CMS audit program 'RACs' up millions in overpayments; Congress probes

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Recovery audit contractors (RACs) hired by the Centers for Medicare & Medicaid Services (CMS) have recouped more than $1 billion in  Medicare improper payments to providers, according to a CMS report.

Reasons for the improper payments include incorrect coding, duplicate claims and using an outdated fee schedule.

In a July 11 letter to the Government Accountability Office (GAO), House Energy and Commerce Committee Chairman John Dingell, D-Mich., and Ways and Means Committee Chairman Charles Rangel, D-N.Y., asked the GAO to undertake a study of the Medicare RAC demonstration program. Citing the fact that there had been “numerous reports of problems with the implementation of the program” and the “substantial challenges” that arose during the pilot program, the letter requested that GAO review the program before its permanent implementation begins later this summer.

The RAC program, piloted in 2005, became permanent this year because of its success, according to CMS. RACS are paid a percentage of what they collect. Not surprisingly, 96 percent of the improper payments were overpayments ($992.7 million) collected from providers, while the remaining 4 percent were underpayments ($37.8 million) repaid to providers.

After the RACs took their cut, approximately $693 million was returned to the Medicare Trust Funds between 2005 and March 2008, according to the report.

Of the overpayments, 85 percent were collected from inpatient hospital providers, 6 percent from inpatient rehabilitation facilities and 4 percent from outpatient hospital providers.

The program began in California, Florida and New York, and was recently expanded to Arizona, Massachusetts and South Carolina.