Recovery Audit Contractor (RAC) Program

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 are paid on a contingency fee basis, receiving a percentage of the improper overpayments and underpayments they collect from providers.

Under the demonstration program operating in California, Florida and New York, 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 use automated software programs to identify potential payment errors in such areas as duplicate payments, fiscal intermediaries' mistakes, medical necessity and coding.  RACs also conduct medical record reviews.  During fiscal year 2006, the RACs collected $69 million in overpayments and found $3 million in underpayments.  An additional $232 million was identified for collections, but the final outcome has yet to be determined.

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.  The agency has already expanded RAC review to Massachusetts and South Carolina, with plans to expand RAC review to several more states in 2008 and 2009, and all states by 2010.

On this site, you will find the latest information on the RAC program expansion and the AHA's advocacy efforts and educational activities. You also will find information about and links to RACTrac, a new Web-based tool to help us create a snapshot of RAC activity so that we can better tailor our advocacy efforts to meet hospitals' needs.

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.