GA, LLC.  He can be reached at winston@nbsoga.com for questions or comments.

RAC Confusion

It’s early 2010 as of this writing. Where doctors are concerned, what we’re seeing is the calm before the storm.  RAC is perceived by most physicians as just another audit nuisance to be ignored unless it becomes a problem.  Why is this?

Where I live, our RAC (Connolly) is focused on hospitals – physicians so far haven’t been hit.  Many have misinterpreted this to mean they’re safe.  It won’t affect them, right?

Wrong!  What’s occurring right now is predictable if you understand RACs and how they work.  They’re paid on commission guys!  (See “A Deadly Combination”)

Knowing this, we would expect them to go after the low-hanging fruit first, and that’s exactly what they’re doing.  If you’re a private practice physician, your time is coming.

Don’t fall into complacency.  You will be hit by RAC – just not quite yet.

Herd mentality is doing what the herd does, and most doctors aren’t preparing.  Most will wait until either they or somebody they know gets slammed.  Then they’ll start thinking maybe they should get their office manager to look into it.  When several more doctors lose thousands of dollars, panic will set in.  Herd mentality will result in a stampede.

Yes, right now the RACs are focusing on hospitals.  What an opportunity for physicians!  Don’t squander this opportunity – take action now!

Use the calm before the storm to your advantage.  Get help now, and narrow your exposure.  Click HERE.