The Medicare Recovery Audit Contractors ("RACs") program started as a demonstration project in California, New York and Florida. The RACs are engaged to review and identify improper Medicare payments—both underpayments and overpayments. The RACs, which are paid on a contingency basis, attempt to identify payment issues through medical chart reviews and through the use of software programs that analyze claims data. There have been complaints and issues raised with respect to the RAC activities in the demonstration states. Consequently, Representatives from California introduced a bill last year to place a one-year moratorium on RAC activities so that the issues associated with implementing the RAC program could be more fully evaluated and addressed. No action has been taken on the bill yet and the RACs are currently scheduled to move into all 50 states over the next couple of years, with many states slated for RAC review in 2008. For more information about the RAC program and this legislation, please see the December 13, 2007, issue of the Health Law Update.

The RAC findings are subject to the Medicare appeals process. We have experience in appealing payment disputes through this process, which can take considerable time and effort to pursue.