Recovery Audit Contractor Program

The Medicare Modernization Act of 2003 established the Medicare Recovery Audit Contractor (RAC) program as a demonstration program to identify improper Medicare payments - both overpayments and underpayments. RACs were paid on a contingency fee basis, receiving a percentage of the improper overpayments and underpayments they collect from providers.

In February 2014, the Centers for Medicare & Medicaid Services (CMS) announced two updates related to its procurement of the next round of Recovery Audit Contractor (RAC) contracts. These changes are small steps in the right direction, but more reform is necessary to alleviate the significant burden hospitals bear as a result of RAC audits.

First, CMS stated that it will "pause" the operations of the current RACs until the next round of contracts is awarded. Because CMS has yet to award the next round of RAC contracts, it recently announced a brief extension to the current contracts, which had been set to expire this month. Yesterday's update makes clear that until the new contracts are in place, hospitals will not receive any new RAC documentation requests. Significant dates for hospitals are:

  • Feb. 21 – the last day a RAC could issue a post-payment additional documentation request (ADR);
  • Feb. 28 – the last day a Medicare Administrative Contractor (MAC) could issue prepayment ADRs for the Recovery Auditor Prepayment Review Demonstration; and
  • June 1 – the last day a RAC may send denied claims to the MAC to recoup payment.

AHA RACTrac Initiative

The American Hospital Association's (AHA) RACTrac survey collects data from hospitals on a quarterly basis to assess the impact the Medicare Recovery Audit Contractor (RAC) program on hospitals nationwide. AHA developed RACTrac in response to the lack of data and information provided by CMS on the impact of the RAC program on providers.

RACTrac findings reveal many valuable insights for both the hospitals that reported the data and the AHA and state hospital associations who can use the information to educate the field and inform CMS and Congress of changes needed to the program.