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Recovery Audit Contractor (RAC) Attorney

What are Recovery Audit Contractors (RACs)?

Recovery Audit Contractors (RACs) are private companies contracted by the Centers for Medicare and Medicaid Services (CMS), used 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 (DME) suppliers, home health agencies, skilled nursing facilities and other healthcare providers in order to identify improper payments. RACs are highly motivated to identify overpayments and other improper payments, as the RACs are compensated based on the amount collected from and/or returned to Medicare providers or suppliers resulting from improper payments.

The RAC program started in 2005 as a demonstration program, mandated by Section 306 of the Medicare Prescription Drug, Improvement and Modernization Act of 2003. This directed the Department of Health and Human Services (HHS) to conduct a three-year demonstration program using RACs. 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. It was initiated in the three states with the highest Medicare expenditures, California, Florida and New York. In 2007, the program expanded to include Massachusetts, South Carolina and Arizona.
 
The RAC demonstration program was determined to be very cost effective by CMS. The RAC program was made permanent by Section 302 of the Tax Relief and Health Care Act of 2006.
 
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 be prepared 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.

The Health Law Firm has defended many Medicare, Medicaid, and other audits. If you have been given notice of an audit, or are looking to prepare your practice in the event of an audit, please contact us at (407) 331-6620 or (850) 439-1001.