The Recovery Audit Contractor program has evolved and expanded in the two years since it was launched nationwide, and it now covers Medicare parts C and D and Medicaid, in addition to the original focus on Medicare parts A and B. Beginning June 1, healthcare providers in Ohio will be subject to “prepayment reviews” by Medicare RACs.

Prepayment Reviews

The “prepayment reviews” will begin as a three-year demonstration program in 11 states, including Ohio. Medicare RACs in those states will review claims before they are paid, to make sure the healthcare provider complied with all Medicare rules. Initially, they will focus on inpatient hospital stays of two days or less – the type of claim that historically results in high rates of overpayment.

It is part of a larger effort by the Centers for Medicare & Medicaid Services (CMS) to eliminate fraud and waste in the Medicare system. According to the CMS’s most recent update, the RAC program has identified $1.45 billion in improper payments since the program went nationwide January 1, 2010 – including $422 million identified in the first quarter of 2012.

Some of those improper payments were actually underpayments, where the healthcare provider was due more money than it originally claimed. But most of the improper payments – about $1.27 billion of the $1.45 billion total – were overpayments, which the Federal government reclaimed through the RACs.

Another subtle change in the program should help providers by issuing demand letters more quickly, since any delay in a RAC issuing the demand could have limited how much time the provider had to file a rebuttal. The demand letters will now be issued by Medicare Administrative Contractors (MACs) rather than RACs.

Contact Us

The Medical Group Management Association has a number of resources available on its website at For more information on how Barnes Dennig can help, visit the Healthcare section of our website or contact me at (513) 241-8313.

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