The Centers for Medicare & Medicaid Services (CMS) has released its final rule on Medicaid recovery audit contractors (RACs), directing states to coordinate with other contractors, entities auditing Medicaid providers and state and federal law enforcement agencies.

Section 6411 of the Patient Protection and Affordable Care Act (PPACA), enacted on March 23, 2010, directs states to establish programs by Dec. 31, 2010, in which they will contract with one or more RACs, which review Medicaid claims submitted by providers of services for which payment may be made under the state plan or a waiver of the state plan to identify overpayments and underpayments.

According to the rule, CMS will require Medicaid RACs to:

• Hire a minimum of one full-time medical director who is a doctor of medicine or doctor of osteopathy;
• Hire certified coders unless the state determines that certified coders are not required for the effective review of Medicaid claims;
• Educate providers, including notification to providers of audit policies and protocols;
• Require RACs to include customer service measures such as providing a toll-free customer service telephone number;
• Limit the look-back review to a three-year period; and
• Establish a limit on the number and frequency of records requested by a RAC.

In addition, the rule encourages states to adopt specific program elements that are part of the permanent Medicare RAC program. States will have the flexibility to design and implement their RAC programs in the following areas:

• Medical necessity reviews;
• Extrapolation of audit findings;
• External validation of accuracy of RAC findings; and
• Types of claims audited.

The regulations take effect on Jan. 1, 2012.

Read the 140-page rule here.