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CMS to Hold Open Door Forum on Part B RAC Audits

April 14, 2009:

Part B providers can no longer deny that they will be undergoing scrutiny by Recovery Audit Contractors (RAC audits)—the Centers for Medicare and Medicaid Services will be holding an Open Door Forum on April 14 from 2:00-3:30 PM ET. The purpose of this special open door forum is to discuss the program and introduce the contractors. For more information about how to participate, go the CMS website at http://www.cms.hhs.gov/OpenDoorForums/23_ODF_PNAHP.asp

A three-year RAC demonstration program was mandated by the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA), to find and correct improper Medicare payments paid to health care providers. The program started in California, Florida, and New York in 2005; these states have the largest number of Medicare claims. In 2007 the demonstration program expanded to include Massachusetts, South Carolina, and Arizona. The Tax Relief and Healthcare Act of 2006 made the RAC program permanent and required a nationwide RAC program by 2010. CMS has begun the expansion process by initiating a competition for four permanent RACs.

Under the demonstration program, the RACs were paid based on the amount of the improper payments they collect. There is some concern that paying RACs a contingency fee may have influenced their judgment; however, CMS believes that the contingency-fee-based payment system correctly aligns incentives among providers, CMS, and the RACs. Although information on the contingency fees is proprietary and is, therefore, not disclosed, CMS reports paying more than $71 million in RAC Contingency Fees for 2007. According to the Agency the RAC program has cost only 20 cents for each dollar collected.

RACs may not develop or apply their own coverage, coding, or billing policies but rather they must follow Medicare coverage, coding, or billing policies. RACs, like Medicare claims processing contractors (MACs), use medical personnel such as nurses, to review claims, and each RAC has a physician Medical Director to oversee the medical record review process. Although certified coders were not required in the demonstration program, each RAC in the permanent program must have certified coders.

Deborah C. Hall
New Product Subject Matter Expert


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