"Contingent Fee"

What Concerns the OIG About MACs and RACs

Published on: October 8, 2012 | by David S. Dessen, Esq.

Last week the Department of Health and Human Services Office of Inspector General released its fiscal year 2013 Work Plan describing the issues it intends to investigate during the fiscal year beginning October 1, 2012. In the section of the Work Plan devoted to Parts A and B of Medicare, the OIG identified its concerns with the operation of the Medicare Administrative Contractors (MAC) and the Medicare Recovery Audit Contractors.

The OIG’s Concerns With the Performance of the MACs

In addition to being concerned about CMS’ ability to adequately monitor and assess the performance of the various MACs, the OIG is concerned with whether the MACs have consolidated all Part A and Part B edits within their jurisdiction, have developed and tested final edits, implemented and used initial, local system, and medical review edits and evaluated edit effectiveness. On a related subject, the OIG is also concerned about Part B claims that were suspended for manual prepayment review on the basis of system edits but on which the reviews were not conducted. According to the OIG, because manual review is more timely and costly to the contractor, some suspended claims might not be reviewed but paid inappropriately. In sum, the OIG believes that the MACs may be paying too many improper claims.

The OIG’s Concern With the Performance of the RACs

As opposed to its concern with the MACs’ performance in specific areas, the OIG Work Plan does not identify any specific concern with the performance of the RACs. Rather, the Work Plan states that the OIG intends to “review the extent that Recovery Audit Contractors (RAC) identified improper payments, identified vulnerabilities, and made potential fraud referrals in 2010 and 2011.” The OIG will also review CMS’ actions in resolving RAC-identified vulnerabilities, addressing potential fraud referrals, and in evaluating RAC performance in 2010 and 2011. Apparently the OIG does not believe that the problems with the RAC program identified by the American Hospital Association, the American Medical Association and other professional organizations as well as some members of Congress warrant investigation.

The Concerns of Others With the Performance of the RACs

Since its inception, the structure of the RAC program has been the subject of considerable unfavorable comment by Medicare providers. In an April 3, 2012 letter, the leaders of 35 professional organizations representing doctors expressed their opposition to CMS’ plan to have RACs conduct prepayment reviews because “[t]he program’s contingency fee structure inappropriately incentivizes the Recovery Auditors to conduct “fishing expeditions” that are exceedingly burdensome for physician practices” and because “[t]hey [Recovery Auditors] are incapable of efficiently or accurately conducting prepayment review.”

What’s Wrong with the RAC’s Contingent Fees? – Part 2

Published on: August 17, 2012 | by David S. Dessen, Esq.

In Part 1 of this post, I provided a brief history of the evolution of the Medicare and Medicaid RAC programs and highlighted provider concerns with the contingent fee part of the program. In this post, I will discuss why I believe that the contingent fee process developed by CMS does not comply with the Fifth Amendment to the United States Constitution and why, if this argument is presented in a proper case, there is a significant possibility that a Federal Court will issue an injunction stopping the program and order the return of the money paid to CMS in response to RAC demands.

The Fifth Amendment to the United States Constitution

Among other protections afforded by the Fifth Amendment to the United States Constitution is the guarantee that the Federal Government may not deprive any person of life, liberty, or property, without due process of law. A basic tenet of due process is conceptualized in the Latin phrase “nemo iudex in causa sua” which translates to “no one should be a judge in his own cause.”

The United States Supreme Court has considered on a number of occasions the circumstances under which the receipt of money by a judge or other decision maker violates due process. It has held that a litigant’s right to due process is violated when the mayor of a town receives a portion of the fines he imposes while acting as a judge. It has also held that a litigant’s right to due process is violated where fines imposed by a mayor while acting as a judge represent a significant portion of his town’s revenue, even though the mayor did not directly receive any part of the fine. In a recent decision, the Court held that due process required a justice of the West Virginia Supreme Court to not participate in an appeal involving a company in which the company and its CEO had contributed significant amounts of money to the justice’s campaign for election to the court. This quotation from the Supreme Court’s opinion in Tumey v. Ohio succinctly sums up why money perverts due process:

Every procedure which would offer a possible temptation to the average man as a judge to forget the burden of proof required to convict the defendant, or which might lead him not to hold the balance nice, clear, and true between the State and the accused denies the latter due process of law.

Why the Contingent Fee Arrangement between CMS and the RACs Violates Due Process

The structure of the program created by CMS gives to the RACs the sole and unreviewable authority to create, from a previously paid claim, a provider overpayment and the right to demand payment from the provider. It is through these actions, taken solely by the RACs, that the RACs create their income. If they want to make more money, they create more overpayments; if they want to make less, they find fewer overpayments. In my opinion, this direct link between the RAC’s income and its decision as to whether a specific claim was improperly billed might lead them not to hold “the balance nice, clear, and true between the State [CMS] and the accused [provider]” as the Tumey Court noted and why the RAC program denies the latter due process of law.

What’s Wrong with the RAC’s Contingent Fees? – Part 1

Published on: August 14, 2012 | by David S. Dessen, Esq.

To date, most of the discussion about the RACs has revolved around the merits of an individual claim and the repayment demand appeal process, including whether the RACs have to establish good cause at an ALJ hearing to justify the reopening of a claim more than 1 year old.

Part 1 of this post provides a brief history of the evolution of the Medicare and Medicaid RAC programs and highlights provider concerns with the contingent fee part of the program. In Part 2, I will discuss why I believe that the contingent fee process developed by CMS does not comply with the Fifth Amendment to the United States Constitution and why, if this argument is presented in a proper case, there is a significant possibility that a Federal Court will issue an injunction stopping the program and order the return of the money paid to CMS in response to RAC demands.

A brief history of RAC contingent fees.

In § 306(a) of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003, Congress directed CMS to conduct a project to demonstrate the use of recovery audit contractors in identifying underpayments and overpayments under Parts A and B of Medicare and to recoup overpayments. Congress further provided that payment may be made to the RACs on a contingent basis from amounts they recovered. In § 302 of the Tax Relief and Healthcare Act of 2006, 42 U.S.C. § 1395ddd(h), Congress made the recovery audit program permanent and directed it be expanded to all fifty (50) states by January 1, 2010. Congress also directed that the RACs be paid on a contingent basis out of funds recovered by the RACs from overpayments, and in such amounts as the Secretary specified for the identification of underpayments.
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