Feds Recover Record $4.1 Billion in Healthcare Fraud with RAC Audits in 2011

Federal authorities announced this week that they recovered $4.1 billion in Medicare fraud judgments last year, up roughly 50 percent from 2009 numbers. This record-high recovery has been attributed to renewed fraud recovery efforts referred to as RAC Audits.

Fraud has long been the weighted chain around the neck of the United States’ Centers for Medicare & Medicaid Services (CMS). Recent estimates peg waste fraud and abuse within the system to be anywhere from $60 billion to $90 billion annually.

Created in 2003, the Recovery Audit Contractor (RAC) program was created to identify and recover Medicare overpayments to healthcare providers. The program originally started in what were considered Medicare hotspots like Florida, New York and California, where auditors recovered $36.2 million in 2005. That amount jumped to $332.9 million in 2006 and almost doubled to $610.9 million in 2007. The U.S. Department of Health & Human Services (HHS) expanded the audits nationwide in 2010.

RAC Audits differ from the Medicare audits of the past in that the auditors are no longer CMS employees waiting to discover red flags to invoke an audit. Today’s RAC Audits are conducted by outside collection agencies as well as independent contractors who are compensated on a contingency basis, keeping a percentage of the CMS overpayments they identify and recoup. This has created a wild-west-type atmosphere where any medical practice can be randomly targeted for audit. Even if the overly zealous auditor finds no overpayments, it costs time and money for a medical practice to defend itself.

Physicians can protect themselves from RAC Audits. Aside from making certain you are in compliance with Medicare’s clinical payment criteria, documentation and billing requirements, you can purchase errors-and-omissions (E&O) liability insurance that will protect your practice against Medicare RAC Audit claims. E&O insurance covers both court costs and any settlements up to the amount specified on the insurance contract.  In most cases, errors and omissions is not covered by your medical professional liability insurance policy.

Adherence to a compliance program is generally considered evidence that billing is done in good faith; however, no compliance program can stop a RAC Audit. E&O insurance protection picks up where the compliance program leaves off. If your practice becomes the target of a RAC Audit, E&O insurance coverage can provide you with the financial resources necessary to sustain your business without undue burden while undergoing a defense proceeding.

Protect yourself. Physicians should contact their medical malpractice insurance broker for more information on RAC Audits as well as E&O insurance coverage.