The Medicare Prescription Drug Improvement and Modernization Act of 2003 also directed the HHS department, i.e. Human and Health Services Department, to conduct a 3-year demonstration project using Medicare Recovery Audit Contractors. The purpose was to conclude whether RACs would prove to be a cost-effective means of analysis, while identifying Medicare overpayment and underpayments and recovering the overpayments or not.
Around March 2005, Centre for Medicare Services also launched the 3-year Recovery Audit Contractors demonstration in the states of California, Florida and New York, that was later expanded to the states of Massachusetts, South Carolina, and Arizona, and was finally completed in March 2008.
After some time, CMS also released a report evaluating the 3-year RAC demonstration that was organized in March 2005. The demonstration was quite successful; resulting in RACs correcting approximately $1.03 billion in improper Medicare payments at a cost of $187.2 million, and the overpayments analysis returned $693.6 million to the Medicare Trust Funds. Of the improper payments identified, $992.7 million were overpayments and $37.8 million were underpayments – providers were reimbursed.
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At the completion of Medicare RAC demonstration, the RAC program became a permanent program as enacted in the Tax Relief and Health Care Act of 2006. In fact, the Tax Relief and Health Care Act also directed HHS to expand the RAC program to all 50 states by a deadline of January 2010. In order to accomplish this objective, the Center for Medicare Services also intended to implement the nationwide Medicare Recovery Audit Contractors program in phases, starting around March 2009. Therefore, it is essential to inform Medicare providers about the RAC program, thus enabling them to prepare for its implementation efficiently.
The following aspects of the RAC program are related to the RAC claim review process that reflects current CMS documentation. However, it is also possible to modify or change the RAC program before and after its implementation. Therefore, the providers are always required to investigate thoroughly, and to continue to monitor the implementation of CMS and administration of the RAC program frequently.
To fulfill the purposes of the nationwide expansion of the RAC program, CMS has further divided the United States into four geographical regions with a single RAC serving each respective region and performing the recovery audit services for all Medicare claim types in the region.
As per CMS, the details of contractors for the nationwide RAC program, along with their respective regions, follow:
- Region A – contracted to Diversified Collection Services, Inc.
- Region B – contracted to CGI Technologies and Solutions, Inc.
- Region C – contracted to Conolly Consulting Associates, Inc.
- Region D – contracted to Health Data Insights, Inc.
RACs were also assigned to identify improper payments resulting from various sources like incorrect payment amounts, non-covered services, incorrectly coded services and duplicate services, and other general mistakes.