Medicare RAC Audits - What Are They and What Do They Mean to Your Practice?

In section 306 of the Medicare Prescription Drug,Medicare Trust Funds and identifying monies that need
Improvement, and Modernization Act of 2003 (MMA),to be returned to providers. It has provided CMS with
Congress directed the Department of Health anda new mechanism for detecting improper payments
Human Services (DHHS) to conduct a 3-yearmade in the past, and has also given CMS a valuable
demonstration program using Recovery Auditnew tool for preventing future payments.
Contractors (RACs) to detect and correct improperThe goal of the recovery audit program is to identify
payments in the Medicare FFS program.improper payments made on claims of health care
The Recovery Audit Contractor (RAC) demonstrationservices provided to Medicare beneficiaries. Improper
program was designed to determine whether the usepayments may be overpayments or underpayments.
of RACs will be a cost-effective means of addingOverpayments can occur when health care providers
resources to ensure correct payments are beingsubmit claims that do not meet Medicare's coding or
made to providers and suppliers and, therefore, protectmedical necessity policies. Underpayments can occur
the Medicare Trust Fund. The demonstration operatedwhen health care providers submit claims for a simple
in New York, Massachusetts, Florida, South Carolinaprocedure but the medical record reveals that a more
and California and ended on March 27, 2008.complicated procedure was actually performed. Health
RACs succeeded in correcting more than $1.03 billioncare providers that might be reviewed include hospitals,
of Medicare improper payments Approximately 96%physician practices, nursing homes, home health
of these were overpayments collected from providers,agencies, durable medical equipment suppliers and any
while the remaining 4 percent were underpaymentsother provider or supplier that bills Medicare Parts A
repaid to providers.and B.
Section 302 of the Tax Relief and Health Care Act ofIt is now more critical than ever that you review your
2006 makes the RAC Program permanent andcurrent billing and compliance policies to ensure that
requires the Secretary to expand the program to allyou are in line with the regulations required by the
50 states by no later than 2010.Centers for Medicare and Medicaid Services so that
According to CMS, the RAC demonstration programyou can take corrective action immediately if
has proven to be successful in returning dollars to theinconsistencies are identified.