Medicaid Recovery Audit Contractor (RAC) Overview

The Centers for Medicare & Medicaid Services (CMS) established the Medicaid Recovery Audit Contractor (RAC) program as a method for States to promote the integrity of the Medicaid program, pursuant to a requirement of the 2010 Patient Protection and Affordable Care Act (PPACA). Medicaid RACs will review claims for which payment has been made under Section 1902 (a) of the Social Security Act or under any waiver of the State Plan to identify underpayments and overpayments and recoup overpayments for the states. [42 CFR 455.506(a)]

The CMS Medicaid RAC final rule includes a number of provisions that respond to key industry concerns, including but not limited to:

  • Medicaid RACs are limited to a three-year look-back period.
  • Medicaid RACs must coordinate their RAC efforts with other auditor programs.
  • Medicaid RACs are prohibited from auditing claims that other State agencies or contractors have already audited for the same issue.
  • Medicaid RACs are required to notify providers of overpayment findings within 60 days.
  • States are required to set limits on medical record requests.
  • Medicaid RACs must employ at least one medical director.

Indiana Medicaid RAC

The Office of Medicaid Policy and Planning (OMPP) has contracted with Truven Health Analytics to provide a fraud and abuse detection system (FADS) to detect and prevent fraud, waste, and abuse in Medicaid billing. The OMPP will implement the CMS-required RAC program through the Truven Health Analytics contract. Truven Health Analytics has subcontracted with Health Management Systems (HMS) to deliver the RAC program.

Indiana Medicaid RAC Focus

The focus of the RAC includes credit balance audits and complex audits of acute care hospitals. The complex audits are beginning with medical record reviews to validate Diagnosis-Related Grouping (DRG) billing by acute care hospitals. In addition, the RAC will perform financial audits of long-term care (LTC) facilities.

The following presentations provide an update of the acute care credit balance audits being conducted and an explanation of the DRG validation audits, as well as an introduction of the LTC financial audits.

Credit Balance Audits

Credit balance audits are one part of the Medicaid payment integrity reviews under the RAC program. The objective of these audits is to identify and recover overpayments. In the initial stages, the RAC program will focus on credit balance audits of hospital fee-for-service claims.

More Information regarding Credit Balance Audits:

DRG Validation Audits

DRGs are assigned using the principal diagnosis, additional diagnoses, the principal procedure and additional procedures, age, sex, and discharge status. The purpose of DRG validation is to ensure that diagnostic and procedural information, and the discharge status of the member, as coded and reported by the hospital on its claim, matches both the attending physician's description and the information contained in the member's medical record.

More Information regarding DRG Validation Audits

Long Term Care Financial Audits

The Indiana RAC LTC audits include all providers enrolled as Provider Type 03 - Extended Care Facility, which includes the following specialty codes:

  • 030 - Nursing Facility
  • 031 - Intermediate Care Facility for the Mentally Retarded (ICF/MR)
  • 032 - Pediatric Nursing Facility
  • 033 - Residential Care Facility
  • 034 - Psychiatric Residential Treatment Facility (PRTF)

More Information regarding Long Term Care Financial Audits