Medicare’s Recovery Audit Program (RAC) is a program that will be utilized by the federal government to address waste, fraud, and abuse in the Medicare program. It is designed to identify overpayments and underpayments and was initially rolled out as a demonstration project. It is now permanent and national and is scheduled to begin in New Jersey in August of 2009.

 

The RAC identified and recouped over $900 million in overpayments between 2005 and 2008. It also identified and refunded over $38 million in underpayments. The program has been controversial in the provider community because the contractors are paid on a contingency fee basis.

 

Contracts were awarded in October of 2008 to four successful bidders to administer these programs in the four RAC regions. (New Jersey is in Region A). On November 4, 2008, CMS announced that these all of these contracts have been challenged. This challenge triggered a stay of all work under the contracts. The General Accounting Office (GAO) has 100 days, until early February, to decide the challenge. The obvious immediate impact is that the RAC contractors cannot move forward with any work, including education and outreach. However, physicians in New Jersey should not assume that this will affect the anticipated August 2009 start date for these audits. It is possible that the Region A contractor will be able to conduct outreach and begin audits in August of 2009.

 

Improvements made to the RAC program include limitations on the number of medical record requests as well as a limit on the look- back period to October 1, 2007, then, once the program is implemented not more than a three year look-back. The RAC contractors must employ a physician medical director and a certified professional coder.

 

It should be noted that the RAC contractors have discretion in creating their own processes for auditing. However, CMS has oversight and reviews their processes for significant issues. AMA has a pending request to CMS to review the processes for consultations and evaluation and management codes.