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Bill Introduced to Reform the RAC Program

Recently, United States Representative Sam Graves introduced the bill HR 2156, otherwise known as the Medicare Audit Improvement Act of 2015. Currently pending, the Medicare Audit Improvement Act addresses the aggressive nature of recovery audit contractors (“RACs”). Since the beginning of the RAC program, contractors have been paid on a contingency fee basis, thus incentivizing them to find improper payments.

The Medicare Audit Improvement Act is intended to curb such practices. The bill would eliminate the contingency fee for RACs and replace it with a flat fee rate–similar to other Medicare integrity contractors. Additionally, the bill would reduce a RAC’s payment at the end of each fiscal year if the RAC had a high overturn rate resulting from the Medicare appeals process. The bill defines a “high overturn rate” as 10% or more in a contract year. Under these circumstances, the RAC’s payment would not only be reduced, but would also have increasing levels of reduction. The Center for Medicare and Medicaid Services (“CMS”) would be required to calculate the fee reduction for each RAC within six months at the end of each contract year. CMS would have the discretion to determine how to apply the reduction to a RAC’s fees–either a per-claim reduction or a reduction in the overall fee paid.

The Medicare Audit Improvement Act also includes a measure that would create a statutory exception for the timely filing requirements for Part B rebilling. Currently, hospitals are permitted to rebill denied Part A inpatient stay claims as Part B outpatient claims, but are required to do so within one year of the date of service (“DOS”). The exception would allow these denied Part A claims to be rebilled under Part B within 180 days after a final determination by the contractor or 180 days following the exhaustion of the provider’s appeal rights.

Lastly, the Medicare Audit Improvement Act would implement statutory language that limits a RAC’s scope of review for inpatient hospital claims to only the information that the admitting physician had at the time the admission decision was made. Historically, RACs often rely on information gathered after the admission decision to argue that the admission was not medically necessary (e.g., RACs will cite the fact that there were no complications during the hospital stay).

Wachler & Associates will continue to monitor the Medicare Audit Improvement Act as it moves through the legislative process. Subscribe to our health law blog to stay updated on the latest RAC news. Wachler & Associates regularly defends providers against audit claim denials, and counsels entities on the best practices for proactively preparing for an audit. If you or your entity needs assistance in appealing Medicare claim denials, please contact an experienced healthcare attorney at 248-544-0888 or email at

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