United States: RAC Update: Appeal Delays Continue, CMS Offers Settlement Deal

Congress created the Recovery Audit Contractor (RAC) program to help the Centers for Medicare and Medicaid Services (CMS) identify improper payments made to providers by Medicare and Medicaid. The enormous growth in appeals to RAC determinations since Congress expanded the program in 2010 was unanticipated four years ago when the goal of ferreting out fraud was paramount.

This summer, a subcommittee of the US House Committee on Oversight and Government Reform heard from Nancy Griswold, Chief Administrative Law Judge (ALJ) for the Office of Medicare Hearings and Appeals (OMHA), who revealed publicly what health care providers have known for a more than a year: A staggering 545 percent growth in RAC appeals over two years has made the 90-day ALJ review requirement — established by Congress in 2010 — untenable, and has pushed adjudication time frames to 387 days as of June 30, 2014. Presently, OMHA has over 800,000 pending appeals and receives a year's worth of appeals every four to six weeks.

With new resources, ALJs have managed to tackle 72,000 appeals per year. Hiring more judges alone will not solve the RAC problem. At the beginning of 2014, OMHA suspended any further assignments of appeal request by providers. This delay means some health care providers may wait years to recoup payment for claims challenged by RACs.

Congress has no intention of putting the brakes on RACs given the billions in improper payments that have been identified and returned to the Medicare Trust Fund. Even so, physicians and hospitals have been burning the phone lines of their elected representatives, complaining about the impact large holdbacks have had on their margins and the high rates of reversals many have experienced through appeals. Administrative issues, such as having a signature in the wrong place on a claim, are often cited as the basis for many initial denials which further logjam the appeals process.

Legislation introduced by Rep. Sam Graves (R-MO) is a direct response to provider frustration with RACs. Presently, the House legislation has an overwhelming 231 co-sponsors. Similar legislation filed by Sen. Roy Blunt (R-MO) has 16 co-sponsors. Neither bill has received a vote, but has served to increase pressure on CMS to better manage its contractors. Health care providers continue to advocate for administrative and legislative remedies. Among the suggestions include greater and earlier CMS engagement and more appropriate performance requirements for its contractors, who many believe need to be reined in from practices that result in their high percentage of incorrect claim determinations and a failure to resolve such errors with the provider informally to eliminate burdensome appeals.

New RAC Contacts Delayed, Under Challenge

For some time, observers believed that by August 2014, CMS would finally approve the next round of RAC contractors and implement some program reforms. A technical protest of the new contract payment terms from CGI Federal, the contractor responsible for the bumpy rollout of the state health exchanges, is expected to further delay new RAC contracts into 2015. Last week, CMS told RACs they may begin automated audits which will continue until new contracts are in place.

The new contracts are expected to make a number of administrative remedies to try and ensure the RAC program is more responsive to the providers they are auditing such as requiring auditors to wait 30 days to allow for discussion before sending claims to the Medicare Administrative Contractors (MACs) for collection. RACs will also have to wait until providers have moved through the second level of appeals before collecting their contingency fees, which are thought to range from 8-12 percent. New contracts are also expected to change the number of documents RACs may request for claims and to adjust these based on providers denial rates. It is not likely these changes will go far enough for most providers caught up in RAC uncertainty.

CMS Offers Settlement Deal for Hospital RAC Appeals

CMS has offered to settle certain disputed hospital claims held up indefinitely as part of RAC claim audits. CMS has offered eligible hospitals 68 cents on the dollar to resolve all denied patient status review claims related to admissions occurring before October 1, 2013. Many of these claims are stagnating in the appeals process. The Agency has been encouraging hospitals to take advantage of the settlement terms to "alleviate the burden of Medicare appeals on both the hospital and Medicare system," according to the CMS website. A few hospitals have already come forward to accept the deal which expires October 31, 2014.

Not all hospitals or claims will be eligible for settlement. For example, only acute care and critical access hospitals will be eligible for settlement and CMS will consider only claims that have exceeded the statutory timeframe for appeal. Hospitals will be expected to submit spreadsheets showing every claim they believe is eligible for the settlement. Complexities in reimbursement are likely to impact settlement results, and hospitals who seek settlement will forfeit the ability to collect cost-sharing from patients.

House Ways and Means Health Subcommittee Chairman Kevin Brady (R-TX) is challenging the Department of Health and Human Services' (HHS) authority to settle hospitals' appeals of denied claims, specifically questioning the proposed settlement terms. Mr. Brady takes issue with the "all or nothing" approach of settling claims and has called upon HHS Secretary Sylvia Burwell to demonstrate how it reached settlement terms, suggesting the 68 percent rate may be double what a recent analysis by the Medicare Payment Advisory Commission (MedPAC) support.

Federal Judge Throws Out American Hospital Association Lawsuit

On September 17, 2014, a federal judge rejected an American Hospital Association (AHA) lawsuit against CMS that challenged the Agency's policy to prohibit hospitals to resubmit an outpatient claim after the RAC denied it as an inpatient claim. Because CMS requires outpatient claims must be billed within one year from the date of service regardless if the time of the RAC denial of the inpatient claim occurs later. AHA initiated legal action in 2012, and is considering an appeal.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

*** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.