WASHINGTON, D.C. – Two California lawmakers applaud CMS for putting on hold a Recovery Audit Contractor (RAC) program in their state in the wake of concerns the contractors were overzealous in scrutinizing inpatient rehabilitation claims, but are livid the agency hasn't responded to their repeated requests for written information on the status of the program. They say they will push legislation to suspend the program permanently unless CMS immediately responds to their concerns.

Reps. Lois Capps (D) and Devin Nunes (R) last Thursday (Nov. 1) sent a letter to Acting CMS chief Kerry Weems demanding he provide information on the program's “pause.” In a statement released along with a letter, they skewered Weems' leadership abilities and ripped the agency for failing to respond to several requests for detailed information on the decision for more than a month.

Nunes added, “By their inaction, CMS is forcing Congress to consider legislative alternatives that may necessitate suspending the program entirely. If CMS wishes to continue to have this auditing tool available, they should take immediate action to address our concerns.”

However, faced with questions from Inside CMS, CMS said it would “be happy” to provide a written statement to the lawmakers clarifying the policy. Capps, a member of the Energy & Commerce health subcommittee, said she was pleased with CMS' statement but disappointed it took a “public shaming in the press” for CMS to “finally step up and do the right thing.”

The fireworks between the California lawmakers and the powerful agency began in June when Capps, Nunes and 34 other members from California, including House oversight committee Chair Henry Waxman (D-CA), wrote to CMS to discuss several concerns their constituents had broached regarding the RACs. Specifically, providers claimed the California contractor, PRG Shultz, had been utilizing aggressive tactics when reviewing IRF claims.  Initially, RACs focused on inpatient acute care. But starting earlier this year, PRG Shultz expanded its reviews to include IRFs and skilled nursing facilities (SNFs), the lawmakers said in the letter. Facilities in California have reported “nearly universal denial rates” associated with joint replacement admit reviews, they added. 

“A key element of the RAC, which is of significant concern to us, is the fact that the contractor may be able to retain recovered payments even when CMS overturns the auditor’s coverage decision,” an aide to Capps said in an e-mail at the time. “In short, there appears to be a strong financial incentive driving auditors to deny coverage and insufficient CMS oversight of the RAC may be resulting in misapplication of Medicare policy.”

Critics of the program have assigned RACs the moniker “bounty hunters,” a phrase used in connection with RACs several years ago by Troy Tippett, a Pensacola, FL, neurosurgeon and president of the Florida Medical Association.

The American Medical Rehabilitation Providers Association testified to Congress in May that they were deeply concerned about the RAC process and worried that the ability of contractors to keep a percentage of the money collected causes a “perverse incentive” to deny as many claims as possible.

In September, following an Aug. 1 meeting regarding the California lawmakers' concerns, CMS agreed to pause the program in order to review the process, but neglected to inform the delegation.

“While we were disappointed that CMS did not notify us directly, we welcomed the news that CMS and the firm holding the RAC contract in California had come to this decision,” Capps and Nunes point out in their Nov. 1 letter. “Our staff respectfully requested official notice in writing of the details of the “pause” so that we could provide accurate information to our constituents who are affected, but did not receive any. Staff members in both of our offices received phone calls and e-mails from CMS officials stating that we would, in fact, receive something in writing.”

Capps, in a statement released along with the letter, said, “I am very concerned about the communication, or lack thereof, from [CMS] regarding this so-called 'pause' in the [RAC] program in California. A decision of this magnitude should be clearly communicated in writing to all stakeholders including Members of Congress and health care providers. CMS’ unwillingness to respond to repeated requests for this crucial information demonstrates a severe lack of leadership and underscores the need for congressional action to force CMS to address our concerns with this program.”

A series of e-mails between Capps' and Nunes' offices and CMS shows that staffers repeatedly asked CMS officials to send “something in writing” about the pause. In an exchange dated Sept. 27, a congressional aide explained that the lack of information made things “very difficult” for the lawmakers who would wanted to communicate with constituents but don't have the necessary details.

CMS responded by sending the same written statement the agency provided to the Sacramento Bee. “We have not suspended anything, just paused,” CMS wrote, adding, “Recognizing the impact on the facilities, CMS has asked the recovery contractor to pause and ask for no more repayments or medical records while we review the process.”

The unnamed CMS staffer further informed Capps' office that he or she had been “keeping all appropriate folks in CMS apprised of the RAC issue and your concerns about getting something in writing. I hope to have something in writing soon but I do not have anything yet.”

Capps staffers asked again on Oct. 3 and Oct. 24. Staffers also requested information on the number of claims denied by PRG and how many had been overturned in appeal, since figures compiled by staffers did not match those the agency had provided.

On Oct. 26, CMS officials said they have not issued an official written statement, but reminded staff that “we have described the pause in meetings with the hospital association during congressional staff calls and in briefings.” CMS also noted that they were in the process of compiling the requested data on denied claims and appeals.

When queried about the situation, a CMS official initially e-mailed Inside CMS the exact response that was given the Sacramento Bee. Later on, however, the agency provided an additional statement. "We are very interested in working with Congress to ensure the most effective administration of the RAC program,” the official said. “We are more than happy to clarify in writing statements and policies that have been outlined to the members and the hospital associations in personal meetings over the past few weeks."

"I am glad that CMS is finally willing to cooperate with health care providers and give them this critical information in writing on the 'pause' in the RAC program for California. It is disappointing that it took a public shaming in the press for CMS to finally step up and do the right thing. I eagerly await CMS' written clarification of its 'pause' policy," Capps told Inside CMS.

CMS did not respond by press time to a query on when the RAC pause would be lifted.

Stakeholders have long voiced concerns about the RAC program, which was mandated in the Medicare Modernization Act of 2003 and initiated via a demonstration program in three states – California, New York and Florida -- in March 2005. The program is scheduled to go nationwide by 2010.

Last year, AMA sent a letter to Ways & Means Chair Charlie Rangel (D-NY) asking him to scrap the program.

Recently, AMA blasted CMS for proposing the RACs conduct medical necessity determinations on Part A and Part B claims.

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