What are Recovery Audit Contractors?

The Medicare Modernization Act and the Tax Relief and Healthcare Act of 2006 established the Recovery Audit Contractor, otherwise known as the RAC, whose mission is to combat fraud and abuse within the Medicare system.  The Recovery Audit Contractor is one of many types of Medicare contractors whose purpose is to detect improper payments.  When improper payments are discovered the RAC will recover those payments from the healthcare provider through an audit process and recoupment efforts.


How Does the Medicare Recovery Audit Contractor Detect Improper Payments?

CMS generally uses a series of edits to screen or catch improper claims before payments are made to the healthcare provider.  There are literally thousands of these types of system edits; however, the sheer volume of claims submissions makes it impossible to detect all of the improper claims prior to payment.  As such, this prepayment review process must be supplemented by a post-payment review process.  The RAC conducts post-payment review of medical records to determine whether there was an overpayment as a result of an improper claim submission.


What is the RAC Review Process?

RACs generally perform one of three types of review.  An automated review simply uses complex software and data analysis to identify improper payments.  A semi-automated review starts with data analysis but the healthcare provider can submit documentation to support or substantiate the claim.  A complex review always entails a review of the medical records to determine whether a payment is proper or not.


How to RACs Get Paid?

Contingency basis.  This gives rise to aggressiveness, diligence and persistence.


What are the Common Causes for Improper Payments?

Services that are not medically necessary as defined by CMS, services that are not correctly coded, and/or the documentation does not support the service.


What Happens if the RAC Identifies an Improper Claim or Claims?

The RAC will notify the provider of the rationale for the determination.  The RAC may allow the provider to submit additional documentation to challenge the determination; otherwise, the healthcare provider will have to appeal the determination through the Medicare appeals process.