Recovery Audit Contractor (RAC) Program



The Recovery Audit Contractor (RAC) program is a federal program that identifies and corrects past improper Medicare payments. The purpose of this program is to prevent future improper payments, lower CMS error rates, protect tax payers,  edicare beneficiaries and providers by preventing incorrect claims (Centers for Medicare & Medicaid Services, 2013). The RAC program was originally a pilot project initiated under the Medicare Modernization Act of 2003. After the RAC pilot demonstrated success by recouping millions of dollars in overpayments, Congress made the program permanent under the Tax Relief and Health Care Act of 2006 (Hegland & Tullbane, 2011).

Improper Payments

According to CMS “improper payments” include:
Improper payment amounts (overpayment or underpayment for services)
Coding Errors (wrong MS-DRG selected)
Unreasonable and unnecessary services (wrong care setting (outpatient vs inpatient setting), lack medical necessity)
Duplicate services were performed (CMS, n.d.)

Who is subject to auditing?

Any healthcare organization on Medicare Fee for Sevice Program (FFS) is subject to RAC audits (Centers for Medicare &  edicaid Services, 2013). This includes physicians, hospitals and suppliers that provide fee-for-service program (procedures, services and treatments) and submit claims to Medicare (Clark et al., 2009). According to AHA, general medical and surgical hospitals report the highest RAC activity, after that Critical Access Hospital (RACTrac, 2014).

AHA’s RACTrac Surveys

Due to the lack of data CMS provides to the public on the impact the RAC program has on hospitals nationwide, the American Hospital Association created the RACTrac Survey. This is a quarterly online survey were hospitals can voluntarily submit their data regarding the RAC audit program. These surveys provide an analysis of submitted data to give an overall picture of the impact RAC has on participating hospitals across the nation. Since the survey began in January of 2010, about 2,489 hospitals have submitted their data to RACTrac and 1,165 hospitals participated in the first quarter of 2014 (RacTrac, 2014). Findings from this survey will be used throughout this Final Applied Project (FAP).

How RAC Works

The RAC program has divided the US into four regions, called A, B, C, and D. Every region has one CMS contracted auditor that is responsible for auditing Medicare participating providers in that region. However, these CMS contracted auditors may subcontract other agencies to perform audits for them. Auditors are paid on a contingency fee basis, meaning that they receive a percentage for every improper payment (overpayment and underpayment) that was recouped or paid (Centers for Medicare & Medicaid Services, 2012). Below is a list of states that fall under each region and the 2014 CMS contractor and subcontractor for each region (AHA, n.d):

Region A:
o CMS Auditor: Performant Recovery, Inc.
o Subcontractor: PRG-Schultz USA, Inc.
o States: Connecticut, Delaware, District of Columbia, Maine, Maryland, Massachusetts, New Hampshire, New Jersey, New York, Pennsylvania, Rhode Island, Vermont
Region B:
o CMS Auditor: CGI Technologies and Solutions, Inc. INPATIENT RAC DASHBOARDS 10
o Subcontractor: PRG-Schultz USA, Inc.
o States: Illinois, Indiana, Kentucky, Michigan, Minnesota, Ohio, Wisconsin
Region C:
o CMS Auditor: Connolly Consulting Associates, Inc.
o Subcontractor: Viant Payment Systems, Inc.
o States: Alabama, Arkansas, Colorado, Florida, Georgia , Louisiana, Mississippi, New Mexico, North Carolina, Oklahoma, South Carolina, Tennessee, Texas, Virginia, West Virginia
Region D:
o CMS Auditor: HealthDataInsights, Inc.
o Subcontractor: PRG-Schultz USA, Inc.
o States: Alaska, Arizona, California, Hawaii, Idaho, Iowa, Kansas, Missouri, Montana, Nebraska, Nevada, North Dakota, Oregon, South Dakota, Utah, Washington, Wyoming