What payment structure do RAC auditors use?

RAC auditors, or Recovery Audit Contractors, operate on a contingency fee basis. This means that they are compensated based on a percentage of the amount they successfully recover for the Medicare program. The structure incentivizes auditors to identify and correct improper payments, as their payment is directly tied to the success of their findings. This approach aligns the auditors' goals with the interests of the Medicare program, promoting thorough and diligent auditing efforts to minimize improper payments.

Using a contingency fee basis is effective because it encourages RAC auditors to focus on accurate auditing and recovery, ensuring that they are adding value to the Medicare system without simply charging for time spent or services rendered. As they are paid only when they recover funds, it motivates them to find legitimate overpayments or underpayments and helps to maintain the integrity of the payment system within Medicare.

In contrast, the other payment structures mentioned would not appropriately align the RAC auditors' interests with program integrity and compliance goals. For instance, a flat fee would not provide the same incentive for thorough auditing, while hourly billing might encourage less efficient practices. A monthly salary would remove any financial incentive connected to their performance in identifying improper payments.