The New Year has brought forth a new audit challenge facing providers. The Medicaid RAC program officially reached its implementation date as of Jan. 1, 2012. Because there was very little guidance on the provider level leading up to this date, most hospitals and physicians find themselves in the dark with regard to the Medicaid RAC program, save for what appeared in the Final Rule released back in September 2011.


On Dec. 30, in order to fill in the blanks CMS released an 18-page FAQ document addressing the Medicaid RAC program and what can be expected. In all, there are 53 questions and answers within the pages. As is my custom, I did some research so everyone can concentrate on something else. I’d like to go in semi-numerical order working from the document, covering what I see as the pertinent points, as some of the FAQs have information that is duplicative compared to the Final Rule.


FAQ No. 5 asks what a state can do to prepare providers for Medicaid RAC audits and whether physicians will need to implement new compliance procedures due to the launch of the program. The answer was that states should be “as informative as possible” about implementation, with the minimum degree of information including the name of the RAC contractor with contact information, when the RAC will begin to identify improper payments and “a general description of the scope of (the state’s) RAC program.” From what I’ve seen, while more than 50 percent of states have an identified Medicaid RAC contractor, information on the contractors originating from the Medicaid programs themselves is virtually nonexistent up to this point.


The second part of FAQ No. 5 was answered with what I found to be curious wording: “We do not expect that providers will have to undertake any major activities to prepare for Medicaid RACs.” We all have seen the glaring weaknesses of the Medicare RAC program, and if current appeal trends continue, we are in for about five solid years of endless paper-shuffling. For CMS once again to soft-peddle the anticipated effects of expanding the process to Medicaid borders on irresponsible.


FAQ No. 10 was the next to catch my eye. Already there are auditing entities that have earned more than one state RAC contract. This particular FAQ focused on the need for unique contractor medical directors licensed in the states covered by these contractual agreements. To illustrate, let’s say Company A has contracted with states B and C to do Medicaid RAC work. Because these are two separate contracts, Company A would have to hire two full-time medical directors, with one being licensed to practice medicine in State B and the other being licensed in State C. However, the FAQ does make one distinction. Continuing the previous example, if states E, F and G wish to be bundled into one contractual arrangement with a contractor, more than one medical director may not be necessary. CMS indicates that the volume of claims in this particular arrangement could be a determining factor in how many medical directors are needed.


FAQ 13 No. asks “Who’s The Watcher?” The question essentially asks how CMS will monitor and evaluate Medicaid RAC programs. CMS states that it will conduct program integrity reviews, perform a program integrity assessment for each state and review overpayments collected, with states being required to “comply with reporting requirements as specified by CMS.” Note the big divergence from Medicare in this case. There is no single validation contractor to judge the work product of the Medicaid RACs, as is employed on the Medicare side. I’ve spoken about the comic nature of RAC accuracy scores in the last report to Congress on RAC activities, so I am on the fence as to whether this can be seen as a good or bad thing at the present time.


This issue dovetails nicely into FAQ No. 17, which asks whether states are required to perform quality assurance of the RAC work product. States “should” determine how they will validate the accuracy of overpayment determinations and include it in the statements of work in their respective RAC contracts, according to the listed answer. Given that there are 50 states and five territories, all with different ways of measuring effectiveness, we should not expect one overarching accuracy score for the Medicaid RAC program as a whole, but rather dozens of bits of individualized data leading to a general conclusion.


FAQ No. 19 is a question asking how CMS will enforce multiple integrity efforts, in addition to those of the Medicaid RACs, and how duplication of efforts can be avoided. With whitewash brush in hand, CMS states that it “intend(s) to make every effort to incorporate and consolidate questions related to program integrity into scheduled reviews so as not to overburden states.” To be clear, there is nothing in that statement that gives any indication at all as to how CMS will avoid duplicitous integrity reviews, thereby reducing provider burden. The answer itself seems to be the new standard by which to measure a “non-answer.”


There were several FAQs about potential conflicts of interest, notably in cases where a RAC contractor already performs an integrity function in a certain state. CMS warns states to be cognizant of conflicts that may reveal themselves, but does not specifically ban any entity from performing multiple integrity functions for a single state.



I’ll wrap up the review with FAQ No. 28, which is of particular interest at the moment: “What happens if a state does not receive any responses to its RAC request for proposal?” CMS presents the options of either requesting an exception to the program or “consider(ing) partnering with other states in order to attract a RAC.” (I call this “The Wingman Option”). One example of this approach can be found in my home state of Wisconsin, where to date a Medicaid RAC contract has not been finalized and discussion has shifted to partnering with a neighboring state in similar straits. Outside of this case, there are a few states that have requested exceptions to the RAC program, according to the Medicaid RACs’ At-A-Glance website created by CMS, but it is unclear whether these states have done so based on inability to find a RAC contractor.


I recommend downloading the FAQs document, reviewing what I have omitted and keeping it safely on file until such time as certain states catch up to the implementation deadline date, now passed.


About the Author


Paul Spencer is the compliance officer for Fi-Med Management Inc., a national physician practice financial management company based in Wauwatosa, Wis. Paul has more than 20 years of experience across all facets of healthcare billing, including six years spent with insurance carriers. In his current role with Fi-Med he acts as a physician educator on issues related to E/M level of service and documentation audits by CMS and other outside entities. Paul has carried the CPC and CPC-H credentials from the American Academy of Professional Coders since 1998.


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CMS’s 18-page FAQ addressing the Medicaid RAC program can be download at


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