Accusing auditors of using overzealous and predatory tactics that are threatening rural hospitals with financial ruin, U.S. Rep. Dan Boren is calling for a federal investigation of Atlanta-based Connolly Inc. and other companies that audit hospitals' Medicare billing.
“While I fully support the need to protect taxpayer money and prevent wasteful government spending, I disagree with the extreme practices under which Connolly Inc. operates and the exorbitant fees it is permitted to collect,” said Boren, D-Muskogee. “Connolly Inc. has engaged in what can only be described as overzealous predatory tactics against several of my constituent hospitals with their aggressive, overly critical approach.”
Connolly Inc. officials did not respond to telephone and email requests for comment.
Mark Rogers, chief executive officer of Pushmataha County Hospital in Antlers, said rural hospitals in Oklahoma and elsewhere will start failing and falling like dominoes in 12 to 18 months if something isn't done to bring extreme auditing practices under control.
“In three to five years we'll either have to throw out or totally redo our state's trauma system because there won't be any rural hospitals left if this program is not stopped,” Rogers said. “This is wrong. It's immoral and the bureaucrats who allowed this and sold this to Congress ought to be ashamed of themselves.”
Rogers said he believes the program targeted large, urban $100 million hospital systems.
“We're collateral damage,” he said.
“No hospital really likes this program,” said Rick Snyder, vice president of finance and information services for the Oklahoma Hospital Association. “All encounter varying degrees of problems with it.”
The Recovery Audit program that is generating the controversy is part of an effort to reduce unnecessary and improper Medicare costs.
The program was authorized by the Tax Relief and Health Care Act of 2006.
To carry out the program, the United States was divided into four regions and a large auditing firm was selected to conduct hospital Medicare cost recovery audits in each region. Connolly Inc. was selected to conduct the audits in the region that includes Oklahoma and 14 other southeastern states.
Rogers and Snyder said the big problem with the Recovery Audit program is that it was set up on a contingency fee basis that allows the auditing firms to keep up to a third of the amount they collect through challenged billings.
The huge financial incentive has prompted auditors to repeatedly question the medical necessity of doctors admitting patients who show up at hospitals with a variety of ailments that are often not easy to diagnose, Snyder said.
“It's easy to be a Monday morning quarterback and decide later it should not have happened like that,” he said.
Rogers and Snyder cite appeal statistics that show a huge percentage of challenged audit findings are being overturned as proof that the auditors are being overly aggressive.
The American Hospital Association reported a survey of more than 1,800 hospitals revealed that 85 percent of the contested audit findings that made it all the way through the appeals process in the fourth quarter of 2010 were overturned in favor of the provider. Rogers cited data from another source that indicated nearly 75 percent of contested audit findings were overturned in favor of hospitals in the first quarter of 2012.
“Unfortunately, forcing hospitals to resort to the appeals process to right the wrongs of the recovery audit contractors only adds to the bill of the recovery audit contractor program for the hospital,” The American Hospital Association said. “The average cost per appeal is $2,000 and it takes an average of 18 to 24 months to complete the appeals process. Many hospitals choose not to bother with the appeals process as the cost of the appeals process outweighs the benefit of recouping the money originally lost by the recovery audit contractor's determination.”
Auditors can go back three years and challenge the same bills over and over again, trying to collect more each time, Rogers said.
A lot of money is at stake. In a recent three-month period that ended June 30, the four recovery audit firms reported collecting $647.2 million in alleged overpayments, with Connolly collecting $223.8 million of that amount. The companies also identified $44.1 million in underpayments that were owed back to hospitals.
The problem is particularly acute for small, rural hospitals in poor, disadvantaged areas where a high percentage of patients are on Medicare and Medicaid.
Pushmataha County Hospital is a prime example, since it is located in one of the poorest counties in the United States. Between 65 and 70 percent of its patients are on Medicare or Medicaid in any given year, Rogers said.
“In the last 10 years, alone, we've written off more than $50 million in uncompensated care delivered to the community,” Rogers said. “Here, keeping our doors open is a struggle at any given time. ... Roughly a quarter of the people who use our hospital have no ability to ever pay their bills. ... This program that Medicare has is forcing us into an endgame situation.”
Rogers said rural hospitals throughout the state and nation are in financial crisis because of the audits, but said administrators are afraid to discuss the situation because talk of financial problems can lead patients to avoid those hospitals for fear they would receive substandard care.
“We are a strong, vibrant hospital that provides good quality of care to people,” Rogers said, adding he felt it was important to speak up because of what's at stake.
Pushmataha County Hospital makes $300,000 to $500,000 in a good year, but will lose money this year, largely because of the audits, which have requested paybacks of nearly $300,000 since January, he said.
“We're having to use our county sales tax to pay Medicare back because of this program,” he said.
Rogers said the recovery audit's cost to his hospital goes way beyond the disputed overpayments. Rogers said he has had to pay staff overtime and hire additional staff just to meet the demands of auditors. And doctors are spending time doing paperwork for appeals that would be better spent caring for patients, he said.
Rogers said he also has had staff members quit because of the added stress.
“My doctors can't close their practices down to defend these things they disagree with,” he said. “We've got a nursing shortage and nurses that should be in a hospital working are sitting in these government contractor cubicles running checklists instead of helping patients where they ought to be.”
Boren has joined with Dave Camp, chairman of the U.S. House Ways and Means Committee, and Fred Upton, chairman of the U.S. House Energy and Commerce Committee, in writing letters to Secretary of Health and Human Services Kathleen Sebelius asking for an investigation into the audit methods used by Connolly and others.
“These practices have the potential to create a life-threatening situation for patient care in impoverished rural communities of Oklahoma,” Boren said.
Officials in Sebelius' office did not respond Friday to requests for comment.