Amid heightened uncertainties about the impact of health reform, hospitals are concerned about how they will be impacted by government plans for a Medicaid recovery audit contractor program.

It was just last year that providers had to contend with full implementation of the Medicare RAC program, following three years of a tumultuous demonstration project.

Then, in November, the Centers for Medicare & Medicaid Services proposed rules for Medicaid RACs. Proponents say RACs are needed to help Medicaid programs recoup overpayments or improper payments, such as in cases where treatments are not warranted by medical necessity.

But providers say safeguards already exist. "We're concerned that adding the Medicaid RAC program is just adding another layer of bureaucracy for hospitals to deal with," says Elizabeth Baskett, the American Hospital Association's associate director of policy. "We're concerned about duplicative audits that don't attain additional cost recoveries, but just make more work for the hospitals in dealing with medical records requests and tracking audits."

One of the concerns with the Medicare audits is that the contractors have been viewed as bounty hunters because they get to keep a percentage of any improper payment they recover. The Medicaid program likely will follow the same procedure, though the proposed rules say fees won't be paid until all appeals have been exhausted. But Eric Hargan, an attorney with Greenberg Traurig LLP and former acting deputy secretary of the Health & Human Services, says a separate appeals process in every state could be burdensome.

Bret S. Bissey, director of regulatory compliance with IMA Consulting, says the majority of Medicare and Medicaid overpayments result from honest mistakes. "I'm not talking about fraud and abuse," Bissey says. "The real question is, from a RAC standpoint, are they going to be able to help identify improper payments and help the system function better? I don't know too many people on the hospital side who think that's the case. It's creating a lot more work."

Baskett says CMS should not require states to adopt a Medicaid RAC program if they already have a Medicaid Integrity Program and similar programs to oversee reimbursements.

Nevertheless, hospitals should implement effective information technology to manage patient flow in a way that will meet an auditor's scrutiny, says Matt Seefeld, CEO of Interpoint Partners, a technology vendor that specializes in business operations software. "You can't leverage spreadsheets and Word documents and e-mail correspondence to manage this process," he says. "Workflow automation is going to be critical."