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RACs are effective, but CMS should provide better oversight, says OIG report

September 4, 2013
by Pamela Tabar, Editor-in-Chief
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Federal initiatives to audit providers for Medicare billing errors and fraudulent activity are making a difference, but the Centers for Medicar & Medicaid Services still needs to iron out some kinks in the system, notes a new report released today from the Department of Health and Human Services Office of Inspector General (OIG).

More than 1 million cases received recommendations for Medicare payment denial in 2010 and 2011, almost half of the total cases examined by the four Medicare-hired Recovery Auditor Contractors, known as RACs. The claims flagged by RACs during this period totalled $1.3 billion in improper payments. Although very few providers (only 4 percent) appeal the RAC decisions, about 44 percent of appealers win their cases, the report notes.

While urging the RACs to look harder for fraudulent activity, the OIG report scolded CMS for not following up on cases and for not measuring the effectiveness of the RAC interventions. CMS also needs to hone communications with RACs and provide better oversight and training for them, the report stated.

“CMS took corrective actions to address the majority of vulnerabilities it identified in FYs 2010 and 2011; however, it did not evaluate the effectiveness of these actions. As a result, high amounts of improper payment may continue,” the report stated. “Given the critical role of identifying improper payments, effective oversight of these contractors’ performance is important… The [study] indicated that RACs had not received formal training and guidance from CMS to help them identify fraud. OIG recommended that CMS require RACs to receive mandatory training on the identification and referral of fraud. CMS concurred with this recommendation.”

The RAC program has been in use since 2006, following a demonstration project that unearthed some $900 million in provider underpayments and fraud within Medicare Part A and Part B claims.