The Medicare billing system is complicated. In an effort to stop overpayment and find those guilty of Medicare fraud, the federal government pays companies or individuals known as "recovery audit contractors" to search through Medicare claims to find improper claims. If an RAC finds a claim considered suspect, the solution can either e to order the money be paid back or to withhold that amount of Medicare reimbursement from later claims by the doctor or hospital. Despite being paid by the government to spot improper claims, RACs incorrectly identify proper claims as potentially fraudulent on a regular basis. According to the American Hospital Association, 72 percent of the claims that are investigated after being withheld by the federal government on the advice of an RAC are later overturned and delivered to the provider.
Such a high failure rate certainly raises questions about the use of RACs, specifically, and about the difficulties inherent in the Medicare billing system, generally. Hospitals and other providers are required to submit to the authority of the RACs as a condition of gaining access to Medicare eligible patients. The cost is enormous expense in protecting valid claims that have been denied incorrectly.
The fact that paid professionals cannot tell the difference between a valid claim and a fraudulent one is troubling. It demonstrates the need for Medicare to be fundamentally changed to protect providers and the government from fraudulent claims. The current system places health care providers at an unacceptable risk of being charged with Medicare fraud for a mistake or even for making valid claims.
Source: Forbes, "Fight Against Medicare Fraud Costing Doctors And Hospitals Billions," by Evan Albright, 29 May 2013