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87–944—PDF 2013

S. HRG. 113–236 

PROGRAM INTEGRITY: OVERSIGHT OF 

RECOVERY AUDIT CONTRACTORS 

HEARING 

BEFORE THE

COMMITTEE ON FINANCE 

UNITED STATES SENATE 

ONE HUNDRED THIRTEENTH CONGRESS 

FIRST SESSION 

JUNE 25, 2013 

( 

Printed for the use of the Committee on Finance 

COMMITTEE ON FINANCE 

MAX BAUCUS, Montana, Chairman 

JOHN D. ROCKEFELLER IV, West Virginia 

RON WYDEN, Oregon 

CHARLES E. SCHUMER, New York 

DEBBIE STABENOW, Michigan 

MARIA CANTWELL, Washington 

BILL NELSON, Florida 

ROBERT MENENDEZ, New Jersey 

THOMAS R. CARPER, Delaware 

BENJAMIN L. CARDIN, Maryland 

SHERROD BROWN, Ohio 

MICHAEL F. BENNET, Colorado 

ROBERT P. CASEY, Jr., Pennsylvania 

ORRIN G. HATCH, Utah 

CHUCK GRASSLEY, Iowa 

MIKE CRAPO, Idaho 

PAT ROBERTS, Kansas 

MICHAEL B. ENZI, Wyoming 

JOHN CORNYN, Texas 

JOHN THUNE, South Dakota 

RICHARD BURR, North Carolina 

JOHNNY ISAKSON, Georgia 

ROB PORTMAN, Ohio 

PATRICK J. TOOMEY, Pennsylvania 

AMBER COTTLE, Staff Director 

CHRIS CAMPBELL, Republican Staff Director 

(II) 

C O N T E N T S 

OPENING STATEMENTS 

Page 

Baucus, Hon. Max, a U.S. Senator from Montana, chairman, Committee 

on Finance ............................................................................................................ 1 

Hatch, Hon. Orrin G., a U.S. Senator from Utah ................................................. 3 

WITNESSES 

Carmody, J.J., director of reimbursement, Billings Clinic, Billings, MT ............ 5 

Draper, Suzie, vice president, business ethics and compliance, Intermountain 

Healthcare, Salt Lake City, UT .......................................................................... 7 

Rolf, Robert, vice president, CGI Federal Inc., Fairfax, VA ................................. 9 

ALPHABETICAL LISTING AND APPENDIX MATERIAL 

Baucus, Hon. Max: 

Opening statement ........................................................................................... 1 

Prepared statement .......................................................................................... 31 

Carmody, J.J.: 

Testimony .......................................................................................................... 5 

Prepared statement .......................................................................................... 34 

Draper, Suzie: 

Testimony .......................................................................................................... 7 

Prepared statement .......................................................................................... 39 

Hatch, Hon. Orrin G.: 

Opening statement ........................................................................................... 3 

Prepared statement .......................................................................................... 48 

Rolf, Robert: 

Testimony .......................................................................................................... 9 

Prepared statement .......................................................................................... 50 

COMMUNICATIONS

American Association for Homecare ...................................................................... 55 

American Hospital Association ............................................................................... 63 

American Orthotic and Prosthetic Association ..................................................... 66 

Center for Medicare Advocacy, Inc. ........................................................................ 69 

(III) 

(1) 

PROGRAM INTEGRITY: OVERSIGHT OF 

RECOVERY AUDIT CONTRACTORS 

TUESDAY, JUNE 25, 2013 

U.S. SENATE, COMMITTEE ON FINANCE, Washington, DC. 

The hearing was convened, pursuant to notice, at 10:05 a.m., in 

room SD–215, Dirksen Senate Office Building, Hon. Max Baucus 

(chairman of the committee) presiding. 

Present: Senators Carper, Casey, Hatch, Grassley, Enzi, Thune, 

and Isakson. 

Also present: Democratic Staff: Amber Cottle, Staff Director; 

David Schwartz, Chief Health Counsel; Matt Kazan, Professional 

Staff Member; Tony Clapsis, Professional Staff Member; and Karen 

Fisher, Professional Staff Member. Republican Staff: Kim Brandt, 

Chief Health Care Investigative Counsel; and Chris Coughlan, Tax 

Counsel. 

OPENING STATEMENT OF HON. MAX BAUCUS, A U.S. SENATOR 

FROM MONTANA, CHAIRMAN, COMMITTEE ON FINANCE 

The CHAIRMAN. The committee will come to order. 

Benjamin Franklin once said, ‘‘Waste neither time nor money, 

but make the best use of both.’’ This committee has oversight of 

Medicare. Forty-nine million seniors and disabled Americans depend on the program. Making sure the government spends Medicare dollars wisely is one of our chief responsibilities, and one this 

committee takes very seriously. In 2011, $29 billion of Medicare payments were considered improper. Our goal should be to lower this amount to zero. Regular 

audits save Medicare money by recouping these errant payments. 

Since 2010, audits have identified $4.8 billion of incorrect Medicare 

payments, but they also can impose burdens on providers. 

Today we will examine the audits performed by private contractors called Recovery Audit Contractors. Their mission is to uncover 

and collect inappropriate payments made to medical providers, 

both under- and over-payments. 

In 2003, the Medicare prescription drug law created the Recovery 

Audit Contractor program as a 6-State demonstration. Over a 3- 

year test period, the program returned $900 million to Medicare. 

It was so successful that Congress expanded it nationwide. 

The Affordable Care Act further expanded the program to cover 

Medicare managed care and Medicaid. As the baby boom generation ages, Medicare must remain financially strong. The Medicare 

trustees determined last month that the Medicare trust fund will 

2 

last 2 years longer than previously estimated, that is, until 2026. 

Per-beneficiary spending is at a historical low. We have made real 

progress ensuring Medicare will be strong for future generations. 

Private audits play a key role in strengthening Medicare’s finances. In 2011, these audits returned nearly half a billion dollars 

to the Medicare trust fund. We need to build on this success, but 

we cannot over-burden legitimate providers who play by the rules. 

We need balance. 

Providers should focus on patient care, not senseless red tape. 

Recovery Audit Contractors frustrate many Montana providers, 

and one is Kalispell Regional Medical Center. In the last year, the 

hospital has had to spend nearly $1 million and hire three new 

full-time staff just to deal with the audits. In total, eight of their 

employees respond to audits. For a small hospital in Montana, that 

is a serious investment. 

Charles Pearce serves as the hospital’s chief financial information officer. What is it that frustrates Mr. Pearce the most? The 

randomness of the audit process. He believes the auditors are overzealous and incur no penalties or consequences when an audit is 

overturned on appeal. 

Mr. Pearce provides example after example of audits that were 

eventually overturned on appeal. One case involved a 65-year-old 

man who had leg surgery and was fitted with a cast. Several weeks 

later, he came into the emergency room with severe chest pain. A 

CT scan showed he had a blood clot on his lung. 

The doctor on duty admitted the man and prescribed medication. 

Almost 3 years later, a private contractor’s audit said this admission was unnecessary. The audit claimed the patient’s medical history did not support the admission. As a result, Kalispell Regional 

was forced to pay back Medicare. 

The hospital appealed the decision, arguing that the admission 

was necessary because the original surgery and cast increased the 

risk for a lethal blood clot. Kalispell Regional won its appeal. Kalispell Regional has won appeals in 90 similar cases. All told, that 

hospital is successful in 53 percent of its appeals. There must be 

better ways to spend the government’s and hospitals’ time and 

money. 

Here are three steps Medicare should take. (1) Incentivize private contractors to focus on the most at-risk services and providers. 

This way, providers with a long track record of following the rules 

are rewarded. (2) Bolster provider education by Medicare and its 

contractors. Providers cannot follow the rules if they do not know 

the rules. Medicare regulations can often be confusing and require 

more time than providers have. (3) Make the appeals process more 

efficient. One of my top rules is to do something that has to be 

done and do it now. The second rule is, do it right the first time. 

As Kalispell Regional’s experience shows, appealed cases often 

face a long and expensive road for both the provider and the government. The Inspector General for the Department of Health and 

Human Services found rulings in the final stages of the appeals 

process—a hearing in front of a judge—are highly inconsistent. 

The IG report found the same facts and circumstances often lead 

to two opposite decisions. Recovery Audit Contractors are only one 

piece of a larger concern with the growing use of contractors. EnVerDate Nov 24 2008 20:25 May 27, 2014 Jkt 000000 PO 00000 Frm 00006 Fmt 6633 Sfmt 6633 R:\DOCS\87944.000 TIMD
3 

suring Medicare payments are made accurately is difficult, and it 

is complex. Over the years, different contractors, all with their own 

acronyms, have been layered over one another. 

While some overlap may be necessary, Congress should work to 

simplify the way the contractors interact with providers. This 

should increase efficiency and will also reduce some unnecessary 

burden on doctors and hospitals. 

As we work to strengthen our Federal health care system, we 

must keep Benjamin Franklin’s words in mind. We must waste neither time nor money, but make the best use of both. We must do 

so to improve patient care. 

[The prepared statement of Chairman Baucus appears in the appendix.] 

The CHAIRMAN. Senator Hatch? 

OPENING STATEMENT OF HON. ORRIN G. HATCH, 

A U.S. SENATOR FROM UTAH 

Senator HATCH. Thank you, Mr. Chairman. I welcome this opportunity to discuss one of the key tools used by the Centers for Medicare and Medicaid Services, CMS, to identify and recover improper 

payments in the Medicare program: the Recovery Audit Contractors, or RACs. Medicare improper payments are a really serious 

issue. 

In 2012, Medicare covered more than 49 million elderly and disabled beneficiaries at an estimated cost of $550 billion. Of that 

amount, CMS reported that the improper payments from Medicare 

were estimated to be more than $44 billion. 

