[Senate Hearing 113-236]
[From the U.S. Government Publishing Office]



                                                        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

                               __________




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                          COMMITTEE ON FINANCE

                     MAX BAUCUS, Montana, Chairman

JOHN D. ROCKEFELLER IV, West         ORRIN G. HATCH, Utah
Virginia                             CHUCK GRASSLEY, Iowa
RON WYDEN, Oregon                    MIKE CRAPO, Idaho
CHARLES E. SCHUMER, New York         PAT ROBERTS, Kansas
DEBBIE STABENOW, Michigan            MICHAEL B. ENZI, Wyoming
MARIA CANTWELL, Washington           JOHN CORNYN, Texas
BILL NELSON, Florida                 JOHN THUNE, South Dakota
ROBERT MENENDEZ, New Jersey          RICHARD BURR, North Carolina
THOMAS R. CARPER, Delaware           JOHNNY ISAKSON, Georgia
BENJAMIN L. CARDIN, Maryland         ROB PORTMAN, Ohio
SHERROD BROWN, Ohio                  PATRICK J. TOOMEY, Pennsylvania
MICHAEL F. BENNET, Colorado
ROBERT P. CASEY, Jr., 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)

 
       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 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 over-zealous 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. Ensuring 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.
    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.
    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 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.

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 anti-platelet 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.
    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 
high-risk, 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.

           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 payment 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 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.
    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 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 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 under-
payment. I would like to add to that that, in CMS's 2012 annual 
financial report, they reported that the percentage of under-
payments 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.
    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.
    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 outpatient--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 over-payment. 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.
    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 co-
insurance 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.
    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.
    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 decision-making 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 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?
    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 under-payments, 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 Medicaid-
related.
    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.
    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 committed 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, 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 long-lasting 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 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 re-bill 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 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 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 contingency-based 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?
    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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