Tag Archives: Contingency Fee

RAC Contingency Fees

When do the RACs get paid their contingency fees?  

Generally, it is after the first level of appeal.    This rule is about to change, so that the RACs will get their fee only after the matter is completely decided, after the second appeal, or perhaps beyond.

What is the timing involved?   Generally, a first level appeal takes 100 days.   This means that the RAC gets their fee in about three months.   But if the new rules come into effect, then the RAC will need to wait to see if their audit withstands the second-level appeal, but that is an average of 400 days long — more than one year!

So obviously this would have an effect on the cash flow for the RACs.

This “second appeal” proposed rule appears to be a compromise because these matters often are decided at the Administrative Law Judge (ALJ) level at a hearing.   When does that take place?  The data is fuzzy, but it appears to be frequently more than 750 days, that is, more than two years later.

If the health care providers had their way, then the RAC would not get paid until a final decision is made.   Yes, the RAC would have to wait to get its money, it would not have the “free use” of money that it can hold until a final decision.

This is important because many ALJ decisions over-turn RAC audits.

Two  RACs evidently have protested this new rule.   The protestors include HMS Holdings (HealthDataInsights) and CGI Federal (which was fired after it botched the roll-out of the Obamacare enrollment website).     This new rule, after all, would disturb their financial model because they would not get paid until they actually earn their money.

What is the right answer to this?

There is no answer that is acceptable to everyone, but lets look at the dynamics.   Under the current “100-day” system, the RAC has every incentive to rush as quickly as possible through the first level of appeal.   In that way, it gets its money as fast as possible.   But after the first level appeal, the RAC has zero incentive to do anything but drag its feet and slow down the process.    It is incentivized to delay the process, because the longer the delay, the more it can hold on to money that later might be taken away should the final decision go in favor of the health care provider.

This delay behavior frequently is done through the standard practice of taking every day of available time to fulfill even the smallest request.   Even if something takes 10 minutes of work, if the RAC has 60 days to do it, then it will complete the 10 minutes of work on the 60th day.   The longer the RAC delays, the longer it holds on to its money.

The health care provider, however, suffers immensely from this practice.   It is guaranteed that the RAC will work for as long as possible and using every possible tactic to lengthen the appeal time.   There is little if any attention given to the difficulties faced by the health care provider.

So under the proposed system, the RAC will have have incentives to operate efficiently up through the second level appeal, then it can continue to drag its heels beyond that.

It is a compromise.

Barraclough has been in dozens of cases involving the statistical extrapolation part of Medicare appeals.   It always has amazed us how long it takes for the RACs to respond to even the most basic information.   This lack of responsiveness slows down the process, harms the health care provider, and perverts the course of justice.   Anything that can be done to curb these practices is a good thing.

Something potentially good from the Government Accountability Office (GAO).