That means 8 cents out of every dollar spent on Medicare was 

paid improperly. That rate is unacceptable, especially given the recent Medicare trustees report which said that the Medicare trust 

fund could be depleted by as early as 2022. 

Reducing the amount of improper payments is imperative to extending the financial longevity of the Medicare trust fund and to 

ensuring that Medicare continues serving patients for years to 

come. 

CMS identifies and recovers improper payments by hiring contractors to conduct audits of the 1 billion-plus claims submitted to 

the Medicare program each year. Auditing is essential to ensuring 

Medicare payments are submitted properly and that Federal dollars are being spent wisely. 

The RACs are a key part of CMS’s oversight strategy, and they 

audit millions of Medicare claims each year. However, we need to 

make sure that RACs are going about their work in a smart and 

productive way. 

Over the past 3 years, CMS has made many important changes 

to the RAC program that have significantly improved their efforts 

to recover improper payments. RACs have increased the amount of 

collected over-payments from $75 million in 2010 to $2.3 billion in 

2012. 

Along with recovering Federal dollars, RACs returned $100 million in over-payments to providers in 2012. Clearly these are positive steps, but we are still a long way from eliminating even half 

of the estimated $44 billion in improper Medicare payments. 

4 

Now RACs must walk a fine line between chasing down every 

last dollar and putting an unnecessary burden on our Nation’s 

caregivers. Even though RACs have reviewed less than 1 percent 

of claims nationwide, their efforts can be burdensome to providers 

caring for sick patients. 

No one goes into the health care business to respond to auditors’ 

requests for dozens of documents, yet we have heard from providers across the country that responding to RAC audits can be a 

long and painful process. 

Providers have also stated that, at times, the RAC audits seem 

arbitrary and that the people conducting these reviews do not fully 

understand the Medicare requirements or acceptable medical practice. These kinds of reports concern me. I support requirements 

that minimize burdens on providers by reducing the look-back period to 3 years, limiting the number of medical records requested, 

and accepting electronic copies of requested documents. 

Another issue that concerns me is the high rate at which RAC 

decisions are overturned on appeal. The HHS Office of Inspector 

General reported that of the 41,000 appeals that providers made to 

administrative law judges, over 60 percent were partially or fully 

favorable to the defendant. Now, such a high rate of reversals 

raises questions as to whether RACs are being too aggressive or do 

not understand current medical practice. 

Currently, CMS is reviewing RACs’ bids for new contracts for the 

coming years. As they review the bids, I would like to see CMS 

take into consideration the balance between program integrity and 

administrative burden. There is a lot of unrecovered money still 

out there, and RACs are an important component in the effort to 

get some of that money back where it belongs, but we need to make 

sure they are going about it in the right way. 

Once again, I want to thank our chairman here for calling this 

hearing, and I look forward to working with him on this important 

issue. 

It is now my pleasure to introduce one of our witnesses today 

from my wonderful home State of Utah, Ms. Suzie Draper, who is 

the vice president of ethics and compliance for Intermountain 

Healthcare, a large regional integrated health care delivery system 

headquartered in Salt Lake City, and one that is recognized nationwide as one of the leading health care provider groups in the country. 

Ms. Draper has a wide range of experience in the health care environment, with 10 years in a variety of clinical areas, including 

primary care, intensive care, and several surgical specialties. In addition, Ms. Draper has over 13 years in the capacity of a consultant 

for medical records, physician services, and corporate compliance. 

At Intermountain Healthcare, Ms. Draper has carried out a pivotal role in the development and implementation of Intermountain 

Healthcare’s compliance and privacy program. So I am very grateful that you would take time out of what I know is a busy life to 

come here and testify and help us to understand this better. 

We are grateful to the other two witnesses as well, so I do not 

mean to ignore you, but I just want to make that point while introducing Suzie and also saying that we are very proud of Intermountain Healthcare and the work that they do. 

5 

Thank you, Mr. Chairman. 

The CHAIRMAN. Thank you, Senator. 

[The prepared statement of Senator Hatch appears in the appendix.] 

The CHAIRMAN. Turnabout is fair play, and I have someone I 

want to introduce from Montana: J.J. Carmody. 

Senator HATCH. Let us not go overboard here. 

The CHAIRMAN. That is right. [Laughter.] 

Also from a beautiful, wonderful State, only this time, Montana. 

But anyway, thank you very much, Senator, for your statement. 

We have three witnesses today. First is J.J. Carmody, director of 

reimbursement at the Billings Clinic, Billings, MT; as well as Ms. 

Suzie Draper, vice president of business ethics and compliance at 

Intermountain Healthcare; and Robert Rolf, vice president, CGI 

Federal. 

Thank you all for coming today, and thanks for taking the time 

to travel here to Washington, DC. Your statements will be automatically included in the record, and I would urge each of you to 

summarize in about 5 minutes. 

Ms. Carmody, you are first. 

STATEMENT OF J.J. CARMODY, DIRECTOR OF 

REIMBURSEMENT, BILLINGS CLINIC, BILLINGS, MT 

Ms. CARMODY. Good morning, Mr. Chairman and distinguished 

members of the committee. I am J.J. Carmody. I am the director 

of reimbursement services for Billings Clinic in Billings, MT. 

Billings Clinic is a physician-led, integrated health care organization with a multi-specialty physician group practice, a 285-bed hospital, and a 90-bed skilled nursing and assisted living facility. 

Our system also includes partnerships with 10 critical access 

hospitals across Montana and Wyoming and is a participant in the 

Mayo Clinic Care Network. Like health care organizations across 

the Nation, Billings Clinic is dedicated to ensuring access to the 

highest-quality care while providing the greatest value for every 

dollar spent on medical treatment. 

As part of this commitment, Billings Clinic has, since the late 

1990s, invested significant resources in its compliance program, 

based on the recommendations of the Office of Inspector General, 

to make sure that medical services that are provided to Medicare 

beneficiaries and other patients are appropriate and are billed accurately. A key part of this effort is early detection of claims processing errors, as well as returning over-payments in a timely manner. 

In addition, our compliance team monitors data for trends that 

may cause compliance risk, performs risk assessments, and conducts pro-active audits. Recovery Audit Contractors, or RACs, are 

a recent entry into the compliance process but in just a few short 

years they have had an enormous impact, both on the clinical and 

the administrative side of our operations. 

Since our RAC began auditing Billings Clinic in May of 2002, we 

have been asked to provide roughly 6,000 records, totaling more 

than $45 million in claims. That is about 14 percent of our overall 

Medicare payments. We expect to see this volume increase in the 

6 

near future as a result of CMS’s decision in March of 2012 to increase the maximum number of record requests. 

At Billings Clinic, approximately seven out of 10 claims audited 

by the RAC had no error. From 2010 to 2012, Billings Clinic appealed 62 percent of the claims that were denied by the RAC. Of 

those appeals that have been resolved to this date, the RAC decision was overturned 84 percent of the time. 

However, 65 percent of the appeals, totaling $3.3 million, are still 

awaiting a decision. Billings Clinic does not take the decision to appeal lightly. It is costly and it diverts our staff and other resources 

from improving patient care, quality, and safety. If this were not 

the case, we would appeal more denials. 

RACs are just one of the entities currently reviewing our patient 

billing. We are also being audited by the Medicare RAC, Medicaid, 

Medicare Advantage, commercial payers, and others. The administrative resources required to respond to this level of scrutiny are 

a major cost to our organization. 

We estimate that we currently spend 8,600 work hours and 

about $240,000 a year just for internal staff to manage audits and 

appeals. Our internal resources include patient financial services, 

coding, and care management staff who spend time tracking requests and processing Medicare and RAC recoveries, as well as 

checking data integrity. In addition, we spend $45,000 a month on 

an outside contractor to help with medical necessity reviews. This 

is in direct response to anticipated RAC activities. 

My written testimony includes a number of recommendations for 

how the RAC process can be improved, but I will just highlight a 

few of these. First, CMS should do a better job of issuing clear and 

concise guidance to help prevent misinterpretation of coding and 

other criteria. The issue of whether a patient stay is inpatient or 

outpatient is the latest example of the need for improvement in 

this area. 

Second, RACs should not continue to audit claims that are found 

over time to have a low error rate or for which their denials are 

consistently overturned. Even when a RAC’s denial for a certain 

procedure is overturned, RACs continue to investigate these procedures in the future. 

Third, Congress and CMS need to do a better job of overseeing 

the activities of the RACs. RACs were created to help make sure 

Medicare pays the appropriate amount for the services delivered to 

beneficiaries. In our view, RAC activities have grown well beyond 

their intended scope. 

Without action from Congress, CMS is likely to continue. There 

is no doubt in our minds that audit and oversight are important 

components to the Medicare program. However, we cannot lose 

sight of Medicare’s goal to promote access to high-quality care. Significant changes in the RAC program will help us achieve that 

goal. 

Thank you for your attention. 

The CHAIRMAN. Thank you, Ms. Carmody, very much. 

[The prepared statement of Ms. Carmody appears in the appendix.] 

The CHAIRMAN. Ms. Draper, you are next. 

7 

STATEMENT OF SUZIE DRAPER, VICE PRESIDENT, BUSINESS 

ETHICS AND COMPLIANCE, INTERMOUNTAIN HEALTHCARE, 

SALT LAKE CITY, UT 

Ms. DRAPER. Chairman Baucus, Ranking Member Hatch, and 

distinguished members of the committee, on behalf of Intermountain, I would like to express our appreciation for having this 

opportunity to describe for you our experience with the RAC program. 

Intermountain is a not-for-profit integrated health care system 

that operates 22 hospitals and more than 185 clinics, with 1,200 

employed physicians. We also have an insurance plan, Select 

Health, which covers over 600,000 lives in both Utah and Idaho. 

