Recovery Audit Contractor (RAC) Program

Background

The Medicare Modernization Act of 2003 established the Medicare Recovery Audit Contractor (RAC) program as a demonstration program to identify improper Medicare payments - both overpayments and underpayments.  RACs were paid on a contingency fee basis, receiving a percentage of the improper overpayments and underpayments they collect from providers.

Under the demonstration program that operated from March 2005-March 2008 in California, Florida and New York, South Carolina and Massachusetts, RACs could review the last four years of provider claims for the following types of services:  hospital inpatient and outpatient, skilled nursing facility, physician, ambulance and laboratory, as well as durable medical equipment.  The RACs used proprietary software programs to identify potential payment errors in such areas as duplicate payments, fiscal intermediaries' mistakes, medical necessity and coding.  RACs also conducted medical record reviews.  In July 2008, CMS reported that the RACs had succeeded in correcting more than $1.03 billion in Medicare improper payments.  Approximately 96 percent ($992.7 million) of the improper payments were overpayments collected from providers, while the remaining 4 percent ($37.8 million) were underpayments repaid to providers. 

The Tax Relief and Health Care Act of 2006 made the RAC program permanent and authorized the Centers for Medicare & Medicaid Services (CMS) to expand the program to all 50 states by 2010. Nationwide rollout of the permanent RAC program is underway, with all states scheduled to come on board this year.  

On this site, you will find the latest information on the permanent  RAC program expansion, AHA's advocacy efforts and educational activities.  You also will find information about and links to RACTrac, a Web-based survey and claim level tool that will collect data on a quarterly basis and assist AHA in our advocacy efforts.

If you have additional questions or concerns, please contact the AHA at RACinfo@aha.org.  To be kept up to date on the latest RAC news, if you are an AHA Member, join AHA's RAC News Group.  Click here  to enter your contact information.