The Centers for Medicare & Medicaid Services designed the Recovery Audit Contractors (RAC) program to detect and correct past improper payments made on claims provided to Medicare beneficiaries under part A or B. Section 302 of the Tax Relief and Health Care Act of 2006 makes the RAC Program permanent and requires the Secretary to expand the program to all 50 states by no later than 2010. Anyone who files claims with Medicare will be subject to review by the RACs. This includes physicians, hospitals, home health agencies, and Durable Medical Equipment providers.

In January 2009, CMS released an “Update to the Evaluation of the 3-Year Demonstration”, which stated RACs succeeded in correcting more than $1.03 billion of Medicare improper payments. Approximately 95 percent of these were overpayments collected from providers, while the remaining 4 percent were underpayments paid to providers.

Some of the reasons improper payments can occur on claims are:

Payments are made for services that do not meet Medicare’s medical necessity criteria.

Payments are made for services that are incorrectly coded.

Providers fail to submit documentation when requested, or fail to submit enough documentation to support a claim.

Payments are made for duplicate services.

Are you prepared? The RACs are paid on a contingency based fee and have every incentive to find incorrectly paid claims. The program will look back up to three years but not before October 1, 2007. It also allows for review of claims in the current fiscal year. Any overpayments found by the RACs will need to be reimbursed to Medicare, which can collect their reimbursement from any future claims checks owed to the provider.

What can providers do to get ready? Conduct an internal assessment to ensure that submitted claims meet the Medicare rules. Know where previous improper payments have been found. Look to see what improper payments were found by the RACs. (Permanent RAC findings will be listed on the RACs’ website.) Consider hiring a third party who can walk you through the process and perform a RAC Base Line Audit. A Base Line Audit will identify non-compliance of documentation, coding and billing to give guidance on all corrective actions that need to be put in place to avoid and/or minimize potential fines and optimize the practice’s revenue.

Given the significant overpayments uncovered during the demonstration period, health care providers should do all that they can to assess their risk, develop a plan, and take immediate action to get their “house in order” now.

For more information about the RAC audits, go to:
http://www.cms.hhs.gov/RAC/
http://www.connollyhealthcare.com/RAC