CMS recently announced the four Recovery Audit Contractors (RACs) that have been awarded contracts to administer the permanent RAC program. Although the initial rollout of the permanent national RAC program was delayed, these contracts mark the beginning of the press to have the RAC permanent program in place by the January 1, 2010 deadline imposed by Congress in the Tax Relief and Health Care Act of 2006. The permanent RACs are:

  • Diversified Collection Services, Inc., in Region A, initially working in Maine, New Hampshire, Vermont, Massachusetts, Rhode Island, and New York;
  • CGI Technologies and Solutions, Inc., in Region B, initially working in Michigan, Indiana, and Minnesota;
  • Connolly Consulting Associates, Inc. (Connolly), in Region C, initially working in South Carolina, Florida, Colorado, and New Mexico; and
  • HealthDataInsights, Inc. (HDI), in Region D, initially working in Montana, Wyoming, North Dakota, South Dakota, Utah, and Arizona.

CMS states that "selection of the new contractors was based on a best value determination for the Federal government that included a sound technical approach for the level and quality of claim analysis and detail to exceptional customer service, conflict of interest reviews and lowest contingency fee." Two of the four RACs chosen for the permanent program, Connolly in Region C and HDI in Region D, participated in the three-year demonstration. PRG-Schultz, the RAC for California during the demonstration program, was the target of loud provider protests regarding its claims denial determinations and was not awarded a contract. However, in a press release dated October 5, 2008, PRG-Schultz states that although it received one of the highest technical scores, it was not awarded a contract because it ultimately did not have the lowest contingency fee bid in any region.

In an effort toward more transparency in the permanent program, CMS released the contingency fees to be paid to the permanent RACs, Region A -12.45 percent; Region B - 12.50 percent; Region C - 9 percent; Region D - 9.49 percent. The Final RFP (and Statement of Work) for the four new permanent RACs is available online. Both returning RACs chosen for the permanent program have significantly lower contingency fees than the new RACs.

Providers should note that of those claims appealed during the demonstration program, decisions were made in the provider's favor 57.4 percent of the time in Connolly's New York and Massachusetts jurisdiction and 41.8 percent of the time in HDI's Florida and South Carolina jurisdiction. The Appeal Update of RAC Evaluation Report through June 30, 2008, is available online.

In October and November, the RACs will start holding town hall meetings in each state for providers, CMS staff and representatives from the RACs to discuss implementation of the permanent program. Following these meetings, the RACs will list the types of issues undergoing review on their websites and begin reviewing claims and issuing decisions.

The RAC permanent program will move into the second stage of the rollout in Texas, Oklahoma, California, and Nevada March 1, 2009, with the remaining states to follow August 1, 2009 or later. A detailed overview of the RAC expansion schedule is available on the CMS website. In addition to the RACs, CMS also announced it has contracted with Provider Resources, Inc., to work as the RAC Validation Contractor (RVC). The RVC will work with CMS and the RACs to approve the new targeted improper payment issues, as well as perform accuracy reviews on samples of claims on which the RACs have already collected overpayments.