CMS Expands Nationwide Program to Identify and Reduce "Improper" Medicare Payments
May 2008  

Beginning in 2005, the Centers for Medicare & Medicaid Services (CMS) piloted a Recovery Audit Contractor (RAC) program in California, Florida, and New York. The purpose of the program was to analyze Medicare data and identify Medicare over and under payments to health care providers participating in fee-for-service Medicare. And find, they did—by 2007, $371.5 million in improper Medicare payments were collected from or repaid to health care providers and suppliers in just those three states!

Nationwide Expansion

The RAC program has now been rolled out nationwide. Michigan and Indiana are under review this spring, and Ohio and Illinois will be up in the fall. The entire program will be implemented before January 1, 2010.

What Can You Expect?

Here are a few data points that may be of assistance:

For the improper payments noted above:

• $143.2 million of the overpayments collected was associated with incorrect coding (41.6%)
• $115.5 million of the overpayments collected was associated with Medically Unnecessary services (32.4%)
• $312.8 million of the total $357.2 million in recoveries were from inpatient services (87.6%)
• 90% of hospitals that participated in the RAC demonstration program were impacted by 2.5% of Medicare revenues or less (but what does 2.5% of your Medicare Revenue mean to you?)
• Only 5% of RAC determinations have been were overturned on appeal to date!!

How Should You Prepare

• Be timely in response to RAC inquiries
• Allocate appropriate resources to the process of appealing cases
• Create a database for monitoring all requests and appeals
• Utilize a multi-disciplinary team to provide continuous improvement of clinical documentation