The demonstration RACs referred only two cases of potential fraud to CMS. One RAC submitted a report regarding rehabilitation service providers who were suspected of altering medical records after services were rendered. A second demonstration RAC notified CMS about multiple claims involving IV Immune Globulin (IVIG) treatments. CMS referred the issues to the Program Safeguard Contractor (PSC) for further review (note: PSCs now are becoming Zone Program Integrity Contractors, or ZPICs).


In defense of the demonstration RACs, CMS stated that the organizations were not instructed nor trained to report fraud to CMS. However, two of the demonstration RACs clearly did their own internal training regarding fraud identification and referral.


As a result of this study, the Office of the Inspector General made several recommendations to CMS regarding the implementation of a fraud referral process within the permanent RAC program.


  • CMS should follow up on the two referrals made by the demonstration RACs.


  • CMS should develop a database to track fraud referrals from the current RACs.


  • CMS should provide mandatory training to the permanent RACs on the identification and referral of possible fraud. CMS also should develop guidelines to assist the RACs in determining when to refer cases of potential fraud for further investigation.


CMS has agreed with all of the OIG recommendations. It already has provided training to the RACs on fraud identification and asked for additional training to be provided by the Department of Justice (DOJ) and the Office of Inspector General (OIG).


Once CMS receives a RAC referral of potential fraud, it will determine if the case warrants further investigation by PSCs, ZPICs or other law enforcement agencies. In addition, RACs now are required to have their own agreements with PSCs/ZPICs to develop formal and informal processes for referring cases that may indicate fraud.

It seems clear from this report the RACs will be on the lookout for potential cases of fraud and will refer such cases for further investigation and possible legal action.

About the Author

Cheryl E. Servais, MPH, RHIA, has more than 25 years of experience in health information management. In her position at Precyse Solutions, Ms. Servais’ responsibilities include planning, designing, implementing and maintaining corporate-wide compliance programs, policies and procedures, and updating them to accommodate changes in federal and other regulations. In addition, she oversees training and development programs related to ethics, compliance and patient privacy; develops and chairs compliance and privacy advisory committees at the executive and board levels and takes an active role in professional organizations.

Contact the Author


Department of Health and Human Services; Office of Inspector General; Recovery Audit Contractors’ Fraud Referrals; Daniel R. Levinson, Inspector General; )OEI-03-09-00130.

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