Recovery Audit Contractor (RAC)
Are You Really Ready for RAC?
With the dwindling Medicare Trust and an onslaught of aging baby boomers, Congress has implemented measures to protect Medicare dollars for future generations. The resumption this year of the Recovery Audit Contract program (RAC) will enable Congress, through the Centers for Medicare & Medicaid Services, to identify improperly billed Medicare claims and to recoup any overpayments to healthcare providers. During an initial RAC demonstration conducted in several states during 2006-2008, targeted healthcare facilities were forced to return nearly $1 billion in overpayments. Given this outcome, can you afford not to be ready?
Medicare and Root Causes
The Medicare Fee-for-Service (FFS) program consists of a number of payment systems with a network of contractors that process over 1.2 billion claims annually from more than one million health care providers, including hospitals, physicians, nursing facilities, labs, ambulance companies, and durable medical equipment suppliers. These contractors are also responsible for educating providers on how to submit accurately coded claims that meet Medicare’s medical necessity guidelines. But this process goes only so far in preventing improper claims.
Improper payments on claims can occur for the following reasons:
- Payments are made for services that do not meet Medicare’s medical necessity criteria.
- Payments are made for services that are incorrectly coded.
- Providers fail to submit documentation when requested, or fail to submit enough documentation to support the claim.
- Payments are made to provider per outdated fee schedules
The magnitude of the problem continues to grow year after year. In January 2008, the Office of Management and Budget (OMB) reported that Medicare is among the top three federal programs in terms of improper payments to providers. Erroneous payments totaled an estimated $10.8 billion in 2007, or 3.9% of claims received.