Interesting RAC stats

The following RAC statistics were gathered from the CMS RAC Status Document FY2007: Status Report on the Use of Recovery Audit Contractors (RACs) in the Medicare Program.

• CMS gave the RACs claims with a total dollar value of $239.6 billion. These were claims that had been paid by the Medicare claims processing contractors between Oct. 1, 2001 and Sept. 30 2006.

 

• RACs identified $371 million dollars of Medicare improper payment during FY2007. Of this amount $247.4 million was returned to the Medicare Trust Funds. The difference between the two figures account for amounts overturned on appeal, as well as the $77.7 million cost to run the RAC program. According to CMS, the RAC program cost 22 cents for each dollar returned to the Trust Funds.

 

• Over 96 percent of these improper payments were overpayments collected from providers and the remaining 4 percent were underpayments repaid to providers. According to CMS, two factors explain why only 4 percent of the improper payments identified were underpayments. First, although the RACs had years of experience in the private sector identifying overpayments, not one of them had experience identifying underpayments before the RAC program. Each RAC had to build the algorithm within their software to identify underpaid claims.

 

• About 85 percent of the overpayments were discovered at inpatient hospitals. CMS attributes this to the fact that RACs are paid on a contingency fee basis and are allowed to establish their own claim review strategies. Therefore the RACs tend to focus on high-dollar claims, such as those from inpatient settings.

 

• Almost half of the improper payments were the result of incorrect coding. The breakdown of overpayments by error type include 42 percent incorrectly coded, 32 percent medically unnecessary, 9 percent had no or insufficient documentation, and 17 percent were categorized as “other.”

 

• Only 5 percent of RAC determinations were overturned on appeal.