The Medicare Recovery Audit Contractor (RAC) program demonstration identified more than $1.03 billion in improper Medicare payments during its three-year demonstration, which ended in 2008, according to the final report on the demonstration issued by CMS. Ninety-six percent of the improper payments were overpayments.
Under the program, the Medicare Trust Funds have received more than $693.6 million as of March 27, 2008. A break down of the overpayments by provider type shows that 85 percent of overpayments were collected from inpatient hospital providers, 6 percent were from inpatient rehabilitation facilities, and 4 percent were from outpatient hospitals.
The three year-demonstration project ran from 2005 to March 2008. The project ran in three states: California, Florida, and New York. Under the Tax Relief and Health Care Act of 2006 (TRHCA) (PubLNo 109-432), the RAC program will be rolled out to all 50 states by 2010. CMS is in the process of approving new RAC contractors for the states that will become part of the program in 2008.
Appeals
As of March 27, 2008, providers had chosen to appeal 14 percent of all RAC determinations; only 4.6 percent have so far been overturned on appeal. Providers have 120 days to appeal from the date of a claim adjustment, and CMS anticipates that most first-level appeals of RAC determinations will have been filed by July 1, 2008
Information gained from RACs
To prevent future improper payments, CMS may implement the RAC program's service specific findings to establish educational activities and system edits for Medicare providers. These activities and edits will assist providers in maintaining Medicare coding and medical necessity policies.
The report noted that the RAC demonstration showed that RACs identified a large volume of improper payments and that the RAC program's cost was dwarfed by the overpayments collected. Some changes that were added to the RAC program as it rolls out to all states include sharing new issues regarding overpayments with provider organizations, requiring each RAC to hire a physician medical director and certified coders, and requiring RACs to return contingency fees when payment determinations are overturned at the appellate level.
Source: RAC Demonstration Report, July 11, 2008.
For more information on this and related topics, consult the CCH® Medicare and Medicaid Guide.
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