Our focus at Intermountain is to provide high-value health care, 

care of the highest quality provided as affordably as possible. We 

have an equally strong commitment to doing the right thing for the 

right reasons. The RAC program has been the largest Medicare 

claims auditing initiative in which we have participated, and I 

would like to share a brief overview of our experience with the 

RAC program. 

In some ways, Intermountain has benefitted from the program. 

We have spent significant amounts of time and effort to improve 

our internal processes. We have improved our infrastructure and 

processes for responding about medical records, and the level of detail used by the RAC program to identify issues to be audited has 

helped us to improve our monitoring and auditing processes, as 

well as improve our internal controls. Because we have such a small net loss, only $16,000 out of the $120 million of Medicare payments, we feel that our compliance 

program is effective. Although not perfect, we feel that we are effective in monitoring the accuracy of our claims. 

But the RAC program has placed excessive burdens on Intermountain as well. The program diverts precious resources that 

might be well-applied to quality improvement and other patient 

care initiatives. 

I will now provide five examples of inefficiencies that add little 

or no benefit. First, multiple government auditors are requesting 

the same records. There have been multiple cases where other government auditors and the RAC are requesting the same records. 

We have also experienced where the RAC has requested the 

same records for review for the same issue more than once. Of 

course, this is not supposed to occur, according to the RAC’s statement of work. 

Second, our appeals unit has been burdened in various ways. We 

understand the purpose of the program was to identify over- and 

under-payments. However, in practice the scope of the RAC program seems to have expanded. We now have to justify that the care 

given to the patient was appropriate without being given clear criteria from CMS. Indeed, the wide variation in criteria used by contractors within the RAC appeals process is highly problematic. 

Let me give you one example in a cardiac case. For cardiac stent 

placement, a patient is given a drug called Integrilin. It is an antiplatelet drug to eliminate the blockage in a stent. At the first level 

of appeal, regardless of the amount of time that the patient is 

given the medication, the claim is denied as inpatient. 

8 

In contrast, at the second level of appeal, the contractor has criteria that the patient should be considered inpatient if the patient 

has been given the medication for 6 hours. As a side note, this is 

a change from last year when the patient was required to have the 

medication for 18 hours in order to be deemed inpatient. 

At the third level of appeal, our experience is that the administrative law judge may well have a differing opinion of Integrilin, 

and our experience at the fourth level of appeal is still pending. 

The third issue is, under the statement of work, the RAC was required to comply with reopening regulations that state that, before 

a RAC makes a decision to re-open a claim, the RAC must have 

good cause. We believe that the RAC data mining has not identified errors on our part and, given our favorable overturn rate of 

over 90 percent, we feel that this has been justified. 

In our first level of appeal, we get 5 percent overturned; on the 

second level of appeal, we get 10–15 percent overturned; on the 

third level, at the administrative law judge level, we have over an 

85-percent overturn of our denials. 

The fourth issue, as related to the recent claims, has raised concerns about our patient safety and care. Similar to the example 

that Chairman Baucus gave of Kalispell, we have received frequent 

denials of cases involving pulmonary embolism. 

Although low-risk pulmonary embolism can be safely treated on 

an outpatient basis, the majority of Medicare patients are highrisk, and most medical literature recommends hospital admission. 

Failure to admit and treat a patient with this condition in a hospital puts the beneficiary at risk, with possible complications and 

possible death. 

The fifth issue is, it seems that RAC cannot determine the accounts that we have already self-corrected or adjusted. As part of 

our compliance program, we have a very active auditing and monitoring process, and when we brought this to the attention of our 

RAC contractor, they said our only course of action was to continue 

to appeal those in which we had already made the corrected claims. 

In conclusion, the RAC’s statement of work clearly states that 

the RAC program should not be a burden to providers. Yet at Intermountain, we have added 22 FTEs, including nurses and physicians, resolved more than 17,000 claims, and are currently appealing 6,000, with 1,700 pending. To date, as stated before, Intermountain has had a total of over $120 million reviewed, but Medicare has had a net repayment of only $16,000. 

At least in Intermountain’s experience, the RAC program is not 

producing significant payment recruitment by the Medicare program. Instead, the RAC program is unjustifiably adding to the burden and cost of health care with little or no benefit. I sincerely 

hope that the inefficiencies in the RAC program will be addressed. 

Thank you for this opportunity to share Intermountain’s experience. 

The CHAIRMAN. Thank you, Ms. Draper, very, very much. 

[The prepared statement of Ms. Draper appears in the appendix.] 

The CHAIRMAN. Mr. Rolf, you are next. 

9 

STATEMENT OF ROBERT ROLF, VICE PRESIDENT, 

CGI FEDERAL INC., FAIRFAX, VA 

Mr. ROLF. Chairman Baucus, Senator Hatch, members of the 

committee, thank you very much for the opportunity to appear before you today. My name is Robert Rolf, and I am a vice president 

at CGI Federal, a global information technology and business process services firm. 

In my role, I am responsible for CGI’s efforts to implement the 

Recovery Audit Contractor program in RAC Region B, which is 

comprised of seven States in the Midwest, as well as similar audit 

and recovery efforts that CGI performs for its State government 

and commercial clients. 

It is my pleasure to appear before you today to discuss the role 

of recovery auditors and the lessons learned as CGI looks to improve efforts to identify and recover improper payments as a way 

to strengthen the Medicare trust funds. 

Under our contract with CMS, CGI is tasked with the identification of improper payments using both automated and manual 

claims review processes intended to identify provider over-payments and under-payments. Although most of this work involves 

catching improper payments on the back end, CGI fully supports 

all efforts to prevent such improper payments from happening in 

the first place. 

Since February 2009, CGI, much like our fellow recovery auditors, has worked diligently to implement the program in an open 

and transparent fashion. CGI’s efforts to date involve extensive 

outreach to the provider community in each State served, through 

town hall-style meetings as well as regular and ongoing Internet 

and audio conferences. Today, CGI has conducted over 100 such 

meetings and received nearly 20,000 contacts at its call center. 

Nationally, recovery auditors have identified more than $4.8 billion in improper payments. However, the RAC program also serves 

as a model in terms of the recovery auditor’s transparency of provider interactions and CMS’s strong program governance to ensure 

that providers are treated fairly and do not experience burdensome 

compliance costs. 

Based on CGI’s experience with the RAC program, I would like 

to share a few observations with the committee about this important CMS program and some lessons learned about recovery audit 

efforts. 

Transparency and communication are critical to the success of 

the program. It is important that recovery auditors provide transparent information to providers regarding issues under investigation, as well as information about the basis for an improper payment determination. 

In addition to the communications described above, each recovery 

auditor hosts a website that provides information on the issues 

that recovery auditors are auditing in their regions and the ability 

to check the current status of claims under review. 

The contingency payment approach works well in practice. Medicare Administrative Contractors have many significant duties in 

the Medicare program and simply are not able to catch every error 

on the front end. Recovery auditors have one primary mission: to 

catch improper payments and correct them. The contingency payVerDate Nov 24 2008 20:25 May 27, 2014 Jkt 000000 PO 00000 Frm 00013 Fmt 6633 Sfmt 6633 R:\DOCS\87944.000 TIMD
10 

ment approach allows recovery auditors to dedicate the necessary 

resources to this task. 

Contrary to some assertions, the contingency approach does not 

encourage the pursuit of questionable recoveries or discourage the 

pursuit of under-payments, for three important reasons. First, recovery auditors do not get paid unless and until a recovery is received by the government; second, fees earned on recoveries that 

end up reversed on appeal must be returned to the government; 

and third, recovery auditors receive an equal fee for finding both 

provider over-payments and under-payments. 

To ensure that incentives remain properly aligned, CMS conducts 

a monthly audit of each recovery auditor to determine how accurate its determinations are. In the last set of cumulative annual 

data published by CMS, all four recovery auditors received accuracy scores greater than 90 percent. I am proud that CGI’s accuracy score was 95.8 percent. 

CMS successfully built in provisions to prevent over-auditing. At 

the outset of the program, CMS developed safeguards to prevent 

fishing expeditions. First, a recovery audit may only conduct an 

audit if a CMS policy team approves it and the nature of that audited is communicated to the provider community in advance. Second, CMS has developed a specific formula to limit the number of 

medical records that a recovery auditor may request. Third, a recovery auditor must pay a provider 12.5 cents per page for most 

documents requested. Overall, the Medicare RAC program works 

well; however, CGI remains open to common-sense suggestions to 

improve the RAC program for all parties involved. 

Specifically, CGI recommends that the committee focus on improving the appeals process. The HHS Inspector General has identified several issues in this area, including the flexibility that administrative law judges have to make decisions that are not in line 

with Medicare policy. 

In cases where recovery auditors do have findings that are overturned on appeal, it is most frequently when an ALJ has made 

such a decision. To increase program effectiveness and consistency, 

Congress and CMS should look at the Inspector General’s findings 

in this area and see if there are opportunities to implement improvements. 

CGI is proud of its ability to deliver successfully on the RAC program and remains passionate about the opportunity to partner 

with CMS and other public agencies in one of the most critical good 

government efforts under way today. 

I appreciate the opportunity to appear before you today and 

would be pleased to answer any questions you may have. 

The CHAIRMAN. Thank you very much, Mr. Rolf. 

[The prepared statement of Mr. Rolf appears in the appendix.] 

The CHAIRMAN. First, I would like to ask Ms. Carmody and Ms. 

Draper about CMS’s audit of the auditors. Mr. Rolf said, according 

to CMS—I have forgotten the figure. It was the high 80s or 90 percent of the audits by the CMS auditor of the RACs turned out favorably. Do either of you have a reaction to that? 

Ms. CARMODY. I actually have not seen the audit of the auditors, 

but I think that you can do a lot with numbers and still be giving 

an accurate statement. But in our case, it is almost 75 percent of 

11 

the claims that actually the RAC agrees there was no issue with. 

