Responding to Recovery Audit Contractors

Author:

Jody Carter, Michael Wranik, Bruce Hallowell, Jared Rhoads

As a means of addressing improper Medicare payments, the Department of Health and Human Services (HHS) launched a demonstration program several years ago to determine whether it would be feasible to use independent contractors to detect improper payments made in the Medicare fee-for-service program.

Under this program, HHS-certified audit contractors called Recovery Audit Contractors or RACs were empowered to review claims based on a percentage of the identified overpayments.  The latest figures available indicate that RAC activity continues to identify payment problems at an increasing rate.  As of July 2008, RACs were active in five states and had found a total of $1.03 billion dollars in improper payments. With such high profile financial successes, it is likely that commercial payers will soon follow suit with similar types of audit programs.

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