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

Medicare Fraud Not Acted on?

As mentioned before, it is not in the interest of the RAC’s to report a physician for fraud.


The RAC’s get ZERO if they report for fraud…BUT if they retract funds paid to a Doc, they then get a percentage of that take.

Make sense?

How about this:

As report in USA Today on 9 Aug 2010, the contractors that are hired to investigate and report fraud are slow to do anything.

Hmm, why might this be?

The contractors that are hired to investigate Medicare fraud are called “Program Safeguard Contractors”.

These PSC’s are hired to research fraud, then report the fraud (if it exists) to law enforcement.

Apparently it takes an average of 178 day for the PSC’s to refer fraud cases.

The amount of time tends to allow the trail to go cold.

As reported:

Out of $834 million in questionable Medicare payments identified by private contractors in 2007, the federal government was only able to recover some $55 million, or about 7% of the funds.

The hoopla is centered around this – the federal government has to find a way to pay for what they are trying to provide.

This means fun and exciting things like:

  • 1099’s for any purchase of a product or server greater than $600…for everyone!
  • more fraud investigations
  • more RAC audits
  • more of anything that can increase the revenue brought into the federal government

Watch out…the Fed’s aren’t just coming after individuals, but all you private practice Docs out there are the prey also.

Do what you can to protect yourself.

New Denial Code for RACs

Effective May 24, 2010, the CMS will institute a new denial code (N432) that is specifically a message to you (the physician’s office) that reimbursement has been held back due to a RAC audit.

Specifically, “When possible, the Remittance Advice shall contain an N432 code to let the provider know that the adjustment is the result of a RAC audit.”

This, when accomplished will be a “heads up” to you that a Demand Letter is on its way.

The extra emphasis on “when possible” is in the CMS Manual Transmittal, which tells me this code won’t always be there which will add to confusion.

Speaking of confusion, if it wasn’t clear already that you better be looking out for #1 (YOU), take a look at this direct quote from the transmittal:

The RAC shall notify the AC and MAC that an overpayment has been identified by forwarding an Excel or flat file to the AC and MAC containing the claims with improper payments. The RAC shall upload a separate file into the RAC Data Warehouse that contains information associated with the improper payment finding for each affected claim/line item…the AC and MAC will forward an Excel or flat file to the RACs with information associated with the claim adjustment. This includes the dollar amount of any additional adjustments to the claim that were identified by the system during the adjustment process. These are normally called associated findings. Working in concert with the AC and MAC, the RAC will issue a demand letter to the provider explaining the reason for the overpayment and the amount of the overpayment to be recouped. The AC and MAC shall establish an Accounts Receivable and an electronic or paper Remittance Advice for notification to the provider in the claims processing system.

If you were able to read that paragraph and fully understand it in one reading, you are brilliant.

My point here is, if you are not organized…fully and completely organized when it comes to any demand letters you receive, any files you send to a RAC and any appeals you file, then you are leaving money on the table.

The CMS is setting up a system so complex, not many people will understand it.

The RAC’s will have to contend with tens of thousands of files and letters…they are going to screw things up.

You need to worry about yourself and make sure it is not your business that is on the wrong side of their screw ups.

How do you do this?

Fanatic organization and tracking when it comes to RAC’s.

You need to track every bit of minutia when it comes to your audited files, and more importantly when it comes to your appealed files.

It should be your goal to make the recovery of money from you by the CMS and RAC as difficult as possible…while following their procedures exactly.

If you are an easy target, chances are you’ll get hit again and again.

This whole process can be made easy for you with myRACTracker.com.

Always know the location of a  file.

Always know where a file is in the process.

If you are on top of these things, you’ll come out ahead of the RACs.