So that is 75 percent accurate out of the gate, where we both agree 

that we submitted the claim correctly. 

The CHAIRMAN. All right. 

Ms. Draper, do you have a thought on that point? 

Ms. DRAPER. HDI is our contractor, and that has not been our 

experience. Again, I have not seen CMS’s audit of the auditors, but 

our experience has been that when they have determined that 

there was an error in the claim, we have been able to win those 

appeals over 90 percent of the time, so our numbers are not consistent with the findings. 

The CHAIRMAN. I was struck with your point, Ms. Carmody, that, 

as the appeals process goes up the chain, the overturn rate is higher. I think at the ALJ level, you mentioned it is about 80 percent. 

I have forgotten the figure that you used. 

Why is that? Why are more decisions by the RAC overturned at 

a higher level? The second question is, is it the medical knowledge 

that the RAC folks have, or more importantly the ALJ has or has 

not? That sort of assumes the point that some medical knowledge, 

or significant medical knowledge, is necessary. 

But first, the first question: why is the overturn rate much higher at the ALJ level rather than at lower levels? 

Ms. CARMODY. I think that is a question we would like to ask. 

I mean, what we find is, maybe that we have a better opportunity 

to explain our case in point as the appeal process goes up a level, 

but we really work hard on submitting our appeals with our part 

of the story. 

In answer to your second question about the knowledge base, it 

really is a matter of interpretation as to what we think is medically 

necessary. We are looking at the case when the patient is there, 

on-site, presenting. We are not looking at it using the hindsight 

that the RAC auditors are able to use when they review the case. 

The CHAIRMAN. Well, my question is, would you feel more comfortable with ALJs who had more medical knowledge? I am not 

asking whether they should be graduates of medical school, but 

should they have more medical knowledge? Is that very important 

as opposed to whether the ‘‘i’’s are dotted or the ‘‘t’’s crossed? 

Ms. CARMODY. I think medical knowledge is important, but I 

echo Ms. Draper’s point that we need to have the same sets of rules 

apply to the claims from the submission of the claim all the way 

through the process, and they are changing the rules as they review them. 

The CHAIRMAN. Ms. Draper, what about the competence of the 

judges, the medical competence of the judges? 

Ms. DRAPER. We have hypothesized, as we have mined our data, 

that at the first level, which is usually not physicians who review 

those claims, that we are not getting a thorough review of the 

charts. So, as we go to the second and third level, we get to tell 

our story. 

We have also been concerned that, at the highest level, we have 

not had similar levels of expertise. I am not saying that it has to 

be a cardiologist, but oftentimes, even at those third and fourth levels of appeal, we do not have those specialists who have the same 

level of clinical competency. 

12 

The CHAIRMAN. We do not have much time here, but where is 

there a meeting of the minds here? Providers think the RACs are 

over-zealous, the RACs think they are doing a good job finding errors. Where is there some agreement? Is there any? 

Mr. ROLF. Well, Mr. Chairman, I think there is common agreement on the appeals process. I think we may take different approaches to it, but I think there is agreement that the—— 

The CHAIRMAN. And what is the agreement? 

Mr. ROLF. That the appeals process needs to be reformed. 

The CHAIRMAN. In what way? 

Mr. ROLF. Well, I think if you look at the ALJs, they are not 

using clinical judgment in their decision-making process. The first 

two levels of appeals, which Ms. Draper indicated were 5-percent 

or 10-percent overturn rate, those are using clinical staff to review 

the medical records and are in large agreement with our decisions. 

I think, once you get to the administrative law judge level, the Inspector General has pointed out the inconsistencies. 

I would agree with the point that, in any judicial process, 

decision-making process, predictability in the law is tantamount. If 

there are arbitrary decisions being made up the line, then that 

makes it very difficult to know how to practice and very difficult 

for us to know how to audit. 

The CHAIRMAN. My time has expired. 

Senator Hatch? 

Senator HATCH. Thank you, Mr. Chairman. 

Mr. Rolf, in a report last year, the Office of Inspector General for 

HHS issued a report in which they found that, when CMS or a 

RAC representative participates in an actual appeal before an administrative law judge, the RAC’s decision is reversed much less 

frequently. Could you tell us why you think this is the case, and 

what lessons can be learned from these particular findings? 

Mr. ROLF. Thank you for your question, Senator. So, in our experience, early on in the program there was a very high level of overturned appeals at the ALJ level, primarily because we were not 

timely notified that hearings were even taking place, and, when we 

were, we were not granted the ability to participate in that process. 

Once we became more active in the process and were given the 

ability to provide testimony as part of that ALJ process, our physicians who participated in that process were able to provide information to the administrative law judge as to the rationale for our 

decisions, and our success rate has been much higher at that level 

since. 

Senator HATCH. All right. Well, let me ask a question that all 

three of you can take a crack at, and that is this. In my opening 

statement, I talked about the importance of striking the right balance between conducting appropriate program integrity oversight 

of the Medicare program and ensuring that there is not an undue 

administrative burden on health care providers. 

Now, given each of your experiences with the RAC program over 

the past 3 years, how do you think that that balance can be better 

achieved, and what recommendations would you give to Congress 

and/or CMS to help improve the program so that there is a better 

balance between those competing objectives? You have answered 

13 

that in part, but I would be interested in hearing all three of you 

on that: Mr. Rolf, then Ms. Draper, then Ms. Carmody. 

Mr. ROLF. Certainly. I think one of the primary areas that there 

can be continuous improvement on—I talked about transparency, 

education, and communication. We participate in monthly communication sessions with our provider associations. 

We still maintain our distance as an auditor—no one enjoys 

being audited—but we can reduce the administrative burden 

through communication, understanding what their pain points are 

in the process, how we communicate to them, how we provide information to them. 

That feedback has encouraged us to make significant changes to 

our provider web portal, which gives them access to information 

about their particular claims. That transparency and that communication really helps dispel a lot of the concerns and myths in the 

program. 

Senator HATCH. Thanks. 

Ms. Draper? 

Ms. DRAPER. My recommendations are two-fold. First is, upstream there needs to be greater clarity from CMS regarding the 

criteria of the claims that are submitted. The significant number 

of the claims that we throw through the appeals process are those 

where there is confusion, particularly on the in- versus out-patient 

criteria. I think that is demonstrated in recent proposed and interim changes that CMS has published. 

If, once we have clarity, providers are committed to doing the 

right thing, and when we can work directly with our CMS contractor, we have much better communication and transparency and 

really do not see the need for separate auditing contractors to be 

out looking at our integrity. So, if we can have improved clarity of 

CMS regulations and then have the responsibility of the program 

integrity back with the contractors, we feel that that reduces our 

administrative burden significantly. 

Senator HATCH. All right. 

Ms. Carmody? 

Ms. CARMODY. Yes. I would like to point out, obviously Mr. Rolf 

is not our RAC contractor. Our experience with our RAC contractor 

is not quite as transparent. So it is very difficult for us to even tell 

why the records are being requested, or under which venue they 

are looking, when we send the records in, so I think that moving 

that transparency and making more of a clear effort to tell us what 

they are looking at when they send the letters in the beginning, in 

their requests, would be very helpful to us. 

On a broader note, obviously, clearer guidelines. ‘‘Inpatient’’ 

versus ‘‘outpatient’’ is really the majority of what we have seen as 

far as RAC activity. I think that we need to think on a bigger scale 

at the CMS level about, what if we did not have observation status 

anymore? 

So I mean, really throwing that out, that is a big one, but it is 

something that we had actually talked to Senator Baucus’s office 

about before. The observation status is just a killer for us. What 

if there was an inlier payment on the DRG that eliminated the argument to begin with? So I mean, we have broad ideas of how we 

14 

could make this work better at the CMS rulemaking level to alleviate these disputes in the end. 

Senator HATCH. Mr. Chairman, my time is about up. 

The CHAIRMAN. Thank you very much. 

Senator Enzi, you are next. 

Senator ENZI. Thank you, Mr. Chairman. I want to thank Ms. 

Carmody and Ms. Draper for being here. I will have some questions 

in writing for them that I think will help clarify some things, but 

I will not have this chance with Mr. Rolf again, probably. 

In studying this as an accountant, I was kind of surprised that 

it was based on contingency. Audits normally are not done on a 

contingency basis. Lawyers do things on a contingency basis, but 

not the prosecutor. Somebody thinks they are going to clean up on 

it. So there is a 9- to 12.5-percent over-payment made. Do you get 

any kind of compensation when you find an under-payment? 

Mr. ROLF. Senator, yes. As I said in my testimony, we get an 

equal payment whether we find an over-payment or an underpayment. I would like to add to that that, in CMS’s 2012 annual 

financial report, they reported that the percentage of underpayments as a percentage of the total improper payment for the 

year was about 3.6 percent. 

Recovery auditors are returning or identifying an under-payment 

rate, as a percentage of the total improper payments that we have 

identified as of CMS’s April report, inception to date, of nearly 7 

percent. So we are actually identifying improper payments on the 

under-payment side of nearly twice what CMS reports in their annual financial report. 

Senator ENZI. I will have to absorb that a little bit I think, but 

I am pleased to hear that you do have some incentive for finding 

under-payments too. 

You mentioned in your testimony that you use computer software 

that kind of does an automated review and helps you to select, I 

assume, whom you are going to audit. Is that computer software 

available to the providers? 

Mr. ROLF. Senator, to directly answer the question, we do not 

provide that audit software directly to the providers. We attempt 

to maintain our distance from them in that respect. 

Senator ENZI. All right. It seems like somebody ought to provide 

them with something like that so they can tell in advance whether 

they are having a problem or not, and not necessarily the contractor, but somebody ought to be providing them with that. Since 

the contractors are using that to determine the need for audits, it 

seems like that might be something that could be contracted for 

too. 

