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But who’s counting. Probably only a few except those healthcare leaders who are taking the RAC initiative seriously. One hundred days could be time well spent in preparing for them. As we say in California, it’s not IF the Big One will shake up the state but WHEN.


Until November 4, everything appeared to be in place for the rollout. The month before, CMS had announced its four permanent RAC contractors. The agency said the selection of the new contractors was based on a best value determination that included a sound technical approach for the level and quality of claim analysis and detail to exceptional customer service, conflict of interest reviews and lowest contingency fee.


The four permanent RAC contractors include the following:

  • Diversified Collection Services, Livermore, Calif., which would initially cover Maine, Massachusetts, New Hampshire, New York, Rhode Island and Vermont;

  • CGI Technologies and Solutions, Fairfax, Va., for Indiana, Michigan and Minnesota;

  • Connolly Consulting Associates, Wilton, Conn., for Colorado, Florida, New Mexico and South Carolina; and

  • HealthDataInsights, Las Vegas, for Arizona, Montana, North Dakota, South Dakota, Utah and Wyoming.


Additional states would be added to each RAC region in 2009, according to the CMS.


Also in October, CMS contracted with Provider Resources, Inc, of Erie, PA, to work as the Recovery Audit Contractor (RAC) Validation Contractor.  The RAC Validation Contractor (RVC) will work with CMS and the RACs to approve new issues the RACs want to pursue for improper payments, as well as perform accuracy reviews on a sample of randomly selected claims on which the RACs have already collected overpayments.

According to CMS, the RVC would be another tool CMS will use to provide additional oversight and ensure that the RACs are making accurate claim determinations in the permanent program. CMS said it was also shifting its traditional approach to fighting fraud by working directly with beneficiaries by ensuring they received the durable medical equipment or home health services for which Medicare was billed and that the items or services were medically necessary.


The 3-year RAC demonstration program in California, Florida, New York, Massachusetts, South Carolina and Arizona collected over $900 million in overpayments and nearly $38 million in underpayments returned to health care providers.


What were the lessons learned from the RAC demonstration?


In September, when Timothy Hill, CFO and Director Office of Financial Management, Centers for Medicare & Medicaid, spoke before a group of healthcare executives in Washington, said RACs collected $980 million from March 2005 through March 2008. Of that amount, 84 percent was collected by inpatient providers, followed by outpatient hospitals, 14 percent.  He said the total cost to run the RAC demonstration was $205.1 million as of July 2008.


Along the way, a number of lessons were learned in how RACs interacted with providers. In response to hospitals’ complaints during the RAC demonstration about being inundated by requests for records, CMS plans to establish a limit on the number of records that can be requested during each 45-day period.


In the new national program, Medicare claims from physicians as well as hospitals will be subject to audits, according to CMS. RACs are expected to choose and review any claim that is likely to contain an improper payment says CMS.


In the final analysis, it’s all about the money.



Chuck Buck

Chuck Buck is the publisher of RACmonitor and is the program host and executive producer of Monitor Monday.

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