CMS announces permanent RAC contractors

Dominic Nicastro, for The RAC Report , October 7, 2008

CMS announced the new Medicare Recovery Audit Contractors (RACs) for its permanent nationwide program Monday, October 6. The four contractors and their selected regions are:

  • Diversified Collection Services, Inc. of Livermore, CA: Region A, initially working in Maine, New Hampshire, Vermont, Massachusetts, Rhode Island and New York
  • CGI Technologies and Solutions, Inc. of Fairfax, VA: Region B, initially working in Michigan, Indiana and Minnesota.
  • Connolly Consulting Associates, Inc. of Wilton, CT: Region C, initially working in South Carolina, Florida, Colorado and New Mexico.
  • HealthDataInsights (HDI), Inc. of Las Vegas, NV: Region D, initially working in Montana, Wyoming, North Dakota, South Dakota, Utah and Arizona.

CMS said it chose the contractors and their regions based on three values:

  • A "best value determination" that includes a strong technical approach and "exceptional" customer service
  • Conflict of interest reviews
  • Lowest contingency fee

Connolly and HDI worked on the initial RAC demonstration project that spanned over six states, collected more than $900 million in overpayments, and returned nearly $38 million in underpayments to healthcare providers, according to a CMS press release.

PRG denied contract
CMS said it chose not to select PRG-Schultz (PRG), which had the lowest percentage of appeals overturned in the demonstration project (2.1%). CMS had awarded PRG the California contract. In a press release, PRG said it received one of the highest technical scores but was denied a permanent contract because of its high contingency fee bid.

Tanja Twist, director of patient financial services at Methodist Hospital in Arcadia, CA, said she is "very glad to see that PRG wasn't selected as one of the ‘Permanent 4' given their track record here in California." The California Hospital Association released a memorandum in July citing several concerns over PRG's work on inpatient rehabilitation facilities (IRFs).

Lowdown on returnees
CMS reports through June 30, 2008 that HDI led all contractors in the demonstration project with 239,205 overpayment determinations. Providers have been the most successful with appeals against HDI (11.5%). Connolly was second with 110,635 and had 4.2% overturned on appeals.

CMS did not release information on the two new RACs – Diversified Collection Services (DCS), Inc. and CGI Technologies and Solutions, Inc. However, the federal government is familiar with DCS. In fiscal year 2007, the government awarded them $36,590,770 in contracts, according to, the Freedom of Information Web site on government spending.

Getting prepared
Facilities need to plan immediately for the RACs' arrival, said William Malm, ND, RN, partner at Health Revenue Integrity Service LLP. Connolly, which had the New York contract in the demonstration project, and HDI, which had the Florida contract in the demonstration program, will not be in those states for the permanent program. So those providers in the demonstration states should be prepared for a different contractor in the permanent program.

The new RACs will begin to educate and inform providers later this month and in November about the program, CMS said. Kimberly Anderwood Hoy, JD, CPC, director of Medicare and Compliance for HCPro, Inc., said one of the new elements of the permanent program is the RAC Validation Contractor, which will approve issues for review by the new RACs. In addition, the contractors will create a Web site to post new topics the RACs are investigating.

NYU Medical Center worked with Connolly during the demonstration project. Robert Tipton, NYU's RAC liaison and its director of inpatient revenue cycle operations, said Connolly established a solid working relationship with the hospital during the process. Stacey Levitt, RN, MSN, CPC, director of patient care management at Lenox Hill (NY) Hospital, agreed.

"This might sound contradictory, as the RAC's primary function is to identify overpayments and potentially recoupment money from the hospitals," Tipton said. "But the reality is that the RAC is here to stay, and creating a working, professional relationship benefits both sides at the end of the day."

Editor's note: For more about the differences between the permanent program and the demonstration project, and to learn tips from providers who were part of the demonstration project, read the October 16 issue of The RAC Report.

This story first appeared as a breaking news item from the editors of The RAC Report, a biweekly e-newsletter from HCPro, Inc.

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