Do you have territories for where you do your auditing? It seems 

like there is an overlap here. 

Mr. ROLF. So, within the RAC program itself, there are four current regions. Those divide up the country into roughly four equal 

regions. We have a 7-State region in the Midwest. No other recovery auditor has our region. 

Senator ENZI. So there would not be two people auditing the 

same provider, then? 

Mr. ROLF. Not within the RAC program itself, Senator. 

Senator ENZI. All right. Thank you. 

15 

Mr. ROLF. There may, however, be Medicare Administrative Contractors or Zone Program Integrity Contractors who will conduct 

audits in that same region. 

Senator ENZI. All right. 

I noticed on the appeals, you mentioned that yours are 95.8 percent, I think it was, that are good. But then I read the information 

about the administrative law judges—and I know that is a little 

ways up the process—that they overturn 80 to 85 percent of what 

comes to them, again, depending on the region I guess, which 

means in some regions they do worse. 

Do you suppose that has anything to do with the administrative 

law judge knowing that the accounting firm gets a percentage of 

the amount? 

Mr. ROLF. I have—— 

Senator ENZI. Would that tend to make them think that maybe 

they could be over-zealous? 

Mr. ROLF. Senator, I think the decision-making at the administrative law judge level—I think the Inspector General’s report 

pointed out some specifics about why there is inconsistency at that 

level, having to do with the need for increased peer review so there 

is more consistency across the decisions, more consistency in how 

they allow additional documentation to be introduced at that level. 

I think we find that, many times we make a decision based on 

what we have been provided in the medical record, and then, at a 

later appeal level or in a discussion period that we have with the 

provider directly, they are able to identify additional information 

that may not have been provided at the time of the original audit. 

Senator ENZI. All right. 

I also noticed that the fee for the records is 12.5 cents per record. 

That sounds pretty cheap if you figure in the amount of time that 

it takes for them to retrieve the record as well as the copying costs. 

Mr. ROLF. It is per page, Senator. So, yes. 

Senator ENZI. I realize that, yes. 

Mr. ROLF. CGI alone has paid out over $8 million to providers 

to provide medical records. I will add that we are the only Medicare contractor that is required to do that. 

Senator ENZI. I will have to do the math to see how many 

records $8 million worth is, but that is a lot of effort on somebody’s 

part to get all of that together. One of the things that I will be 

checking is to see how you would feel about the cost of appeal being 

charged to the provider. I have run out of time, so I will send that 

one in writing. 

The CHAIRMAN. Thank you, Senator. 

Senator Isakson? 

Senator ISAKSON. Thank you, Mr. Chairman. 

I want to follow up on a question the chairman earlier referred 

to in his opening remarks, and some of the other members have referred to. There is a fine line between recovering payments that are 

clearly improper and questioning a judgment call made by a professional at a moment in time. I am very interested, particularly, 

about the determination between inpatient admission versus outpatient observation status. 

16 

Can you tell me what standards you apply to those judgments 

you make, the questions you ask about those judgments that are 

made by those professionals? 

Mr. ROLF. Certainly, Senator. The criteria that we are required 

to use by CMS are clinical review judgment and the education, experience, and medical opinion of the auditor who is conducting the 

review, applying national coverage determinations and local coverage determinations, and CMS policy regarding particular types of 

services. We apply those and use that information to make our determinations. 

We also provide, on the web portal and to the providers, the specific policies that apply to each issue that we are auditing for so 

that they can link to those policies and be able to identify them 

and read them for themselves in advance of any audit being conducted. 

Senator ISAKSON. So the standard is, the person making the determination or the review is not necessarily a medical professional, 

but they are somebody who is using medically professional information, is that correct? 

Mr. ROLF. By contract, all of our reviewers have to be licensed 

clinicians, overseen by a chief medical director, which we exceed 

by—we actually have 5 direct physicians on staff who oversee the 

audits. 

Senator ISAKSON. How arbitrary is the determination of which 

cases you review and which ones you do not? 

Mr. ROLF. The cases that we decide to select are based on specific, narrow policy rules that we present to CMS. CMS reviews 

those policies, determines whether our scope, whether our audit approach, and whether the good cause language that we use for that 

review, is appropriate. Only after they determine that and we post 

that information on our portal for the providers to be able to access 

it, are we allowed to then select claims in that narrow category to 

audit. 

Senator ISAKSON. So every Medicare claim that is filed is reviewed to determine whether or not it should be reviewed by a 

RAC or not? 

Mr. ROLF. No, Senator. We do not focus on individual providers 

or individual claims; we focus on specific areas of review. Most of 

the criteria that are used to identify a particular program vulnerability area come from reports by the Inspector General, or the 

comprehensive error rate testing contractor that identifies specific 

areas of high error rate within the Medicare program, and we focus 

our efforts on those. 

Senator ISAKSON. So a computer might kick out a common type 

of claim that you want CGI to review, and then you have an individual look at it, is that correct? 

Mr. ROLF. Correct. 

Senator ISAKSON. All right. 

Ms. Draper, I think I heard you say that you had $120 million 

in claims questioned, and they recovered $16 million. 

Ms. DRAPER. Sixteen thousand. 

Senator ISAKSON. Sixteen thousand? 

Ms. DRAPER. Correct. We still have $24 million in claims—the 

majority of which are in this controversy over inpatient versus outVerDate Nov 24 2008 20:25 May 27, 2014 Jkt 000000 PO 00000 Frm 00020 Fmt 6633 Sfmt 6633 R:\DOCS\87944.000 TIMD
17 

patient—that are in appeal. To concur with Mr. Rolf, we have had 

under-payments that have also been returned, so our net recovery 

is $16,000. We have returned $1.9 million in over-payments and 

have recovered $1.8 million and change in under-payments. 

Senator ISAKSON. Mr. Rolf, I understand the recovery, payment 

based on recovery, both from an under-payment as well as an overpayment. But if you had a provider that had $120 million in claims 

questioned and a net of $16,000 in actual recovery, would that not 

indicate that maybe you did not need to look so deeply into that 

provider as you would somebody else where you had a much higher 

rate? 

Mr. ROLF. Actually, Senator, if across the program all providers 

had the experience that Ms. Draper did, we would not have recovered $4.8 billion, and we would not still be in business. 

Senator ISAKSON. Yes, you would be out of business. 

Mr. ROLF. Exactly. 

Senator ISAKSON. But the question still remains. I mean, bad behavior is what we want to stop. Over-payment is what we want to 

stop. But it seems like, if you have a consistent record of performance and good behavior, that you ought to focus more on those providers where you do not have that than where you do. 

Mr. ROLF. In our experience, in my nearly 20 years of experience 

in this area, that does drive our behavior. 

Senator ISAKSON. Thank you. My time is up. 

The CHAIRMAN. Thank you, Senator. 

Senator Casey, you are next. 

Senator CASEY. Thanks very much, Mr. Chairman. Thanks for 

calling this hearing. I wanted to really pick up where Senator 

Isakson left off, and that is to focus—I know there are a lot of parts 

of the testimony to focus on, but there are two that continually 

jump out at me. 

One is, Ms. Draper, the amount that Senator Isakson mentioned, 

the $120 million. I am reading from your testimony, the last page. 

Intermountain had a total Medicare payment review of $120 million. After all of this, Medicare has recovered only a net of $16,000. 

That is point one. 

Point two is, Ms. Carmody, you say on page 2 of your testimony, 

from 2010 through 2012, 20 percent of all cases were appealed. 

Then you go on to say, ‘‘Billings Clinic had been successful on appeal 84 percent of the time, winning 308 cases while losing 57.’’ 

I am going to review the same issue and see whether or not— 

I just do not know the answer to this, and it is why I am asking 

this question about the statute and the rules. Is there a provision 

in law or in practice where, if an entity is reviewed year after year 

in a certain time frame, if there are no findings, if there are no 

over-payments, or if they have a high batting average, so to speak, 

on appeal, is there a risk-based assessment done? Are you aware 

as to whether or not there is a provision for that in the law? 

Mr. ROLF. So, Senator, the entire program is a risk-based assessment because of the nature of how we are reimbursed. As I testified to, only and until dollars are not just simply identified but actually recovered and deposited into the Medicare trust funds are 

we able to invoice for our services. 

18 

If any of our decisions are overturned on appeal, we owe the entirety of our fee back to CMS. So again, Ms. Draper’s experience 

aside, we would not still be in business if we were not focusing on 

those areas where there were significant errors in recoveries and 

where there were more black-and-white issues that were less likely 

to be overturned on appeal. 

Senator CASEY. I want to make sure I understand this. So, if you 

have an entity that has—say we have two entities. One entity has 

no errors, no finding of over-payment. That is prevailing for, say, 

10 years. Then you have another entity B that has continual problems, lots of over-payments, lots of problems. Are those two entities, under the law, treated the same? Are they audited at the 

same frequency? That is the question I have. 

Mr. ROLF. I would say that, under the law, they are both subject 

to a RAC review if they are a fee-for-service Medicare provider. In 

practice, we would not continue to request medical records and review in areas where no findings were being found. It is very simple 

economics for us as a contractor reimbursed on a contingency fee 

basis. 

Senator CASEY. All right. But there is no prohibition on you auditing the good performer at the same rate as the bad performer? 

Mr. ROLF. No, Senator. 

Senator CASEY. And that is just a point I wanted to establish, 

and I was not sure if that was accurate. 

The other question, which is difficult to answer, but maybe Ms. 

Carmody or Ms. Draper can answer this, if you have an opinion; 

maybe you cannot. Is there any instance where you believe this 

program or the impact of the program has had an impact on care 

or the quality of care? 

Ms. CARMODY. Well, I would say that it has an impact on our 

physicians and how they want to think about whether or not somebody is an inpatient or an outpatient. From a physician perspective, they want the patient in a hospital bed, and they want to 

treat them the same way they are going to treat them. 

