Sample Paper on History and purpose of the Recovery Audit Contractor

Recovery Audit Contractor

The U.S. Government Accountability Office (GAO), by 1990, had declared Medicare at high risk for improper payments and fraud due to its decentralized administrative structure, size, and scope. In 2002, the Improper Payments Information Act was enacted by congress. The act required all federal agencies to estimate and report annual amounts of improper payments for all programs and activities across the country. When the Department of Health and Health Services (DHHS) had begun to estimate the rate of improper payments in the Medicare fee-for-service (FFS), it is estimated that the payments had totaled $23.2 billion. Since then, the improper payments rate had significantly declined to $10.8 billion in 2007 as a result of the implementation recovery audit contractor (RAC) program across the U.S. This paper explores the history and purpose of the RAC program, the process of the program as it pertains to its impact on healthcare organizations, and one instance of the program’s biblical integration.

History and Purpose of the RAC Program

The RAC program was created through the Medicare Modernization Act (MMA) of 2003. It was created to help the Centers for Medicaid and Medicare Services (CMS) and DHHS to identify and recover improper Medicare payments paid to healthcare providers in the FFS Medicare plans (Debra Cascardo, 2010). In section 306 of MMA, DHHS was directed by the U.S congress to conduct a three-year RAC program. This was to help detect and correct improper payments that patients and health insurance agencies made to the Medicare FFS program. In 2005, the DHHS, in contact with the CMS, implemented the RAC program to perform the actual work of reviewing, auditing, and identifying the improper payments (Liette, 2011). By the end of a demonstration of the program, the CMS had recovered nearly $693.6 million.

Impact of RAC on Healthcare Organizations

The demonstration program found out that many healthcare providers collected sizeable amounts of improper payments yearly. For instance, in the 2010 financial year, it is estimated that healthcare providers collected $75.4 million of improper payments. In the financial year 2011, improper payments significantly increased to $797.4 million (Squire, 2015). Audits were conducted in association with the RAC program, and as a result, sizeable amounts of improper payments were recovered (Hegland & Tullbane, 2011). This significantly affected healthcare organizations as their profitability significantly declined.

Biblical Integration

Hebrew 12: 11 states that at the time, there are disciplines that not only lead to joy but also cause pain. For individuals who lead a righteous life always enjoy the peaceful fruits that such disciplines bring along. Relating this biblical verse to the RAC program, the CMS believed that the demonstration of the program required significant manpower due to its complexity and the large volume of information that is needed to be audited within a short period. Therefore, the CMS argued that it would be challenging to recover sizeable amounts of improper payments received by various healthcare organizations. At the end of the demonstration project, the CMS recovered a sizeable amount of improper payments, and the profitability of healthcare organizations that received such payments significantly declined.

By 1990, GAO had declared that Medicare was at high risk of improper payments. To solve this problem, the RAC program was implemented in 2005 to help CMS and DHHS to identify and recover improper payments made to the healthcare providers under the Medicare FFS plans. Besides, the program has significantly affected healthcare organizations by reducing their profitability levels.


Debra Cascardo, M. A. (2010). Recovery audits are back: tactics for tough times. The Journal of Medical Practice Management: MPM, 25(4), 210. Retrieved from

Hegland, L. T., & Tullbane, C. L. (2011). Responding to the Recovery Audit Contractor Program: a system-wide approach. Physician Executive, 37(3), 44. Retrieved from

Liette, E. (2011). Medicaid Integrity Contractor Audit Response (Doctoral dissertation, The College of St. Scholastica). Retrieved from

Squire, M. (2015). RAC: A Program in Distress. BYU L. Rev., 219. Retrieved from