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1. Emilija

In 2003, the Medicare Modernization Act (MMA), called for the CMS to add recovery audit contractors and the use for their purpose to be demonstrated (Fritz et al., 2013). The use of the RACs was blended in with a demonstration project. “In response to the legislative directive, CMS developed a 3-year demonstration project for the RAC initiative, which began in March 2005. CMS is required to evaluate the effectiveness of the initiative and provide a report to Congress at the end of the demonstration project” (CMS Recovery Audit Contractor Initiative, 2007, p. 255). Thanks to this initiative, the use of Recovery Audit Contractors (RACs) allowed for the identification of overpayments and underpayments, and recoup of overpayments made by the Medicare program, and to see if the use of RACs is cost-effective. RACS was used for this very intended purpose in order to avoid any negative impact it may cause on a healthcare organization. Romans 8:28 says, “And we know that all things work together for good to them that love God, to them who are the called according to his purpose” (King James Bible, 1769/2016). Aligning ourselves with His will will allow us to grow His kingdom and grow our fellow brothers and sisters. RACs allowed for the protection of the Medicare Trust Fund and a cost-effective way to add resources.

RACs Process

Now as with any process in healthcare, the process of RACs is a team effort with many different steps. Once an improper payment is identified, an RACs contacts the provider in question in regards to the overpayment or underpayment (Harrington, 2021). Redetermination can be requested by any provider, supplier or even beneficiary (Harrington, 2021). A provider must comply with the review, requiring them to send medical documentation in regards to the audited claims. This step also sets the tone for what level of review must be completed, complex or automated. The automated review does not require further review of prescription or other documentation (Harrington, 2021). This also is changed based on levels of review.

With this understanding, RACs can move on to step two of the process. RACS will use automated process algorithms to review all PDE records and identify overpayments and underpayments. If further examination is necessary with the complex process, the third step will take place. This will allow RACs to request and receive any additional information to refute all or some of the RAC’s findings (Harrington, 2021). Once the RAC finalizes a decision and their decision has been confirmed, RACs will send out a Notification of Improper Payment (NIP) (Fritz et al., 2013). The RACs will then work with the Data Validation Contractor (DVC) program to assess the validation of an RACs claims. This is in order to create an Improper Payment Review Package (IPRR). Now, the steps can continue to go further and further into detail depending on the level of appeal.


Now, after review of the RACS, their purpose, and the appeals process, it is clear to see the level of importance that RACs carry in the healthcare industry. RACs must use a team of key players in order to review any and all oversights within the payment process (Harrington, 2021). This is important in the process that still needs further growth. It is up to us as healthcare administrators to see the importance of the process and to ensure accurate documentation and coding for this process (Harrington, 2021).


CMS’s Recovery Audit Contractor Initiative. (2007). Journal of oncology practice, 3(5), 255. https://doi.org/10.1200/JOP.0752502Links to an external site.

Fritz, J. V., Setlock, S., & Grooms, D. P. (2013). Recovery audits: Practical update for neurology practices. Neurology. Clinical practice, 3(3), 224–232. https://doi.org/10.1212/CPJ.0b013e318296f2ac

Harrington, Michael K. Health care finance and the mechanics of insurance and reimbursement. (2nd ed.). Burlington, MA: Jones & Bartlett, 2021.

King James bible. (2016). Thomas Nelson. (Original work published 1769).

2. Alesha

The Center’s for Medicaid and Medicare (CMS) use the term “Recovery Audit Contractors” (RACs) to refer to the organizations tasked with finding and fixing errors in Medicare Payments (Harrington, 2021). Harrington (2021) also mentions that this initiative grew out of a trial run that found that sending auditors into healthcare facilities reduced the number of erroneous payments made and the total number of errors made when processing Medicare claims. To verify that Medicare is only paying for truly essential and enumerated services, RACs conduct post-payment reviews of claims. Review efforts must be concentrated on CMS-identified problem regions with high rates of mistaken or inaccurate payments. With the Recover Audit Contractor (RAC) program being initially implemented as a pilot project, it was then expanded to encompass the entirety of fee-for-service Medicare in 2009 and Medicare Advantage in 2010, as mandated by the Tax Relief and Health Care Act of 2006. Wright et al., (2023) indicates that the extension of this program is closely aligned with the post-ACA period. The available evidence indicates that Recovery Audit Contractors (RACs) and Medicare Administrative Contractors (MACs) have prioritized the identification of instances where hospitals have billed brief inpatient admissions as outpatient observation stays (Wright et al., 2023). Consequently, hospitals have responded by escalating their utilization of observation stays as a means to circumvent audits.

