Evolution of Recovery Audit Contractor (RAC)

  • Date: June 15, 2010
  • Source: Admin
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With the mission to recover erroneous Medicare payments paid to the healthcare providers under Free-for-Service Medicare plans, the Recovery Audit Contractor program was launched through the Medicare Modernization Act of 2003.  However, this program became permanent for all states in Jan 1, 2010 by the United Department of Health and Human Services (DHHS).

Evolution of RAC

The United States Congress, under section 306 of the Medicare Modernization Act of 2003, directed the DHHS to conduct a 3-year demonstration program in order to identify and rectify improper payments in the Medicare Free-for-Service. Following the direction, DDHS through its Center of Medicare and Medicaid Services (CMS) initiated the program RAC in 2005 which helped them to track the actual work of auditing, identifying false Medicare payments and reviewing the entire process. 

Initially, RAC was launched in New York, California and Florida. However, by 2007 the program expanded in Massachusetts and South Carolina. By the end of its three year demonstration, RAC recovered around $693.6M on behalf of CMS. 

How RAC Works:

With their own proprietary software to study claims made in any or every region of the U.S., RAC will determine outliers based on statistical analysis.

At the time of inception, RAC was hospital-focused, but from now on RAC may also review claims from any provider of service billing to Medicare Part A or Part B.


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