The Centers for Medicare & Medicaid Services (CMS) recently released a report on the Medicare Recovery Audit Contractor (RAC) three-year demonstration program. Congress authorized the RAC demonstration for the purpose of identifying underpayments and overpayments under the Medicare program. The RACs are paid on a contingent basis for detecting and correcting overpayments and underpayments. From 2005 through March 27, 2008, RACs succeeded in correcting more than $1.03 billion in Medicare improper payments. Inpatient hospital providers accounted for 85 percent of the overpayments collected by the RACs. Providers chose to appeal only 14 percent of the 525,133 RAC claims with overpayment determinations. There are many denials still in the appeals process but of those already decided, one-third ended with a decision in the provider's favor. The most common errors detected by the RACs include medically unnecessary (40%), incorrectly coded (35%), and no/insufficient documentation (8%). The RAC permanent program will be implemented gradually, beginning in selected states in the summer of 2008 and have the full national expansion in place by January 10, 2010. Some of the changes that will be included in the permanent program as it is rolled out include a reduced look-back period, an October 1, 2007, audit cutoff date, and limits placed on the number and format of medical records that RACs can request. A copy of the report is available online.

We have assisted clients with the Medicare appeals process and expect more healthcare providers to be subject to overpayment demands as the RACs continue efforts to recover alleged overpayments.