On September 16, 2011, the Centers for Medicare and Medicaid Services (CMS) published the final rule in the Federal Register which implements the Medicaid Recovery Audit Contractor (RAC) program, as required by § 6411 of The Patient Protection and Affordable Care Act (PPACA). States are required to fully implement their Medicaid RAC programs by January 1, 2012.  CMS estimates that the Medicaid RAC program will result in net savings to the Medicaid program of $110 million in fiscal year (FY) 2012, $330 million in FY 2013, $480 million in 2014, $580 million in 2015, and $630 in FY 2016.

The final rule addresses many of the provisions included in the proposed rule released on November 10, 2010.  For example, States may contract with one or more Medicaid RACs, and States are not required to adopt new administrative review processes to accommodate the Medicaid RACs. Medicaid RACs are reimbursed on a contingency fee basis for the identification of overpayments and States have the discretion to establish the timing of Medicaid RAC contingency fee payments.  The final rule provides that “States must adequately incentivize the detection of underpayments.”

It appears that CMS has attempted to apply some of the “lessons learned” from the Medicare RAC Demonstration Project by establishing a three-year look back period for the Medicaid RACs (unless the State receives CMS approval) and requiring that the Medicaid RACs hire at least one full-time Medical Director who possesses the credential of a Doctor of Medicine or Doctor of Osteopathy.  Medicaid RACs are also required to issue overpayment findings within 60 calendar days.  While CMS does not establish a medical record request limit in the final rule, States are required to establish such limits based on the number and frequency of medical record requests.

The final rule requires States—not Medicaid RACs—to report instances of potential fraud to the state Medicaid Fraud Control Unit (MFCU) or appropriate law enforcement officials. CMS emphasizes in the final rule that Medicaid RACs are not intended to replace current Medicaid program integrity or audit efforts.  CMS also makes it clear that it does not expect to release a Medicaid RAC Statement of Work or have significant oversight of the Medicaid RAC program after its implementation.  A significant concern in the provider community involves  the potential for overlapping audits, given the number of government contractors authorized to audit Medicaid claims.  The final rule provides that the Medicaid RAC “should not” audit claims that are currently under review or have been reviewed.

The Medicaid RAC final rule is available by clicking here.