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Department of Health Care Finance - DHCF

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CMS Mandated Provider Audits

Recovery Audit Contractor (RAC)

The  RAC program was created through the Medicare Modernization Act of 2003 (MMA) to identify and recover improper Medicare payments paid to healthcare providers under fee-for-service (FFS) Medicare plans. The United States Department of Health and Human Services (DHHS) is required by law to make the program permanent for all states by January 1, 2010 under section 302 of the Tax Relief and Health Care Act of 2006.  Medicare Recovery Audit Contractors (RACs) are private entities with which CMS contracts to identify and collect improper payments made in Medicare’s fee-for-service program. Medicare RACs are paid on a contingency fee rate ranging between 9 and 12 percent of the amount collected. The Affordable Care Act expanded the RAC program to Medicaid and requires the states Act to require States to establish programs by December 31, 2010, to contract with 1 or more Medicaid RACs to audit Medicaid claims and to identify underpayments and overpayments. States must fully implement their Medicaid RAC programs by April 1, 2011.