In its first annual report to Congress on the national recovery audit contractor (RAC) program, the Centers for Medicare and Medicaid Services (CMS) reported that RACs had identified and collected $75 million in overpayments and $16.9 million in underpayments for fiscal year (FY) 2010. Not surprisingly, the majority, or 82 percent, of RAC program corrections related to overpayments whereas 18 percent of RAC program corrections were identified underpayments that were refunded to providers.

Healthcare providers have appealed approximately five percent of all claims collected in FY 2010. To date, CMS reports that only 2.4 percent of all 2010 claims collected have been both challenged and overturned on appeal. However, we would note that this data is preliminary, as it does not fully account for the FY 2010 claims that still are working through the appeals process, which can take up to two years to fully adjudicate. In our experience, it is that latter levels which provide the greatest opportunity for fair review, and we would expect the favorable appeals outcome percentage to increase in future reports.

The report also briefly addresses the Medicaid RAC program established by the Patient Protection and Affordable Care Act (PPACA). States are currently in the process of implementing their Medicaid RAC programs. As of May 2011, CMS completely exempted each of the five U.S. territories from implementing a RAC program on the basis of Medicaid claims system infrastructure challenges. Future reports will contain greater detail on the status, implementation and outcomes of the Medicaid RACs.

As noted in the April 14, 2011, issue of the Health Law Update, CMS officials discussed their plans to move away from the "bounty-hunter" tainted name "RAC" and towards the term "Recovery Auditor." This report to Congress implements that initiative. CMS's discussions of the FY 2010 results refer to the contractors as Recovery Auditors while references to RACs are mostly in terms of the demonstration project.