CMS Announces Transition Process for RAC Contracts


On February 18, 2014, CMS announced that it is in the procurement process for the next round of Recovery Audit Contractor (RAC) program contracts and that the transition to new contracts will include a pause in RAC audits in the interim. CMS highlights the following dates of importance for providers:

  • February 21 was the last day a RAC may send postpayment Additional Documentation Requests (ADRs);
  • February 28 is the last day a Medicare Administrative Contractor (MAC) may send prepayment ADRs for the Recovery Auditor Prepayment Review Demonstration; and
  • June 1 is the last day a RAC may send improper payment files to the MACs for adjustment.

Following the transition, however, RAC operations will resume and auditors will be able to audit claims for dates of service during the period covered by the pause in operations. 

CMS published a list of five program changes that will be effective with the next RAC contract awards, including the following:

  1. RACs must wait 30 days to allow for a discussion prior to sending the claim to the MAC for adjustment, thus allowing providers to initiate a discussion as well as appeal the claim at issue.
  2. Within three days of receiving a discussion request, RACs must confirm receipt with the provider.
  3. RACs will not receive any contingency fee earned on a denial until the second level of appeal is exhausted and the denial is upheld.
  4. CMS is establishing revised ADR volume limits that will be diversified across claim types (e.g., inpatient, outpatient).
  5. CMS will require RACs to adjust the ADR levels in line with the provider’s denial rate, thus allowing for providers with low denial rates to have lower ADR limits and providers with high denial rates to have higher ADR limits.  CMS does not say, however, how it will define a “low” and “high” denial rate.

CMS’s RAC update is available here and CMS’s list of “RAC Program Improvements” is available here.    

Learn more on RAC related information from the King & Spalding Health Headlines published on February 17, 2014 on More Than 100 House Members Urge HHS to Reform RACs and January 21, 2014 on Congress Passes FY 14 Spending Bill, Includes Important Healthcare Provisions.

The King & Spalding RAC Coalition continues to press for fundamental and lasting RAC reform.  The Coalition is an ad-hoc group of hospital clients created in April 2013 in an effort to communicate jointly to CMS and Congress the need for meaningful and common-sense reforms to the RAC program.

Reporter, Juliet M. McBride, Houston, +1 713 276 7448,

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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