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The Recovery Audit Contractors (RACs) identify, correct, and collect Medicare payments improperly paid to providers. The RAC program was created through a federal law known as the Medicare Modernization Act of 2003 (MMA). It was originally a three-year demonstration project that was made permanent by the Tax Relief and Health Care Act of 2006. The program was scaled back in January 2016, with RACs only able to audit 0.5% of hospital claims within a 45-day period -- down from the original 2% -- and will no longer audit records going back three years.
This may come as a relief for hospitals that have felt financial and administrative burdens due to RAC audits. The American Hospital Association and other healthcare organizations have lobbied for changes to the RAC program. Some hospitals reported having spent hundreds of thousands of dollars in appeals, audits, and denials from the program.
To read more about the RAC program, please visit the CMS website at https://www.cms.gov/research-statistics-data-and-systems/monitoring-programs/medicare-ffs-compliance-programs/recovery-audit-program/.