The U.S. Department of Health and Human Services (HHS) has released its final rule on the Medicaid Recovery Audit Contractor (Medicaid RAC) program. HHS expects the Medicaid RAC program to save $2.1 billion in waste over the next five years, of which $900 million will be returned to states. Many providers had expressed concerns that the proposed Medicaid RAC program -- unlike its sister Medicare RAC program -- lacked standardization and would thus subject multi-state providers to varying Medicaid RAC rules and processes. While the final rule did provide for some standardization, many of the elements of the Medicaid RAC program remain under the purview of the states. The following are highlights from the final rule:

Look-Back Period. RACs are limited to a three-year claims look-back period.

Limits on Medical Record Requests. States will establish the limits on the number and frequency of medical records requested by a RAC. However, RACS are required to accept submissions of electronic medical records on CD/DVD or via fax at the provider’s request.

Deadlines. RACs must notify providers of overpayment findings within 60 calendar days.

Appeals. States are required to have an adequate appeals process for adverse Medicaid RAC decisions; however, the final rule notes that states maintain complete flexibility regarding the design and administration of such appeals processes.

RAC Staffing Requirements. RACs must hire a full-time contractor medical director who is an MD or DO in good standing, as well as certified coders, unless the state determines that coders are not required.

Customer Service Measures. RACs must compile and maintain provider-approved addresses and points of contact.

Education and Outreach. RACs must work with states to develop educational and outreach programs that include notification of audit policies and audit protocols.

Reporting Fraud. States, not RACs, have the responsibility to make referrals of suspected fraud to the State Medicaid Fraud Control Unit or other appropriate law enforcement agency.

Coordination of Audits. States and their RACs are required to coordinate auditing efforts with those of other entities conducting audits of providers receiving payments for Medicaid claims.

Contingency Fee Limits. RACs must return contingency fees within a reasonable timeframe as prescribed by the state if their determination is reversed at any level of appeal.

The original April 1, 2011, RAC Medicaid implementation date was delayed in part to ensure states would be able to comply with the provisions of the final rule. The final rule requires implementation by January 1, 2012.