What Are Recovery Audit Contractors (RACs)?
Recovery Audit Contractors (“RACs”) are private companies contracted by the Centers for Medicare and Medicaid Services (“CMS” or “Medicare”), tasked to identify Medicare overpayments and underpayments and return Medicare overpayments to the Medicare Trust Funds. RACs review claims submitted by hospitals and health systems, physicians, durable medical equipment providers, hospice and home health agencies, skilled nursing facilities and other healthcare providers and suppliers in an attempt to identify improper payments. RACs are highly motivated to identify overpayments and other improper payments, as the RACs are compensated on a contingency-fee basis, based upon the principal amount collected from and/or returned to Medicare providers or suppliers resulting from improper payments.
The RAC program began as a demonstration program in 2005, mandated by Section 306 of the Medicare Prescription Drug, Improvement and Modernization Act of 2003, which directed the Department of Health and Human Services (“HHS”) to conduct a three-year demonstration program using RACs. The RAC demonstration program began in 2005 in California, Florida and New York, the three states with the highest Medicare expenditures. In 2007, the program expanded to include Massachusetts, South Carolina and Arizona. The purpose of the RAC demonstration program was to determine whether the use of RACs would be a cost-effective way to identify and correct improper Medicare payments.
The RAC demonstration program was deemed to be very “cost effective” by CMS. CMS estimates that the RAC demonstration program cost approximately 20 cents for each dollar returned to the Medicare Trust Funds.
Section 302 of the Tax Relief and Health Care Act of 2006 made the RAC program permanent and required its expansion nationwide by no later than 2010. According to its most-recently published “Expansion Schedule,” CMS planned to expand to 23 states by March 1, 2009, and the remaining states by August 1, 2009 or later. Thus, Medicare providers and suppliers nationwide can expect RAC auditing beginning in 2009.
RACs may attempt to identify improper payments resulting from:
- Incorrect payments;
- Non-covered services (including services that are not reasonable and necessary);
- Incorrectly coded services; and
- Duplicate services
Medicare providers and suppliers nationwide should begin to prepare for RACs and increased Medicare auditing activity. At a minimum, preparation for the RACs should include:
- Establishing systems to timely respond to RAC record requests within required timeframes;
- Monitoring areas that may be subject to RAC review;
- Implementing compliance efforts; and
- Monitoring claim denials and appealing these claims through the Medicare appeals process.
Claim denials made by RACs can be appealed successfully through the Medicare appeals process.
Our firm has defended successfully thousands of Medicare, Medicaid, and third party payor audits and has developed strategies for substantially reducing overpayment demands. We have fully developed legal analyses and have applied the defenses of waiver of liability, provider without fault, and the treating physician rule. In the RAC demonstration program, our firm represented numerous hospitals and health systems with their appeals of claim denials and overpayment determinations, with successful results.
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Call us at 248-544-0888 or send us an e-mail to schedule a meeting to discuss your concerns with RACs or to discuss your other healthcare law-related needs.