So it is a process that the physician has to think about in a different way than they did prior to the RACs. They kind of feel like 

their judgment is being second-guessed. So, in that case, they are 

more likely to default to the outpatient setting than the inpatient 

setting, and that financially impacts patients. 

So I would not say that there is a quality of care issue. We are 

going to treat the patient the same, we are going to take care of 

them, but it does have a financial impact on the patient that we 

have not talked about. It moves them from the inpatient deductible 

to the outpatient co-insurance, and it brings up the fact that they 

have to pay for their self-administered drugs. 

The patient does not understand why, 2 years later, they were 

in a bed in a hospital and now they are subject to different coinsurance or different payments, or heaven forbid the patient does 

not have Part B Medicare. They have to pay for everything. They 

have no coverage, they do not get that. So there is a financial impact on patients that we did not have a chance to bring up, and 

that is hurtful. 

Senator CASEY. Thanks very much. 

Senator HATCH [presiding]. Senator Thune, you are next. 

19 

Senator THUNE. Thank you, Mr. Chairman. Thank you, panel, for 

your answers and for your insights. 

Ms. Carmody, if you find that the practices of your RAC auditor 

are abusive or outside the scope of the RAC statement of work, 

what is your recourse? I will ask maybe a more specific question. 

In your case, what do you do if Health Data Insights, the RAC 

auditor not only for Montana but for my home State of South Dakota and 15 other States, is engaging in abusive or unauthorized 

auditing practices? 

Ms. CARMODY. Right now what we do is we talk to our Senator, 

and we appeal. In the beginning, we were not as good at appealing. 

We were not quite as ready as Intermountain Healthcare, and so 

we did not appeal as much. We are appealing more and more. We 

have gotten people to come in and help us, and all we can do is 

appeal and continue to respond and make comments, send letters 

to CMS about changes that we would like to see in the program, 

and talk to all of you. 

Senator THUNE. All right. And is the appeal to CMS? 

Ms. CARMODY. The appeal of the RAC? 

Senator THUNE. Of the RAC. 

Ms. CARMODY. It goes through the appeals process, so it starts 

with CMS and goes up the chain. 

Senator THUNE. Yes. All right. 

Ms. Draper, in your testimony you expressed frustration about 

the volume of record requests. In your opinion, what is an appropriate amount of record requests for a RAC? 

Ms. DRAPER. If we could look at specifics in the different hospitals—when we are looking at one hospital that can be bombarded 

by 450 requests for records within a 45-day period, that is a significant change for our medical records staff, and we are shifting the 

care or the work that they need to do on coding and submission of 

the claims in the day-to-day process in order to respond to that 

record request. 

Again, if we could have a more focused area and, if they found 

a problematic area, then increase that scope, that would be much 

more helpful for us. 

Senator THUNE. Good. 

Mr. Rolf, for claims that involve review of medical necessity, 

what is the educational level of the auditors? 

Mr. ROLF. So the first-level auditors are licensed nurses, the 

same practice that is being employed by commercial insurers and 

State Medicaid agencies, most payers throughout the system. They 

are overseen and supported by physicians in multiple specialty 

areas that can provide them higher-level clinical opinion on particularly difficult cases. 

Senator THUNE. And decisions that are made on medical necessity that are made by a physician, are they reviewed by a peer physician at CGI? 

Mr. ROLF. Oftentimes, if there is an area that they require additional information on, they will seek out one of their peers for that 

information. We also do a QA step with inter-rater reliability that, 

on a monthly basis, is reviewing the decisions of all of the auditors 

on staff to ensure consistency within and across the program. 

20 

Senator THUNE. Would you support a requirement that RACs 

have to abide by time lines for review like hospitals have for data 

requests? 

Mr. ROLF. Let me address that in a couple of different ways, if 

I may, Senator. So currently, under our statement of work with 

CMS, we are required to follow all timeliness guidelines for the 

completion of a review. If we do not, we are subject to losing our 

fee for that individual claim that we did not review on a timely 

basis, which is the ultimate penalty. With regards to many of the 

time frames that have been discussed here, those involve appeals 

contractors that we have no responsibility for. But, as we have said 

before, reform of the appeal system, I think, is warranted. 

Senator THUNE. And what role does peer-reviewed medical literature play in the decision-making? 

Mr. ROLF. I think it is critical. Our physicians, our staff, continue 

their continuing medical education, are kept up and current on current medical process and literature, and are provided with an electronic literature library for the most updated information in order 

to make their decisions. 

Senator THUNE. How about evidence-based approaches? 

Mr. ROLF. All factors that are part of current medical practice 

are involved in the decision-making process on any one case. 

Senator THUNE. Now, you mentioned you would be open to a reform of the appeals process. Do you have any suggestions about 

how to do that? I would pose that question as well to both Ms. 

Draper and Ms. Carmody. 

Mr. ROLF. We should increase the ability of contractors to participate in the third level of appeal, add clinical judgment and review 

to the third level of appeal, and increase consistency in decisionmaking so there is predictability in the regulations and the rules 

so that my fellow panelists know how to practice and we know how 

to audit. 

Ms. DRAPER. I would concur with his last statement, but I would 

also add that, in the appeals process, we need a greater level of 

medical experience in the first level of appeal. It is a great deal of 

wasted time, energy, and resources if we have to get to the third 

level of appeal before we can recoup our monies, and so, why not 

put that level of expertise up at the front level? 

Ms. CARMODY. Once again, I would agree with that statement. 

We need the consistency up-front to know in the beginning that it 

is going to be looked at in the same way and that everybody is applying the same rules to how you bill a claim. And then if we could 

get that opinion moved up the appeals process, and also speed up 

the appeals process. Right now our money in those claims is held 

up for a significant amount of time. 

Senator THUNE. My time has expired. Thank you, Mr. Chairman. 

Senator HATCH. Thank you, Senator Thune. 

Senator Grassley? 

Senator GRASSLEY. I just have a couple elementary questions on 

the overall view of this, since I was involved in 2006 and 2008 in 

setting this up. 

CMS works under the principle that clean claims should be paid 

quickly, so we created RACs to follow behind and confirm that 

21 

claims were properly paid. Do any of you argue against the idea 

of having some review of claims? 

Ms. DRAPER. No, I think we all owe that responsibility to the taxpayer, that we as health care providers are held accountable for the 

claims that we are submitting. 

Senator GRASSLEY. Mr. Rolf? Well, you are involved with it, so 

that answers that. 

Mr. ROLF. Yes. No, Senator. 

Senator GRASSLEY. Opponents of RACs being allowed to keep a 

portion of the insurance claims say that this approach wrongly 

incentivizes RACs. However, we have seen other audit contractors 

who fail to ever collect any money that they identify as waste, 

fraud, and abuse. Mr. Rolf, do you have an opinion on how best to 

pay contractors for inaccurate claims? 

Mr. ROLF. Absolutely, Senator. I think, as I testified, my experience over the past, again, 18 years of doing this work is that the 

contingency audit approach allows for the greatest flexibility and 

scaling to the size of the problem, which, as you know, within the 

Medicare program is a very large issue. 

If you only fund, through an administrative budget, 50 auditors, 

they are only ever going to do 50 auditors’ work regardless of 

whether it is a $1-million issue or it is a $29-billion issue. Allowing 

a contingency approach gives recovery auditors the flexibility to address the full scope of the improper payment problem. 

Senator GRASSLEY. Do any of you have any problems, the other 

two of you? 

Ms. DRAPER. I would disagree with Mr. Rolf, because we see that, 

by the contingency methodology, this is one reason why we have 

a lower level of clinicians reviewing at the first level of appeal. It 

de-incentivizes providers to appeal for claims for services that they 

have appropriately rendered. Intermountain has taken the position 

to aggressively appeal those claims because we feel that we have 

provided quality care and should receive the appropriate payment 

for that. 

Senator GRASSLEY. Ms. Carmody? 

Ms. CARMODY. Yes, I would agree. It is costly for us to appeal. 

I think we have kind of pointed that out. So, even when we win, 

we have still lost those resources. It has caused us to move the resources to the back end of the claim instead of to the front end of 

the claim. 

So, if we had a process that was more of a review up-front—and 

Mr. Rolf did refer to that in his testimony—I think that that would 

be a better incentive and a better payment methodology that got 

the claim right the first time and educated providers better about 

what the issues are. Then we would not have the need for this 

back-end approach with a contingency attached to it. 

The feeling is among our staff that a lot of times with these medical necessity reviews, they literally are just looking at length of 

stay. That is really what that first level of denial is based on— 

length of stay and hindsight only—and then it is forcing us to 

spend more resources to get our money back. 

Senator GRASSLEY. I yield back my time. 

The CHAIRMAN. Thank you, Senator. 

Senator Carper? 

22 

Senator CARPER. Thank you, Mr. Chairman. Welcome, everyone. 

Nice to see you all. Thanks for coming by to help us with this. 

I want to go back just a little bit in time. You have all heard of 

GAO, the Government Accountability Office. They are a watchdog 

for the legislative branch. 

One of the things they do for us is, about every other year they 

come up with something called a high-risk list. The high-risk list 

is high-risk ways of us wasting money, the taxpayers’ money. It is 

sort of like a to-do list. I chair the Committee on Homeland Security and Governmental Affairs. We sort of use it as our to-do list 

to go out there and try to figure out how to save some money for 

the taxpayers. 

In 2002, when George W. Bush was President, he signed into law 

legislation, I think in response in part to the GAO’s high-risk list. 

He said one of the high-risk ways of wasting money is improper 

payments. A lot of people thought, well, it is fraud. It is not so 

much fraud as it is just mistakes. It is over-payments, it is underpayments, accounting errors, paying bills that really, really are not 

owed. 

