The Medicare Recovery Audit Contractor Program

The Medicare Program’s Recovery Audit Contractor (“RAC”) Program has significantly increased the volume of post-payment reviews conducted on providers, including hospitals.  While proper Medicare payment is critically important, the RAC program has also been very burdensome to providers, especially given that RACs are paid based on a percentage of their overpayment recoveries.  RAC reviews also result in a large percentage of payment denials that are then reversed during the Medicare appeals process.

To properly balance the interests of the RAC program, the FAH believes reforms are needed to the program.  The FAH supports the following policies and reforms regarding RACs:

  • The scope of RAC reviews, and contractor reviews more broadly, should exclude any medical necessity matter involving physician judgment.  Alternatively, CMS should resolve the conflicting standards addressing patient status determinations in the manual provisions by creating one reasonable, balanced standard;
  • RACs should not be permitted to recoup payments from hospitals until after a RAC denial is upheld by an ALJ, and similarly, RACs should not be paid until a final ALJ determination is made upholding their denial;
  • RACs will conduct patient status reviews for providers that have been referred by a Quality Improvement Organization (QIO) as exhibiting persistent noncompliance with Medicare payment policies, and since this RAC activity will materially increase overall appeals volume, especially for patient status denials, these RAC reviews should be delayed by one year;   RACs should be penalized when their post-payment denials are overturned on appeal at a significant rate at the ALJ level;  
  • RACs should be prohibited from issuing determinations for claims when the RAC misses its deadlines for those claims; and,
  • RAC denials should be reviewed and approved by a physician on staff at a RAC before being issued to a provider.

FAH will continue to communicate with CMS as we work toward these reforms.