The Centers for Medicare & Medicaid Services announced last week that it will resume implementation of its Recovery Audit Contract (RAC) program.

The program, which searches for improperly billed Medicare claims, was placed under a stop order in November, due to protests from potential contractors over the award process. The protest has now been resolved and the program will be underway in 2009, as scheduled.

CMS awarded RAC contracts last October and plans to roll out the RAC program in phases through 2009 in four regions:

• Region A, awarded to Diversified Collection Services, Inc. of Livermore, Calif., covers Maine, New Hampshire, Vermont, Massachusetts, Rhode Island and New York.
•  Region B, awarded to CGI Technologies and Solutions, Inc. of Fairfax, Va., covers Michigan, Indiana and Minnesota.
•  Region C, awarded to Connolly Consulting Associates, Inc. of Wilton, Conn., in Region C, covers South Carolina, Florida, Colorado and New Mexico.
•  Region D, awarded to HealthDataInsights, Inc. of Las Vegas, Nev., in Region D, covers Montana, Wyoming, North Dakota, South Dakota, Utah and Arizona.

Additional states will be added to each region in 2009. PRG-Schultz, Inc. and Viant Payment Systems, Inc. will  be added as subcontractors, CMS officials said in a recent announcement.

The federal government reports it recovered nearly $700 million in improper Medicare payments through its RAC pilot program, conducted from 2005 to 2008.

The RAC program was made permanent under the Tax Relief and Health Care Act of 2006, which requires the Department of Health and Human Services to expand the program to all 50 states by no later than 2010.

"The RAC demonstration program has proven to be successful in returning dollars to the Medicare Trust Funds and identifying monies that need to be returned to providers," CMS officials said. "It has provided CMS with a new mechanism for detecting improper payments made in the past, and has also given CMS a valuable new tool for preventing future payments."

CMS officials said the RAC pilot program had "a limited financial impact on most providers," with the vast majority of hospitals in the pilot states impacted by less than 2.5 percent to their bottom line.

Some lawmakers have challenged the program, however, saying RACs are paid to find overpayments, which would affect their impartiality.