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A Guide for Physician Interaction with Recovery Audit Contractors

    • Up until now, Recovery Audit Contractor (RAC) issues have largely focused on inpatient hospital billing issues. However, the RAC for Illinois has begun to creep into issues that directly impact physicians. Anyone who submits even a single claim to a Medicare fee-for-service program is subject to claim review, audit and now RAC review. Therefore, ISMS has prepared this guide to help members:

      1. Understand the RAC process;
      2. Respond to RAC communications; and
      3. Minimize exposure to RAC and related Medicaid medical record review and audit.

      Please note: Nothing provided herein is intended to serve as legal advice for physicians in dealing with a RAC audit.


      The RAC program began as a demonstration program authorized pursuant to Section 306 of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003. The demonstration was conducted in a three-state region (Florida, New York, and California) over a three-year period. The RAC demonstration was charged with identifying past "improper payments" in the Medicare program by reviewing paid claims data to identify alleged over- and under-payments made to providers in the Medicare program.

      The result of that demonstration program was the recovery of nearly $900 million dollars in alleged overpayments.

      The recovery amount from the demonstration was staggering to legislators, and regulators who, in an attempt to curb fraud, waste and abuse in the Medicare program, made this program permanent and extended it to all 50 states, effective in 2010, by including the RAC program in section 302 of the Tax Reduction and Health Care Act of 2006.

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