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Medicaid Recovery Audit Contractor (RAC) Overview

The Centers for Medicare & Medicaid Services (CMS) established the Medicaid Recovery Audit Contractor (RAC) program as a method for states to promote the integrity of the Medicaid program, pursuant to a requirement of the 2010 Patient Protection and Affordable Care Act (PPACA). Medicaid RACs will review claims for which payment has been made under Section 1902(a) of the Social Security Act or under any waiver of the State Plan to identify underpayments and overpayments and recoup overpayments for the states. [Code of Federal Regulations 42 CFR 455.506(a)]

The CMS Medicaid RAC final rule includes a number of provisions that respond to key industry concerns, including but not limited to:

  • Medicaid RACs are limited to a 3-year look-back period. Medicaid RACs must coordinate their RAC efforts with other auditor programs.
  • Medicaid RACs are prohibited from auditing claims that other state agencies or contractors have already audited for the same issue.
  • Medicaid RACs are required to notify providers of overpayment findings within 60 days.
  • States are required to set limits on medical record requests.
  • Medicaid RACs must employ at least one medical director.

Indiana Medicaid RAC

For the Indiana Health Coverage Programs (IHCP), the Office of Medicaid Policy and Planning (OMPP) implemented the CMS-required RAC program, which is delivered by the Family and Social Services Administration (FSSA) Audit Services staff.

Indiana Medicaid RAC Focus

The focus of the RAC includes credit balance audits of acute care hospitals. In addition, the RAC performs financial audits of long-term care (LTC) facilities.

Credit Balance Audits

Credit balance audits are one part of the Medicaid payment integrity reviews under the RAC program. The objective of these audits is to identify and recover overpayments. In the initial stages, the RAC program will focus on credit balance audits of hospital fee-for-service claims.

More information regarding credit balance audits:

Long-Term Care Financial Audits

The Indiana RAC conducts LTC financial audits of all IHCP providers enrolled as provider type 03 - Extended Care Facility, which includes the following specialty codes:

  • 030 - Nursing Facility
  • 031 - Intermediate Care Facility for Individuals with Intellectual Disabilities (ICF/IID)
  • 032 - Pediatric Nursing Facility
  • 033 - Residential Care Facility
  • 034 - Psychiatric Residential Treatment Facility (PRTF)

More information regarding long-term care financial audits:

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