The complexity of the operations within the healthcare dimension requires well-structured processes to ensure the ideal provision of services. As such, policymakers should aim at making the necessary enhancements to the healthcare system to ensure its effectiveness in every domain. The Recovery Audit Contractor (RAC) demonstration project is a program that was introduced with an aim of streamlining the healthcare services by correcting improper Medicare payments. Herein, the history, relevance, and processes of the RAC process in relation to healthcare organizations is evaluated.
History and Purpose of RAC Demonstration Project
The Recovery Audit Contractor demonstration project commenced from the financial year 2005 to 2008 as a demonstration project (Willis, 2016). The program used Recovery Audit Contractors to review, identify and audit inappropriate Medicare payments. The Centers for Medicare and Medicaid Services (CMS) instituted the program, which despite its initial success in all fifty states, it became a controversial program (Willis, 2016). The program was initiated to identify and rectify improper Medicare payments by detecting the underpayments and overpayments on healthcare claims (Harrington, 2021). As part of the program’s success during the initial period of its inception, the Medicare Trust Fund received over USD 900 million in overpayments, and underpayments of about USD 38 million were repaid to the healthcare providers (Willis, 2016). Following RAC’s massive success, the secretary of the Health and Human Services Department instituted the program after an authorization by the congress to retrieve overpayments linked to the services offered under Medicare part A or B.
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Process of the Recovery Audit Contractor
The Affordable Care Act (ACA), under Section 6411, expanded the program to constitute the Medicaid program (Harrison & Barksdale, 2013). As such, the CMS believes that the RAC is cost-effective in ensuring that healthcare providers receive the right payments, thus ensuring the protection of the Medicare Trust Fund. The RAC audit process involves nine steps which are complicated and require an extreme level of technical expertise (Harrison & Barksdale, 2013). Based on the outcome of the demonstration project, the RAC audits led to a significant collection of overpayments from numerous healthcare providers (Harrington, 2021). The CMS data indicated that the overpayments collected from the financial year 2010 to the first six months of the financial year 2012 had increased by USD 910.8 million (Harrison & Barksdale, 2013). According to Harrison & Barksdale (2013), RAC collections through its audit process are immensely significant over time. Consequently, these collections conveyed a significantly adverse effect on the US hospitals’ profitability.
Also, the complexity of the RAC audit process augmented a serious burden on the healthcare providers due to the significant data gathering for audits which involved preparing appeals, pulling records, updating their staff on the current RAC program, and copying charts. Data gathering is usually the first step in the RAC audit process which leads to some healthcare voicing their concerns over inadequate expertise in handling the RAC audit processes and appeals. In consideration of the inconveniences and disruptions caused by the RAC processes, the CMS began making an overhaul on the RAC processes in January 2015 (Willis, 2016). Some of the enhancements of the RAC processes include the introduction of the audit and appeal to fairness and integrity. The legislation aimed at improving the Medicare appeals and audit processes to shield the healthcare providers from the inefficacies of the past processes.
Conclusion
The outcome resulting from the RAC has yielded mixed reactions by the healthcare providers, the CMS, and the Administrative Law Judge (ALJ) in the appeal processes. The RAC has been effective since its initiation as a demonstration program from FY 2005 to 2008. However, the CMS should continually review the program to enhance its efficacy around every organization, just as it significantly yields benefits for the Medicare Trust Fund in returning overpayments.
References
Harrington, M. (2021). Health Care Finance and the Mechanics of Insurance and Reimbursement (2nd ed.).
JP, H., & RM, B. (2013). The impact of RAC audits on US hospitals. Retrieved 11 March 2021, from https://pubmed.ncbi.nlm.nih.gov/24003757/
Willis, L. (2016). Recovery Audit Contractor (RAC) Part 1: The History Of RAC. Retrieved 11 March 2021, from https://www.healthicity.com/blog/recovery-audit-contractor-rac-part-1-the-history-of-rac
