Review RAC Demo Project Issues to Understand, Avoid Fraud

While RACs are not responsible for reviewing claims for potential fraud, they are responsible for referring to CMS any potentially fraudulent instances found during those reviews.

During the RAC demonstration project, one RAC reported referring two cases of potential fraud it uncovered to CMS, even though CMS reported no provider-specific referrals, according to a February 2010 OIG Report, "Recovery Audit Contractors' Fraud Referrals."

Another demonstration project RAC notified CMS of multiple claims from Florida providers "involving millions of dollars in improper payments to physician practices for Intravenous Immune Globulin treatments," though it did not formally refer the potential fraud to CMS. In addition, the OIG report stated that CMS directed the RACs to cease reviewing the claims and that it did not track the outcomes of the referrals it received from RACs.

At the time of the demonstration project, CMS provided RACs with a number of conferences and meetings in which fraud issues were discussed, but no formal training was ever provided, the report said. In response to an OIG information request regarding the training, CMS stated, "In order to determine if recovery auditors could work in Medicare, CMS purposely did not provide formal training to the RACs. The RACs needed to prove to Medicare and the provider community that they could work in the Medicare environment. Significant CMS intervention would have clouded the result."

The OIG made three recommendations to CMS based on their findings:

• Conduct a follow up to determine the outcomes of the two referrals made during the demonstration project


• Implement a database system to track fraud referrals


• Require RACs to receive mandatory training on the identification and referral of fraud

CMS agreed with all three recommendations.