CMS report: RAC program saves nearly $700 million in improper payments

The Centers for Medicare & Medicaid Services released a report offering evidence that the recovery audit contractors (RACs) pilot program is successfully identifying improper payments. The findings will help the agency improve the program as it expands nationwide within 2 years, officials say.

By law, the national program must be implemented by Jan. 1, 2010.

The evaluation report shows that $693.6 million in improper Medicare payments were returned to the Medicare Trust Funds between 2005 and March 2008 after accounting for the dollars repaid to health care providers, the money overturned on appeal, and the costs of operating the RAC demonstration program.

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

CMS initiated a competition for four permanent RACs after the pilot program ended in March 2008. CMS also has developed a strategy to ensure that the RAC program does not interfere with transition from existing Medicare claims processing contractors to the new claims processors, the Medicare Administrative Contractors (MACs). This strategy will allow the new MACs to focus on claims processing activities before working with the RACs, according to CMS.