The Return Of The Medicare Bounty Hunters

bounty%20hunter.jpgIn the 1990’s there was a system in place that seemed reasonable at the time. The government hired private companies to audit hospital cost reports on the government’s behalf and to add additional incentive, those companies, generally large insurance companies, would receive bonuses based upon funds recovered. This lead to a sort of system where there were “gotcha” games between the auditors and providers, the providers would try and maximize their reimbursement knowing that the auditors would be specifically looking for places to cut.
Making matters worse, the auditors tended to ignore “errors” that benefited the providers because those errors didn’t benefit the government contractors. So too, the providers, in analyzing and contesting the audits through the appeals process would only report “errors” that benefited the providers. This system eventually led to the prosecution of a number of hospital executives as well as one of the largest whistleblower cases ever. (Click here to read more about John W. Schilling and the case against HCA/Columbia) The government ended that incentive program in part because of the gaming of the system it produced.
Well, it is back again. The government has contractors, called recovery audit contractors, or RACs that receive between 9-12% of overpayment funds they recover on behalf of the government on Medicare audits. In just three years, they have reportedly collected over $1 billion dollars. The only problem, except that the last time it produced somewhat unseemly results, is that these contractors are required to report to law enforcement instances of criminal fraud as opposed to billing errors or overpayment.
To date, only two cases have been referred to for criminal prosecution. The motive, you might suspect, is financial. The RACs don’t get any money for cases referred for criminal prosecution, only for their own recoveries. This suggests that the RACs are erring on the side of overpayment as opposed to fraud, which still benefits the government as well as the RAC and the provider; no harm, no foul. However, the implicit or explicit threat of criminal referral may be an interesting bargaining tool to make these recoveries. Another interesting twist is that the RACs can go back and audit the same providers over and over again, collecting on overpayments (not fraud) no matter how many times the provider makes the same errors.
To read more, click here.