Recovery Audit Contractors: What is it and when will it affect you?

(PYA Alert dated November 30, 2007)


Recovery Audit Contractors ("RAC") has been piloted in California, Florida and New York. The role of the RAC is to identify improper payments, both overpayment or underpayment that resulted from billing for non-covered services, medical necessity not met, excessive or insufficient payment for services that were incorrectly coded, duplicate payments and payments in which other insurance was responsible.

Section 306 of the Medicare Prescription Drug, Improvement and Modernization Act of 2003 directed the Secretary of the US Department of Health and Human Services to pilot the use of Recovery Audit Contractors (RACs) in identifying Medicare underpayments and overpayments and recouping the Medicare overpayments. To date the largest amount of overpayments has been found to be in Inpatient hospitals. These overpayments have been attributed to lack of medical necessity and incorrect coding data. Compensation to the RAC is based off of a percentage of identified improper payments.

Due to their large utilization of Medicare, California, Florida and New York were chosen for pilot programs, but CMS plans to make the RAC program permanent and to expand the program nationwide. All 50 states will have Recovery Audit Contractors by March 2010. Georgia, North Carolina, Tennessee and Alabama will be included January 2009 or later but South Carolina, Massachusetts and Arizona are expected to be included by March 2008. The RAC focus is on the following service sites:

• inpatient hospitals
• skilled nursing facilities
• outpatient hospitals
• durable medical equipment companies
• laboratories
• ambulances
• physicians

PYA’s team of Clinical Compliance and Reimbursement professionals can assist in assessing your risk related to billing compliance, identify areas of potential overpayment risk, identify process improvement opportunities and educate your staff to ensure compliance within your organization.

If you would like more information, please contact Lorraine Larrance or Carol Eyer at (800) 270-9629.

The information provided via PYA Alert, Tax Planning Alert, or Audit and Accounting Alert should not be construed as accounting, auditing, consulting, or legal advice on any specific facts or circumstances. The contents are intended for general information purposes only.  Please contact us at (800) 270-9629 to discuss your specific situation or to discuss any specific questions you may have.

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