And the 2002 legislation, the bill the President signed into law, 

said basically, Federal agencies across the board, you have to start 

keeping track of your improper payments, is what it said. You have 

to start keeping track of your improper payments. 

Well, every 2 years GAO would come up with a new high-risk 

list, and they still would list improper payments and say, as agencies were starting to report them and identify them, the number 

would go up and up and up. In 2010, the improper payments disclosed—not by every agency, especially the Department of Defense; 

they are still not even today doing a very good job of reporting improper payments—but the agencies that are reported in 2010 about 

$120 billion of improper payments. About $120 billion. Over $40 

billion of that was Medicare, about $20 billion was Medicaidrelated. 

In 2010, Senator Coburn—Dr. Coburn—and I worked with a 

bunch of our colleagues to pass legislation, signed by President 

Obama, that said, Federal agencies, you have to start, not just 

tracking your improper payments, you have to report them. You 

have to stop making them and then, if the Federal Government is 

owed money, you have to go out and collect the money. All right. 

Also, we are going to start evaluating Federal agency heads, in 

part, on their performance as to whether or not they take this direction seriously, whether they actually go out and try to recover 

monies that have been improperly paid. We saw that number drop, 

improper payments drop, government-wide from about $120 billion 

in 2010 to about $115, $114 billion in 2011, and it dropped to about 

$108 billion in 2012. 

Part of what happens with this recovery audit contracting is that 

we actually do recover some money. The other thing that happens 

is, it is an educational process, and it enables whoever is doing the 

auditing to hopefully work with the providers to say, here are some 

things you may want to do differently so we will not have to bug 

you on this in the future. I say all that in part to say, this is a 

big problem, and it requires the efforts of a lot of people to fix. 

23 

Everything I do, I know I can do better, and I am sure the same 

is true of recovery audit contracting. One of the good things about 

you all being here today is you can help us figure out what is working and what makes sense. My dad always used to say, just use 

some common sense. He said it to my sister and me, his children, 

a great deal in hopes that we would someday learn to use some 

common sense. 

A lot of times, when I am sitting in a hearing like this, I recall 

my father, I channel my father, and I say, well, if we were going 

to use some common sense, what would we do differently? You all 

have had a chance—I got here too late to hear your testimonies, 

but you all have had a chance to share some ideas and respond to 

a bunch of questions. 

Just think if we were to use some common sense and try to realize that this is a huge problem, it is a big issue, it is a lot of money, 

it is tens of billions of dollars, what are a couple of things—let me 

just start with you, Ms. Carmody. Just use some common sense. 

What should we do differently? 

Ms. CARMODY. Well, being on our compliance team from its inception in the 1990s at Billings Clinic, the first thing we do is a 

root cause analysis. We find something, we do a root cause analysis. Here is the problem, inpatient versus outpatient. It is unclear, 

it is confusing, let us do something about it. I think that is the part 

that is missing in all of this. 

So yes, we need the RACs and they are recovering improper payments, but yet we all agree it was a medically necessary service. 

We are disagreeing about the setting or the method that it was 

billed, not even the method in which it was delivered. We do not 

deliver outpatient observation services any differently than we do 

in inpatient service. So there is a root cause there. What are we 

doing about that root cause? It does not really feel like we are 

doing much. 

So in my opinion, if there is one thing we should do, it is going 

back to the rules and regulations guiding us—or not guiding us in 

some cases—to the decisions we are making and that education 

and feedback. We have a different RAC, as I said, and we are not 

really receiving that education and feedback, and we do not really 

feel like they are motivated to do that in all cases. If they are continuing to make their money by identifying the same issue over 

and over again, where is the motivation for teaching us—— 

Senator CARPER. So we may want to think about realigning the 

incentives just a little bit. 

Ms. CARMODY. Yes, a little bit. I mean, I just think a friendly— 

I started my career as a Medicare auditor, and we actually had 

great relationships with the places that we audited, because we 

had aligned incentives. The max incentive was, get the payment 

structure right, get the cost reports right, teach them how to do a 

better job next year. I think if we could align those incentives, we 

could work together in a better way. 

Senator CARPER. Good. Thanks. Thank you. 

Ms. Draper, same question. 

Ms. DRAPER. I would concur. The greatest frustration that we 

have is lack of clarity of the criteria by which CMS requires us to 

do billing. Where we have clear rules and regulations, we are comVerDate Nov 24 2008 20:25 May 27, 2014 Jkt 000000 PO 00000 Frm 00027 Fmt 6633 Sfmt 6633 R:\DOCS\87944.000 TIMD
24 

mitted to doing that right every time, but I think you see the great 

deal of frustration on those areas where there is a lack of clarity. 

So, using the concept of a root cause analysis, it seems to me 

that we would all step back and say, where is the greatest amount 

of money that is being appealed in all of the RAC contractors within our MACs, or in all the other acronyms that I will not go into 

that are currently auditing us, and say, where are those stumbling 

blocks to providers to getting the claims right? Similar to what 

your father was saying, if you tell me how to do it right, I will do 

it right, but you have to tell me what right is. 

Senator CARPER. All right. Same question, Mr. Rolf. 

Mr. ROLF. Thank you, Senator. Thank you for your leadership, 

along with the chairman and Senator Hatch and Senator Coburn, 

on these issues. I would agree, transparency and communication 

and openness of dialogue between both the auditor and the auditee 

are important. 

I would also say that, as I testified, we should expand some of 

the governance programs that CMS has put in place in the RAC 

program to some of the other audit programs that are out there, 

such as the limitation on records requests, the notice of the types 

of audits being performed, and the work that we do to prevent 

overlap with other audit entities, through tools like the RAC Data 

Warehouse that prevent us from auditing records that someone 

else has requested but do not necessarily apply back the other way. 

I think those things would help overall with the entire comprehensive look at Medicare audit programs, not simply the RAC program. 

Senator CARPER. All right. 

Lastly, if I could, Mr. Chairman, we oftentimes send follow-up 

questions in writing to folks who come and testify before us. Sometimes it is helpful, sometimes not. Just a thought: I do not know 

if anybody else on the panel would be interested in doing this, but 

what about the idea of convening a teleconference call to just continue this conversation, because, between the three of you, you can 

help us make some real improvements here. We have plenty of 

money to recover, and there are smarter ways to do it. Some of 

them are doing it, others are not. 

Some of the concerns I hear are really not about the RACs, the 

Recovery Audit Contractors, but it is kind of the clear guidelines 

that we need and we are not getting. So is that something you all 

would be willing to do? 

Ms. DRAPER. Of course. 

Mr. ROLF. I would be happy to participate. 

Ms. CARMODY. Yes. 

Senator CARPER. All right. Thanks. Thank you so much. All 

right, Mr. Chairman. Thanks so much. 

The CHAIRMAN. Thank you very much, Senator. 

I am trying to figure out how to ask, where is the beef? 

Mr. ROLF. Mostly in Montana. [Laughter.] 

The CHAIRMAN. Yes, that is true. There is a lot more beef in our 

State than in many other States. But where is the beef here? That 

is, where is most of the waste? I mean, over-payment. You talked 

about over-payment. With Intermountain, it is kind of almost as 

much under-payment as over-payment. But you say it is inpatient, 

25 

outpatient. Is that where most of the beef is, most of the stuff? I 

guess, go ahead, Ms. Carmody. 

Ms. CARMODY. Yes, that is really where the bulk of the repayments that we have made are, really the two: inpatient versus outpatient. 

The CHAIRMAN. All right. 

Ms. CARMODY. So there were services provided. It was an argument over the setting. 

The CHAIRMAN. Right. Now, if that is the case, let us just focus 

on that a little bit. What clarity would help with respect to inpatient versus outpatient decisions? Drilling down a little more, 

where? 

Ms. DRAPER. As we look to some of the proposals that have been 

made by CMS, there is still a great deal of confusion. But relying 

on the provider—the physician who has that patient in the emergency room—he or she is the best one to determine the level of care 

and the intensity of care, and helping to give clearer, easy, consistent guidelines to those providers is really what our physician 

community is crying for. 

If I have to call them in for one more mandatory training about 

what we think is the current criteria, I am going to have a medical 

staff revolt. So, if we can have just a clear, consistent, and longlasting criteria, we would all applaud. 

The CHAIRMAN. So you are saying what, that there are many 

changes, there is inconsistency, or the criteria are just too vague 

and ambiguous? What do you mean? 

Ms. DRAPER. All of the above. 

The CHAIRMAN. Well, what most? 

Ms. DRAPER. Most is, it is very ambiguous about what actually 

constitutes an inpatient claim. When we look at a patient who requires intense care, whether it is in our ICU, increased acuity of 

our nursing staff, et cetera, that is one area. 

But it can also be a patient, particularly in our Medicare population, who is very frail. So there are standards that have been 

written by other clinical contractors that, at least as a baseline, 

would help us. Currently, Medicare does not have that baseline for 

clinical criteria. 

The CHAIRMAN. Mr. Rolf, what do you think of that? What do you 

think about the basic question, most of it is inpatient/outpatient. 

Do you agree with that? 

Mr. ROLF. I think, when we hear concerns from the provider 

community in our area, that that is certainly one of the areas that 

does come up. I know we have a representative here from hospital 

providers, but we are also auditing durable medical equipment 

companies, we are auditing anybody who bills fee-for-service. So, 

depending on the particular provider category, there may be unique 

circumstances to that. 

The CHAIRMAN. But we hear from the providers the constant refrain of ‘‘more clarity, more clarity.’’ Would you agree with that? 

Mr. ROLF. I think there is opportunity for that. I think where 

confusion does come in is where we are required to audit strictly 

against Medicare policy. The first level of appeal is required to 

judge our decision based on a Medicare policy, which may be crystal clear, and then you get to the final level of appeal, and they 

26 

have broad discretion to make a decision based on a looser interpretation of those rules. 

