Preparing for and Living Through a RAC Audit: A Guide for the Clinical Laboratory, in G2 Compliance Report

There is no doubt about it—government enforcement is on the rise and with the expansion of the Recovery Audit Contractor (RAC) program, more providers, including clinical laboratories, will be faced with the proposition of navigating the often complex world of a government audit. In this day and age, RAC audits are virtually impossible to avoid; however, providers can take proactive steps to prepare for and to better address a RAC audit once the government is at the door.

Background on the RAC Program

The Centers for Medicare and Medicaid Services (CMS) first implemented the RAC program in 2005 as a pilot program in five states (California, Florida, Massachusetts, New York, and South Carolina). After three years, the program was expanded to a permanent national program. With the passage of health reform, the RAC program has once again been expanded to include all Medicare claims, not just Part A and B claims. CMS also has begun implementation of Part C and D RACs, as well as the Medicaid RAC program.

Currently, there are four RAC regions, each handled by a different contractor. RACs have historically been tasked by CMS with detecting and correcting past improper payments (over- and underpayments). However, this is changing. Later this month, CMS is expected to implement a new demonstration project that will allow RACs to conduct prepayment reviews on certain types of Medicare claims. The new project will permit RACs to review selected claims to determine compliance with Medicare requirements before Medicare makes a payment to the provider. At least initially, the demonstration project is limited to a list of diagnosis-related groups relative to an observed problem by CMS surrounding short hospital stays.