Harrington (2021) explains the process for RACs with numerous crucial phases to conducting an audit for the RAC program. To begin, an RAC will be chosen by the CMS to conduct audits in a given area (Harrington, 2021). The Medicare fee-for-service claims database is searched by the RAC for overpaid claims (Harrington, 2021). When audits are conducted of any kind, medical policies, coding guidelines, and payment regulations are all applied to claims data analysis which is important those are set in place before hand. Harrington (2021) further explains, the contractor conducting the recovery audit will contact the provider whenever it suspects billing irregularities and request additional information to determine if an error payment was made. If the auditor requests medical records or other documentation, the provider has 30 days to furnish it (CMS.gov, 2023). In order to determine if an overpayment or an underpayment occurred, the RAC looks over the supplementary materials. A claim decision letter is sent to the provider or supplier when a RAC discovers an incorrect payment during an audit. Overpayments can be refunded or disputed by submitting paperwork from the provider. CMS.gov (2023) also indicates that the provider has 60 days to repay any overpayments if it agrees with the findings. The provider can use the regular Medicare appeals procedure to dispute any incorrect payment findings. Only when the auditors find instances of waste, fraud, or abuse do RACs receive compensation (CMS.gov, 2023). The goal of this setup is to have RACs concentrate their audit efforts where they are most likely to find fraudulent payments. Some doctors, however, say the RACs incentives to find cases of poor care under this system of payments are perverse (CMS.gov, 2023).

Due to the complex nature of audits and the extensive amounts of data and evidence that must be collected in order to conduct one, it is crucial for healthcare executives and administrators to collect the necessary documents for each, and every claim submitted. Harrington (2021) states that in 2007, the RAC succeeded in correcting over 1.03 billion dollars of improper Medicare payments, that is over 96 percent being overpayments, and the remaining 4 percent underpayments, all being repaid by providers. The utilization of an audit can serve as an opportunity to foster healthcare personnel’s provision of feedback to one another, while also facilitating the expression of concerns to organizational leaders and promoting active involvement in the governance of the healthcare institution (Hut-Mossel et al., 2021). This in a sense shines a light on the healthcare administrators and its leaders to ensure all proper procedures are followed and regulations are implemented to prepare for audits, and to simply be well organized so that overpayment or underpayment does not occur at all.

Matthew 7:16-17 teaches, “The come to you in sheep’s clothing, but inwardly they are ferocious wolves. By their fruit you will recognize them. Do people pick grapes from thornbushes, or figs from thistles? Likewise, every good tree bears good fruit, but a bad tree bears bad fruit” (The English Standard Version Bible, 2001). Sincerity and lack of deception are significant qualities of honesty. We all sin and find it easy, thus honesty is something we must work for despite the fact it should be a Christian trait. Integrity is important in relationships with not only those in our personal lives, but also those in our professional lives.


CMS.gov. (2023). Medicare Program Integrity Manual. Chapter 3 – Verifying Potential Errors and Taking Corrective Actions. CMS.gov. https://www.cms.gov/Regulations-and-Guidance/Guidance/Manuals/downloads/pim83c03.pdfLinks to an external site.

CMS.gov. (2023). Part D RAC Audit Processes. CMS.gov. https://www.cms.gov/data-research/monitoring-programs/part-c-d-recover-audit-program/part-d-rac-audit-processLinks to an external site.

Harrington, M. (2021). Healthcare Finance and the Mechanics of Insurance and Reimbursement. Jones & Bartlett Learning.

Hut-Mossel, L., Ahaus, K., Welker, G., & Gans, R. (2021). Understanding how and why audits work in improving the quality of hospital care: A systematic realist review. Plos One. https://doi.org/10.1371/journal.pone.024867Links to an external site.

The English Standard Version Bible. (2001). Crossway Bibles.

Wright, B., Parrish, C., Basu, A., Maddox, K., Liao, J., Sabbatini, A. (2023). Medicare’s hospital readmissions reduction program and the rise in observation stays. Health Services Research. https://doi.org/10.111/1475-6773.14142Links to an external site.

Each reply must incorporate at least 2 scholarly citations, course textbook and 1 instance of biblical integration in current APA format.

course textbook:

Harrington, M. K. (2021). Health Care Finance and the mechanics of Insurance and Reimbursement. Jones & Bartlett Learning.

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