Is RAC ready to roll?

As the federal government gears up for a major expansion of a controversial audit program, industry experts are skeptical that the CMS will have the resources to pull this off by the end of the year.

Agency executives themselves seemed uncertain at a Senate hearing last week, admitting that challenges lay ahead in expanding the Recovery Audit Contractor program to all of Medicare and to Medicaid by Dec. 31.

The Recovery Audit Contractor program allows third-party auditors hired by the CMS to keep 9% to 12.5% of provider payments they identify as improper. It now conducts audits only in fee-for-service Medicare, but provisions in the new reform law call for an expansion of the RAC program to Medicare Parts C and D and Medicaid by Dec. 31.

But the program has yet to be instituted in all 50 states just in the fee-for-service domain, which leaves agency officials to speculate whether more contractors will be needed—or if the current four RAC contractors will need more staff to conduct audits across Medicare and in all of the Medicaid state programs.

Such a task will not be easy, said Deborah Taylor, director and chief financial officer of the CMS' Office of Financial Management, when she testified before a subcommittee of the Senate Homeland Security and Governmental Affairs Committee.

Medicaid in particular poses a challenge, as the CMS will have to deal with more than 50 different programs, with most states in need of resources to start up RAC-like audits.

Fundamental problems with the RAC program need to be addressed, according to the American Hospital Association. For example, the CMS has yet to implement corrective actions to address 35 of 58, or 60%, of the vulnerabilities for improper payments identified in the RAC pilot project, said AHA spokesman Matt Fenwick, who highlighted recent findings by the Government Accountability Office.

Others are skeptical of the tight time frame. The RACs for the most part “haven't even started up the medical necessity reviews yet,” said Nancy Hirschl, president of consultancy Hirschl & Associates.

Contractors, though, seem confident. “We are prepared to take on additional work, and prepared to help the CMS” with the expansion, Lisa Im, CEO of Performant Financial Corp., the parent company to Diversified Collection Services, told the Homeland Security panel.