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Public Notice of Final Action for the Recovery Audit Contractor (RAC)

The South Carolina Department of Health and Human Services (SCDHHS) gives notice of the following actions regarding an exception to 42 CFR § 455.502(b), which requires SCDHHS to contract with a Medicaid Recovery Audit Contractor (RAC) under the State Plan under Title XIX of the Social Security Act Medical Assistance Program (Medicaid).

Effective on or after July 1, 2018, SCDHHS will amend the South Carolina Title XIX State Plan to seek an exception from some or all Medicaid recovery audit contracting requirements. 

Under Section 1902(a)(42)(B)(i) of the Social Security Act, states and territories are required to establish programs to contract with one or more Medicaid RACs to identify and recoup overpayments made under the State Plan or state waiver programs. Federal rules also allow for state-specific exemptions and requirements that permit Centers for Medicare & Medicaid Services (CMS) to vary Medicaid RAC program requirements. 

SCDHHS RAC program employs a contingency fee-based RAC contract that ties contractor payment to the performance of its recovery efforts. A recent effort to re-procure a RAC for a contract period beginning in 2018 yielded zero proposals in response to a solicitation that closed Feb. 2, 2018. The lack of interest in SCDHHS' recent solicitation is a strong indicator that it is not cost-beneficial for auditing firms to submit proposals due to the small number of enrollees and claims in our non-managed care programs. Other states with large managed care enrollments have also experienced this same issue and have sought and received such exception as SCDHHS is requesting. 

Based on the action above, SCDHHS does not anticipate a budget impact. Since the vendor is paid on a contingency fee basis, they do not receive a payment unless they recover an overpayment. 

Copies of this notice are available at each County Department of Health and Human Services Office and at for public review. Additional information regarding this action is available upon request at the address cited below.

Any written comments submitted may be reviewed by the public at the SCDHHS, Attn: Program Integrity, Jefferson Square Building, 1801 Main Street, Columbia, South Carolina, Monday through Friday between the hours of 9 a.m. - 5 p.m.

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