NC Medicaid RACs Paid to Find Errors By Providers, No Incentive to Find Errors By DMA

I’ve always known that the Recovery Audit Contractors (RACs) in North Carolina are conducting these Medicaid audits inappropriately and without complying with NC Medicaid rules and regulations. But are the RACs compensated in a way that encourages the RACs to find overpayments to providers and not underpayments. (Did you even know that RACs are instructed to find underpayments too???? I mean, what a joke!! Please, providers, let me know if any of y’all have received a Tentative Notice of Underpayment!).

Anyway, what is a RAC?

RAC’s are private companies that have contracted with the State purpose is to reduce improper Medicare payments and implement actions to prevent future improper payments.

In North Carolina, the RACs are Public Consulting Group (PCG), Carolinas Centers for Medical Excellence (CCME), and, new to the RAC system, HP Enterprises (HP).

According to the federal agency Center for Medicare and Medicaid Services (CMS), the RACs receive MORE compensation if the RACs find noncompliance and LESS compensation for finding instances in which the State  UNDER-paid a health care provider.

If the RAC finds noncompliance (as in the provider owes money back to the State), the RAC is paid on contingency. Now every state does not pay the same contingency rate to the RACs. The federal government allows some variation.  But the chart below represents the percentage of the money recouped by the health care provider that the RAC receives as payment.

Contingency Fee Percentages – Overpayments: Data Table

State Percentage
Alabama1 12.5
Arizona 12.5
Colorado 11
Connecticut 9.3
Georgia 12.5
Indiana 10.5
Iowa2 12.5
Kansas3 17
Kentucky 12.5
Mississippi 9.49
Missouri 12
MEAN 10.94
Nevada 8.75
New Hampshire4 11.5
New Jersey 11.5
New Mexico 10.5
New York 5.25
North Carolina 11.5
North Dakota 9.95
Ohio 10
Oregon 9.4
Pennsylvania5 11.57
South Carolina 11.9
Tennessee 12
Virginia 9.3
Washington 9.9

So North Carolina is paying the RACs 11.5% of all money recouped by health care providers for “noncompliant documents.”  For example, if PCG determines that Provider X owes $500,000.00 to DMA  because of noncompliant paperwork, PCG is paid $57,500.00. Nice to know that we pay over the mean.

Now, what about these alleged UNDER-payments? As in, the RAC determines that the State did not pay the providers enough…

Again, this varies state to state. North Carolina pays the RACs a flat fee of $100.00 for finding underpayments. One hundred dollars.

I find myself almost at a loss of words.

Imagine you are the CEO of PCG. As CEO, you are concerned about the profit of the company. Would you tell your employees to investigate OVER-payments? Or UNDER-payments?
I still would LOVE to hear from any provider who has received a Tentative Notice of Underpayment.


Posted on March 26, 2013, in CCME, Division of Medical Assistance, Health Care Providers and Services, Medicaid, Medicaid Audits, NC DHHS, North Carolina, OAH, RAC and tagged , , , , . Bookmark the permalink. 3 Comments.

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