Recovery Audit Contractor (RAC) Overview

On February 28, 2008, the Centers for Medicare and Medicaid Services (CMS) released the Medicare recovery audit contractor (RAC) status document and a related press release for fiscal year (FY) 2007. Since March 2005, the RAC demonstration project has operated in the states of California, New York, and Florida to determine whether RACs would be a cost-effective means of identifying Medicare underpayments and overpayments, and recovering the overpayments.

According to the status document, RACs identified and corrected $371.5 million in improper Medicare payments during FY 2007 at a cost of $77.7 million, returning $247.4 million to the Medicare Trust Fund. Of the improper payments identified during FY 2007, only 4 percent ($14.3 million) were underpayments repaid to providers.

In June 2008, CMS reported that it had recovered more than $1 billion through the RAC pilot program, 96 percent from overpayments to providers. The RAC pilot program is now a permanent national program. By January 2010, CMS plans to have four RACs in place to audit Medicare payments in all states.

RACs are paid on a contingency fee basis, receiving a portion of the money recovered from providers-a risk-free process for CMS. Therefore, future audits will be more aggressive than the CMS audit programs of the past. RACs use proprietary data mining software to identify claim errors as part of their non-complex reviews. On average, healthcare providers have 60 days to reconcile RAC findings and refund payments made to them by Medicare. The RAC program has created a variety of compliance, cash flow, and administrative burdens for healthcare providers. The top issues facing healthcare providers as a result of the RAC pilot program are:

• DRG and coding errors
• Length of hospital stay
• Non-covered services
• Medical necessity
• Duplicate claims

Recovery Audit Contractor (RAC) Solution

For more than 15 years, Context⁴ Healthcare Inc. has been serving healthcare providers by providing solution products that help speed and perfect claims processing. The ClaimsEditor^® RAC Audit solution is an online tool that allows healthcare providers to upload their claims in various electronic file formats. Healthcare providers are then able to quickly asses their pre-RAC audit risk and liability on claims already processed and paid by Medicare. Furthermore, this process helps healthcare providers reduce their risks and liabilities and keeps their claims processing activities moving forward.

The ClaimsEditor^® RAC Audit solution is the most advanced and comprehensive clinical editing technology available to healthcare providers. It helps to ensure that claims are properly coded and are in accordance with Medicare rules and regulations. The ClaimsEditor^® RAC Audit solution examines the entire claim and identifies procedure to diagnosis mismatches, unbundling occurrences, nonspecific diagnosis codes, global service violations, potential unbilled revenue, and many other problem areas targeted by RAC audits. Healthcare providers are able to quickly asses their audit risks once claims are uploaded to the online tool. Because it is a Software as a Service (SaaS) solution, the ClaimsEditor^® RAC Audit solution requires no hardware investment or additional integration with existing systems, ensuring a rapid return on investment (ROI). The solution enables healthcare providers to:

• Use a secure online portal to correct claims being processed
• Totally eliminate hardware investments and additional systems integration costs
• Analyze and correct a variety of issues with a complete editing system
  • Coding initiative violations
  • Procedure/diagnosis relatedness
  • Code validity
  • Utilization errors
  • Billing oversights
  • Support documentation requirements
  • Global period violations
  • NCD, LCD, DME, Medical Necessity, and many more
• Achieve true "clinical editing" as opposed to "technical editing"
  • Edits are specific to the clinical coding aspect of the claim (for example, unbundling edits, ICD and/or diagnosis/procedure code mismatches, global period violations, complete local coverage determination policies, correct coding initiatives, healthcare provider oversights, regulatory, reporting)
  • Other solutions only edit technical aspects (for example, payor ID is 10 characters instead of the required 12)
• Create, customize, and write rule sets based on RAC audit findings with a flexible and comprehensive rule writer tool
• Make better assessments, manage claim generation, and improve the overall review process with a full set of standard management and financial reports (more than 20 reports)

The ClaimsEditor^® RAC Audit solution enables healthcare providers to mitigate their pre-RAC audit risks and liability and continue ongoing internal audits based on their findings. Providers can upload various types of electronic claim forms to a secure online site at their convenience.

As healthcare spending continues to increase dramatically each year, additional government regulations will be imposed. Strict reimbursement guidelines will grow exponentially more complex due to the Medicare RAC program. The ClaimsEditor^® RAC Audit solution has proven to be a valuable tool and an indispensable resource for healthcare providers struggling to stay compliant with rapidly changing rules and regulations.