OIG Releases Study on Medicare RAC Performance, Says Contractors Recovered $1.3 Billion in FYs 2010 and 2011

by King & Spalding

OIG recently published a study analyzing the performance of Medicare Parts A and B Recovery Audit Contractors (RACs) in fiscal years (FYs) 2010 and 2011.  OIG said that it conducted the study to evaluate CMS’s oversight of RAC performance and to assess CMS’s responses to certain vulnerabilities in the Medicare program and CMS’s actions with respect to RAC-referred potential fraud. 

RACs contract with CMS and are tasked with identifying improper payments—both overpayments and underpayments—for Medicare Part A and B claims.  RACs are also required to refer potential fraud to CMS.  CMS pays RACs a percentage of payments recovered from providers in instances of overpayments and/or a percentage of payments returned to providers in instances of underpayments.

To conduct its study, OIG pulled data and other information concerning the four RACs in operation in FYs 2010 and 2011 from a number of sources.  Those sources included RAC Data Warehouse files on improper payments; CMS data regarding vulnerabilities stemming from RAC-identified overpayments; CMS files regarding RAC referrals of potential fraud; and CMS’s annual RAC performance evaluations.  Some of OIG’s findings included:

  • Out of 2.6 million claims reviewed in FYs 2010 and 2011, RACs identified approximately 1.3 million claims involving improper payments.  These claims amounted to nearly $1.3 billion, and, of this amount, RACs recovered or returned $903 million ($768 million was recovered and $135 million was returned).  Inpatient hospitals and physician/non-physician practitioners accounted for 93 percent of all recovered or returned improper payments in FYs 2010 and 2011.
  • During the study period, providers appealed only a small number of RAC-identified claims with overpayments.  In FYs 2010 and 2011, RACs identified about 1.1 million claims with overpayments and providers appealed 65,198 of them (or about 6 percent).  Almost half (44 percent) of those appealed claims were overturned in the providers’ favor.
  • CMS took corrective action to address the majority of vulnerabilities resulting in improper payments.  According to CMS guidance, a vulnerability is any specific issue associated with more than $500,000 in improper payments.  In FYs 2010 and 2011, CMS identified 46 vulnerabilities and eventually took action to address 28 of them.  CMS’s corrective actions included contractor technical direction letters, implementing computerized edits to block improper payments, and mailing educational letters to providers.  As of June 2012, CMS had not taken corrective action with respect to the remaining 18 vulnerabilities identified in FYs 2010 and 2011.  According to the report, CMS explained that at least one of those vulnerabilities—underpayments made to multiple providers—was considered to be a low priority, but that it intended to take action after addressing other higher-priority vulnerabilities.  OIG also found that CMS did not evaluate the impact of the actions it implemented for any of the 28 vulnerabilities for which CMS took corrective action, despite CMS policy stating that it is responsible for carrying out such evaluations.
  • In FYs 2010 and 2011, CMS received a total of six RAC fraud referrals.  According to the study, CMS had not taken action to address any of those referrals as of November 2012.
  • With respect to CMS’s performance evaluations, OIG noted, among other things, that CMS did not describe the RACs’ ability, accuracy, or effectiveness in identifying improper payments in four of the eight performance evaluations it reviewed.  OIG added that none of the evaluations linked the RACs’ proficiency in identifying improper payments to performance evaluation metrics.

In light of its findings, OIG recommended that CMS (1) take appropriate action to address the vulnerabilities pending corrective action and evaluate the effectiveness of all implemented corrective actions; (2) make sure that RACs refer all appropriate cases of potential fraud; (3) review and respond to RAC referrals of fraud in a timely fashion; and (4) introduce new performance evaluation metrics to better track and improve RAC performance.  In CMS’s response, it concurred with OIG’s first, second and fourth recommendations.  With respect to OIG’s third recommendation, CMS did not say whether it concurred but stated it had reviewed the six referrals of potential fraud referenced in the report.

Reporter, Greg Sicilian, Atlanta, +1 404 572 2810, gsicilian@kslaw.com.

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.

© King & Spalding | Attorney Advertising

Written by:

King & Spalding

King & Spalding on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
Privacy Policy (Updated: October 8, 2015):

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.


JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at info@jdsupra.com. In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at: info@jdsupra.com.

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.