Undercoding Is it Worth it?

What is the issue?
Hospitals are undercoding the services and items furnished to beneficiaries in a continual effort to avoid federal audits. The increasing trend of undercoding can, however, have significant financial impact on the hospitals. Specifically, undercoding can result in revenue loss for the organization.

Why are hospitals undercoding?
Industry experts associate this trend of undercoding with fear. More specifically, with the increased audit activities by the Centers for Medicare & Medicaid Services’ (CMS’) contractors, such as the Recovery Audit Contractors (RACs), providers are fearful of denials and accusation of fraud by the federal government. Further, the recent release of the White House memorandum concerning federal audits does not appease hospitals’ fears of potential paybacks, monetary penalties, and possible incarceration.

According to the White House memorandum, reclaiming improper payments “is a critical component of the stewardship and protection of taxpayer dollars, and it underscores that waste, fraud, and abuse by entities receiving Federal payments will not be tolerated.”  Thus, the President has directed all federal government departments and agencies to expand their use of audits to detect improper payments of Federal dollars. The Administration will expand the use of the Payment Recapture Audits model, which is the model currently used by the RACs. Under this model, highly skilled auditors identify improper payments using sophisticated tools and technology. The auditors are paid on a contingency basis, where compensation is linked to the identification of improper payments.