RAC Updates: Assessing Your RAC Risk by Sue Kay

The adage “no news is good news” definitely does not apply to physician offices when it comes to the RAC (Recovery Audit Contractors) program. For the past several years (during the 3-year demonstration program and during the past year of national expansion), RACs have primarily been focused on hospitals and not individual physician offices. This false sense of security has caused many office managers to put RAC preparations on the back burner. Between now and the end of the year, we will start to see RAC rear its ugly head in private-practice physician offices. This article is intended to provide you with some RAC background information, up-to-date status information on the RAC program, and tips for assessing your practice’s potential RAC Risk.


The Recovery Audit Contractor (RAC) program was authorized by Congress as part of the Medicare Prescription Drug, Improvement and Modernization Act of 2003 (MMA). As part of the legislation, Congress directed the Centers for Medicare and Medicaid Services (CMS) to conduct a three-year recovery audit demonstration program in a small number of states.

The goal of the RAC program is to detect and correct improper Medicare payments and to collect those overpayments from providers.

From March 2006 through March 2008, the Medicare Recovery Audit Contractor (RAC) demonstration project identified more than $1 Billion in incorrect Medicare payments – including some $900 Million on overpayments to facilities and providers.

The obvious success of this demonstration program led to the RAC program being made permanent as part of The Tax Relief and Health Care Act of 2006. This authorized CMS to expand the program in all 50 states.

In the Spring of 2007, CMS began the open bidding process to select four RAC contractors for the permanent RAC project. In October 2008, CMS announced the four (4) new national RACs that had won contracts to serve the Medicare RAC program – roughly one RAC for each ¼ of the country.

Those RACs and associated contact information are as follows:

Region A
Diversified Collection Services (DCS)

Region B
CGI Federal

Region C
Connolly Healthcare

Region D
HealthDataInsights (HDI)

Up-to-date RAC status information:

  • According to the American Hospital Association, recovery audit contractors denied $2.47 Million in claims during the first quarter of 2010;
  • Originally intended for fee-for-service Medicare only, the new health care reform law calls for expansion of the RAC program to Medicare Parts C and D by December 31, 2010.
  • The new health care reform law also calls for RAC expansion into Medicaid programs as well by December 31, 2010.
  • President Barack Obama is expected to sign a bill into law today that will expand recovery-audit-type contractor programs beyond Medicare. The Improper Payments Elimination and Recovery ACT requires federal agencies to put audit/corrective action plan programs in place to reduce overpayment errors. The White House cited the success of the current RAC program when announcing plans for additional audit programs. This means that RAC is just the start and that you should anticipate additional audit recovery programs being implemented moving forward.
  • Non-governmental insurance companies are taking note of the audit recovery success as well. Anthem and Humana are starting to perform similar audits at hospital and physician levels. Be prepared for the flood gates to open as more and more insurance companies put similar programs into place.
  • Different RAC contractors seem to be focused on different issues. Visit each of the individual contractor websites above for a complete listing of issues in each region.

Assessing Your Risk

Knowledge is key in terms of assessing your potential RAC Risk. You need to be aware of where previous improper payments have been found and then take a close look at your own billing tendencies. Here are some tips and resources for doing so:

  • You can find a listing of what improper payments were found by RACS during the demonstration period by visiting the CMS website at www.cms.hhs.gov/rac.
  • Permanent RAC findings will be listed on the individual regional RAC websites.  Visit your region’s RAC website frequently to keep up to date as new findings/issues are posted regularly.
  • Sign up to receive email notifications with up-to-the-minute RAC information. I receive weekly updates from www.racmonitor.com. All it took was signing up for a free registration account via their website.
  • Be proactive! Start watching and tracking your denied claims. Look for patterns in the denials to see if you are consistently doing the same thing over and over. Take corrective steps now to avoid incorrect claims and improper payments. If you uncover improper payments as part of this self-audit, report it to the claims processing contractor. With the contractor’s approval, these claims will be excluded from RAC review.
  • Watch for updated information from Efficiency in Practice through our newsletters, on our website and via upcoming complimentary tele-classes.

Bottom-line, recovery audits of all types are here to stay. You need to be aware of the risk, continually seek education and resources on the topic, and be proactive with your preparation.

© 2010 Efficiency in Practice

Sue Kay, Senior Consultant at InHealth, is the editor of Efficiency in Practice, the free eNewsletter for medical practice managers who want to save time, money and reduce risk.  For more information and to access your FREE report, The 8 Things You MUST Know About CMS’ RAC Program, visit www.efficiencyinpractice.com

This article can be reprinted freely online, as long as the entire article and this resource box are included.

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