Recovery Audit Contractors (RAC) - Overview
The RAC audit "pilot" program started in 2005 and includes the following just a
few states (NY, CA and FL). The Centers for Medicare and Medicaid Services' (CMS)
is overseeing the recovery audit contractors (RAC) demonstration program. It is
three-year demonstration program to determine whether the use of independent auditors
is a cost-effective way to identify and recover Medicare underpayments and overpayments.
The RAC program also was intended to provide information to Medicare claims processing
contractors (e.g., quality improvement organizations and program safeguard contractors)
to assist in preventing improper payments in the future. For their efforts, RACs
are paid a percentage of the provider overpayments recovered, as well as an additional
fee for underpayments identified.
RAC Demonstration Program Results
The three-year demonstration program began in March 2005 and initially focused on
three high-Medicare utilization states: Since California, Florida, and New York
account for 25 percent of all Medicare payment, they were the obvious choice for
the program. During the three year program, approximately $990 million was collected
back to the Medicare and a few additional states were added.
The majority of improper payments that were identified were for overpayments, as
opposed to underpayments. This may have been due in part to the project's design
where the focus was on areas that would likely yield more overpayment mistakes.
The vast majority of the $990 million in overpayments were recovered from inpatient
hospitals. The types of healthcare providers that were subject to the program
included:
- Hospitals
- Inpatient Rehabs
- Skilled Nursing
- Outpatient Hospitals
- Physicians
- Other
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