The Recovery Audit Contractor (RAC) initiative is a Centers for Medicare and Medicaid Services (CMS) initiative that began in 2005 as a demonstration project in three states including California. A permanent RAC program is begins in mid 2008.

Under the RAC program, private companies are contracted to retrospectively review Medicare claims for potential over-payments or under- payments. Major areas of focus in CA have been the medical necessity of admissions to Inpatient Rehabilitation Facilities (IRFs)) and patients admitted to acute care for one-day or short acute care stays.

During the demonstration project, thousands of patient claims were denied based on the RAC’s retroactive determination that these important medical services were not necessary. Providers also reported numerous problems with communication, documentation, and reimbursement recovery. On behalf of its members, CHA has been in close communication with CMS and in advocating for legislative action to mandate changes to the RAC program.