CMS releases results of RAC demonstration
Healthcare Auditing Weekly, July 15, 2008
Recovery Audit Contractors (RACs) corrected more than $1.03 billion in improper Medicare payments, according to a CMS evaluation of the RAC pilot program.
RACs identify underpayments and overpayments under Parts A and B of the Medicare program. The demonstration project began in 2005 with the three largest states in terms of Medicare utilization: California, Florida, and New York. In 2007, Massachusetts, South Carolina, and Arizona were added for the remainder of the demonstration.
According to the results of the pilot program, 96% of improper payments RACs uncovered were overpayments collected from the providers and 4% were underpayments, repaid to providers.
CMS drew several conclusions stemming from these results in its evaluations, including:
- The cost to run the RAC program is less than the amount returned to the Medicare Trust Fund. The total cost was $.20 for each dollar collected.
- Providers did not appeal every RAC overpayment determination. Only 14% were appealed and 4.6% were overturned.
- It is administratively possible to pay RACs on a contingency fee basis.
Based on problems that occurred during the demonstration, CMS will make these changes to the permanent program:
- RACs will only look back as far as October 1, 2007. A four-year look back period was too long.
- RACs will be required to hire a physician medical director to oversee the medical record review process, assist nurses and coders, and manage quality assurance procedures. Providers believe the lack of physicians present at the RAC audit resulted in erroneously denied claims.
- RAC contingency fees will be disclosed. In the pilot program, CMS did not disclose RAC contingency fees, resulting in apprehension from providers.
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