What Is a RAC Audit?

Medicare and Medicaid often do not completely reimburse doctors, hospitals and other healthcare providers. In addition, the opposite is also true, wherein some health care providers overbill or commit fraud against the Medicare and Medicaid system. The purpose of an RAC audit is to protect the Medicare and Medicaid system from this potential fraud.

Identification

• RAC is an acronym for recovery audit contractor. RAC represents an effort to audit health care providers on behalf of Medicare and Medicaid to ensure health care providers are not overbilling Medicare and Medicaid. The Centers for Medicare & Medicaid Services (CMS) oversee the programs.

Functions

• The CMS selects recovery audit contractors to perform audits at provider facilities. The CMS pays RAC contractors on a contingency basis, which means they are only paid when they find overpayments or potential fraud. For this reason, health care providers must have their records and accounting system in order; this protects them from an audit in which RAC contractors may be extremely aggressive in looking for problems.

Benefits

• According to Shoreline Records Management, "in 2007, $10.8 billion dollars were identified as improper payments." The RAC audit was instituted to protect the Medicare system from this kind of fraud, waste and abuse.

Considerations

• Third-party organizations provide audit preparation software to help health providers organize their records and prepare for an RAC audit. Given the aggressive nature of an RAC audit, health care providers may wish to consider consultation.