In the Medicare Prescription Drug, Improvement, and Modernization Act of 2003, Congress directed the Centers for Medicare and Medicaid Services ("CMS") to initiate the Recovery Audit Contractor ("RAC") demonstration project to recover Medicare overpayments and identify underpayments in California, Florida and New York. RACs are paid on a contingency basis, meaning that the contractors receive a portion of what they identify and collect from providers. Due to the perceived success of the program, Congress required that it be implemented permanently nationwide by 2010.

RACs utilize data-mining software to identify those claims with the highest potential for overpayments or underpayments. RAC contractors identify improper payments through either an automated (which is based only on claims data) or complex review process (for which the RAC requests a copy of the medical record). Once an error has been identified, the RAC contractor communicates the determination to the fiscal intermediary, carrier or Medicare Administrative Contractor, who then adjusts the Medicare reimbursement. If dissatisfied with the RAC's decision, the provider may pursue an informal, voluntary discussion with the RAC auditor and/or file a formal appeal with the fiscal intermediary, carrier or Medicare Administrative Contractor.

CMS has announced that RAC automated reviews will commence in June or July 2009 followed by RAC complex reviews for DRG validation and coding in the fall of 2009, culminating in RAC complex reviews for medical necessity in 2010. Despite all of the information that has been published so far about the permanent RAC program, providers continue to have many questions about how to prepare for RAC audits, how the audit process will work, and whether and how to appeal adverse determinations.

Whether your organization is RAC-ready or just getting ready, you will find the Hall Render RAC Roundup a valuable resource for all your RAC questions.