So I would say, again, where you get lack of clarity is often when 

you get to that third level of appeal where they are not being consistent with clear medical policy. 

The CHAIRMAN. Why is there less clarity at the third level? 

Mr. ROLF. I do not believe there is any less clarity in the policy 

of the third level. I think there is less clarity in how they are interpreting that policy at the third level. 

The CHAIRMAN. And why is that? 

Mr. ROLF. Since 2005, they have been granted greater latitude 

to make decisions on cases without strictly following Medicare policy. 

The CHAIRMAN. And why? 

Mr. ROLF. I could not tell you that, Senator. 

The CHAIRMAN. The greater latitude has caused a deviation from 

Medicare policy? 

Mr. ROLF. It is an identification that was made in the Inspector 

General’s report. 

The CHAIRMAN. All right. 

Ms. Carmody, do either of the two of you want to address that 

point? 

Ms. CARMODY. Yes. I think one of the things that Mr. Rolf is likely referring to is the administrative law judges’ decision to allow 

claims that have been determined to have been outpatient when we 

had billed them initially as inpatient claims. 

The ALJs in many cases have allowed providers to go back and 

re-bill those as if they were outpatient, so in some cases we are 

talking expensive cardiac surgeries that were indeed done, they 

were medically necessary. We billed them as inpatient. The patient 

maybe stayed a day and a half in the hospital and was released. 

CMS’s current rules do not allow you to go back and basically rebill that claim. Also, many of them are outside of the timely filing 

guidelines because RACs have gone back 3 years. 

The ALJs have made a lot of decisions to say, you know what, 

provider? You did provide the service. You did the service. If you 

agree to go ahead, we will let you bill it as outpatient. So that is 

the latitude I believe he is referring to, or at least that is the experience we have had, to say you are allowed to recoup some money 

for the service you did. Current CMS rules allow us to recoup no 

money. 

The CHAIRMAN. All right. Thank you. 

I am sorry, Senator Thune, I did not see you come back. Go 

ahead. 

Senator THUNE. I already went. 

The CHAIRMAN. I missed that. I was not here when that happened. All right. 

Senator Hatch? 

Senator HATCH. I think this has been a terrific panel, between 

you and me. It seems to me, as a former medical liability defense 

lawyer in my prior life, and realizing that an awful lot of the cases 

were frivolous just to get the defense costs, it seems to me the incentives are perverse here. The incentives are to find fault, unless 

27 

I am missing something. Am I wrong? You make more money if 

you find more fault. Am I wrong there, Mr. Rolf? 

Mr. ROLF. So, Senator, the way I would address that question is 

that, again, since we only get paid when the government gets paid, 

and, if we are wrong we owe our fee back, our incentives are to be 

very clear in our decisions, focus on black-and-white issues, and 

really only address those areas where—— 

Senator HATCH. I am not criticizing you. It is the system that I 

think is a lousy system. It is a subjective system to begin with, in 

a lot of ways. I am concerned about that. We have to really look 

this over to see if we can find some better way of making this a 

quality system that works better than it currently works. 

But I think you two women have done a terrific job in presenting 

your respective medical institutions’ feelings in this matter, or in 

these matters, I guess I should say, and I personally appreciate you 

very much. I think we need to look at this really carefully, Mr. 

Chairman, and see what we can do. You have not really spent a 

lot of time going into all the multiplicity of these things. I would 

like to hear just a little bit more. How many different groups are 

auditing you and finding fault? 

Ms. DRAPER. We concurrently have our Medicare Administrative 

Contractor. I was happy that you were helping me with some of the 

acronyms. They are called CERT auditors or Comprehensive Error 

Rate—— 

Mr. ROLF. Testing. 

Ms. DRAPER [continuing]. Testing contractors. I mean, really you 

almost have to have a play sheet. 

Senator HATCH. I do not blame you for not remembering all of 

these. 

Ms. DRAPER. I am happy when I can remember all the acronyms. 

We have our Zone Program Integrity Contractors that can also 

audit us. Then at multiple levels with our MACs, or our Medicare 

Administrative Contractors, you can have pre-payment audits, you 

can have probe audits, a variety of different ways in which they are 

reviewing our claims. 

Senator HATCH. Ms. Carmody? 

Ms. CARMODY. Yes. And I would say, that is just Medicare. I 

mean, obviously all the other government payers can audit claims 

as well—Medicaid. 

Senator HATCH. And people wonder why hospital costs are going 

up and up and up. 

Ms. CARMODY. Correct. 

Senator HATCH. Then they blame you for it. 

Ms. CARMODY. So it is the same staff and the same personnel 

who are responsible for the integrity of pre-payment in our compliance program, so we keep going back to those same people or types 

of people. So, R.N. nurse coders, they are wonderful people. They 

are hard to come by. We have a need for more and more of them. 

So it is continual pressure on the same types of people with multiple audits, and the same account could be audited multiple times. 

Senator HATCH. Well, I just have to say that I think all three of 

you have been very helpful to the committee here today. We have 

to find a way of getting health care to a point that the government 

can live with it and the people who give health care can live with 

28 

it. We do not need to have doctors second-guessed on everything 

that they do, especially when they have good results. 

I am very concerned about it, because I see just billions and billions of unnecessary costs in some of the things that we do here, 

that we require here in the Congress. I think we are at fault too, 

because we could do a better job. 

I appreciate your testimony, Mr. Rolf. You have been very articulate, representing your industry very, very well as far as I am concerned. But I really have empathy with the two women here and 

their prospective institutions, because I do not know how they put 

up with it, to be honest with you. You do not have any choice, I 

guess, but we have to find some way of making this more reasonable and, like you say, more transparent and more workable. 

I have to leave, but I just want to thank all three of you for being 

here. Thank you, Ms. Draper, for making the trip back here. It 

means a lot to me. 

Mr. ROLF. Thank you, Senator. 

Senator HATCH. Thank you. 

The CHAIRMAN. Thank you all. 

Senator Carper? 

Senator CARPER. One of the things I heard from a couple of you 

today—I think we have heard from a couple of you today—is that 

there is still a need for CMS to conduct stronger outreach and education. 

I understand that a change in law is needed to allow some of the 

Medicare recovery to be used for this sort of outreach, which would 

help prevent future over-payments, or maybe under-payments, and 

reduce the burden, at least a little bit, on providers. Am I correct 

that additional outreach and education by CMS would prove helpful? 

Ms. DRAPER. It would in our situation. Previous to the RACs experience, we had a very beneficial—and I think mutually beneficial—relationship with our Medicare contractor. We would welcome additional outreach from CMS and our Medicare contractor. 

Senator CARPER. All right. 

Ms. Carmody? 

Ms. CARMODY. And I would agree. When we do receive the Medicare audits from the MACs themselves, their motivation is, it is not 

a contingency; the providers are judged on how accurately they pay 

from the get-go. So their motivation is to teach us how to do it correctly or tell us what their beef is. So that is not a contingencybased fee, and it leads to more of an incentive for them to teach 

us. 

One other example or item of note I wanted to bring up is that, 

when we get back to the contingency fee, it used to be a common 

hospital practice that you would hire an outside contractor or consultant to come in and help you with your billing practice. This has 

been years ago. 

Those might have been paid on a contingency basis. The OIG has 

expressed huge concerns with hospitals hiring these outside firms 

to come help you look at under-billing on a contingency basis because of the motivation to potentially over-bill that it created. So 

if those sorts of contracts are frowned upon in a hospital setting 

from the one side, why are they encouraged on the other? 

29 

Senator CARPER. All right. 

Well, Mr. Chairman, I would just note that the vision we are 

talking about here where CMS would provide some additional outreach and education, there is actually a provision in the legislation 

that Dr. Coburn and I and a bunch of others—I think 20-some 

other Senators—recently introduced to address a range of Medicare 

integrity issues. 

There is an acronym for it, but I am going to give you the full 

name: the Preventing and Reducing Improper Medicare and Medicaid Expenditures Act, PRIME. We think it would help provide 

some of these additional funds, and maybe they could be put to 

good use. 

None of you have easy jobs; frankly, we do not either. We need 

to help figure out how we could, each of us, do our jobs a little bit 

better. At the end of the day, I would like to reduce some of the 

headaches for our provider community. 

At the end of the day, we want to make sure that the improper 

payments that are being paid continue to be reduced, and we want 

to make sure that we are still going to have a Medicare program 

in 10 or 20 years. Right now, the prospects are not really encouraging there, because we are running out of money. 

So we are all in this together, and there is a shared responsibility to figure out how to do, here, the important job that we are 

going to do, and do it better. So we look forward to hooking up with 

you all on the phone and to continue this conversation. 

One of the things I will be asking you, Mr. Rolf, from what you 

have heard from Ms. Carmody and Ms. Draper, is, what are some 

things you actually agree with? Or maybe you could modify—not 

now. No, no, not now. But we will ask, what do you agree with? 

I always like to put myself in other people’s shoes and say, how 

would I like to be treated if I were in their shoes—Golden Rule. 

Mr. ROLF. Certainly. 

Senator CARPER. And to do it the other way around. Somebody 

needs to put on the hat of the taxpayers, because they have a stake 

in this as well. 

Mr. Chairman, good hearing. We thank you all for joining us. 

The CHAIRMAN. Thank you very much, Senator. 

We thank all three of you for taking the time to come here. There 

will be more questions in writing. You might also, when you answer the questions—or even not answering the questions—let us 

know if you have an idea, how to further improve here, something 

that has not come up at this hearing, or if you want to emphasize 

something that has come up, again, our goal is to try to resolve this 

as much as possible. The RAC process exists, it is there, we want 

to make it work best for patient care and as efficiently as possible. 

Thank you very much for your testimony. The hearing is adjourned. 

[Whereupon, at 11:36 a.m., the hearing was concluded.] 

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