SB 25-314
Fiscal Note
Legislative Council Staff
Nonpartisan Services for Colorado’s Legislature
SB 25-314 RECOVERY AUDIT CONTRACTOR PROGRAM
Prime Sponsors:
Sen. Kirkmeyer; Bridges
Rep. Bird; Sirota
Published for: Senate Appropriations
Drafting number: LLS 25-0717
Fiscal Analyst:
Kristine McLaughlin, 303-866-4776
kristine.mclaughlin@coleg.gov
Version: Initial Fiscal Note
Date: April 28, 2025
Fiscal note status: The fiscal note reflects the introduced bill, which was recommended by the Joint
Budget Committee.
Summary Information
Overview. The bill places several requirements on vendors hired by the Department of Health Care Policy
and Financing to conduct recovery audits and the audits they conduct.
Types of impacts. The bill is projected to affect the following areas on an ongoing basis:
State Revenue
State Diversions
State Expenditures
Appropriations. For FY 2025-26, the bill requires and includes a net zero change in appropriations to the
Department of Health Care Policy and Financing.
Table 1
State Fiscal Impacts
Type of Impact
1
Budget Year
FY 2025-26
Out Year
FY 2026-27
State Revenue $0 $0
State Expenditures $0 $0
Diverted Funds $20,900,588 Not Calculated
Change in TABOR Refunds $0 $0
Change in State FTE 0.0 FTE 0.0 FTE
1
Fund sources for these impacts are shown in the tables below. Page 2
April 28, 2025 SB 25-314
Table 1A
State Diversions/Expenditures
Fund Source
Budget Year
FY 2025-26
Out Year
FY 2026-27
General Fund, Cash Funds, & Federal Funds -$20,900,588 Not Calculated
Recovery Audit Contractor Recoveries Cash Fund $20,900,588 Not Calculated
Net Diversion $0 $0
Summary of Legislation
The bill places several requirements on vendors hired by the Department of Health Care Policy
and Financing (HCPF) to conduct recovery audits (RAC vendors) and the audits they conduct
including contracting requirements, disclosure requirements, audit limitations, and review
requirements.
Contracting Requirements
The bill requires RAC vendor compensation to be contingent on the money they recover. For the
next audit, this contingency fee must not exceed 16 percent of recoveries and for subsequent
audits must be tiered based on required work, if allowed by federal regulations.
Disclosure Requirements
The bill requires HCPF to issue notices of adverse action within 60 days of the federal deadline
(currently 60 days) or forfeit the state share of the recovery.
Audit Limitations
The bill imposes the following limits on audits, if allowed by federal regulations:
audits are restricted to claims made in the last three years;
providers may be audited no more than three times per calendar year;
audits must be grouped across providers;
the number medical records an RAC vendor can request is capped and tiered by provider
size; and
for providers with an audit denial rate of 40 percent or higher, audits are restricted to 25-
percent of claims per audit type.
Review Requirements
The bill requires HCPF to:
review all RAC vendor audit proposals and regularly review all vendor work; and Page 3
April 28, 2025 SB 25-314
establish a process for providers to request an exit conference, informal, and formal
reconsideration process; providers must request an informal reconsideration before
submitting a formal appeal.
Recoveries Cash Fund
Finally, the bill requires all recoveries to be credited to the newly created Recovery Audit
Contractor Recoveries Cash Fund.
State Diversion
Currently, overpayment recoveries are credited to HCPF based on the funds that paid the initial
provider claims. The bill diverts these funds—$20.9 million in FY 2025-26—into the newly
created Recovery Audit Contractor Recoveries Cash Fund. Recoveries for future years have not
been estimated. These funds will continue to offsets HCPF’s need for General Funds, cash funds,
and federal funds based on the funds that paid in the initial claims.
State Revenue and Expenditures
The bill impacts HCPF revenue and expenditures in several ways, which will be adjusted through
the annual budget process.
Contingency Fees
The bill will decrease HCPF’s expenditures for contractor contingency fees in FY 2026-27 only.
The RAC vendor contingency fee is currently 18 percent of recoveries. The bill requires it to be
lowered to 16 percent for the next audit only. If recoveries remain consistent, this may lower
HCPF’s contract costs by about $400,000, approximately one third of which would be state
funds. However, recoveries are not historically consistent and the lowered rate may decrease
recovery revenue if RAC vendors are less incentivized to identify overpayments. Thus, the fiscal
note has not estimated savings.
Forfeited Recoveries
The bill’s disclosure requirements may decrease HCPF revenue by requiring notices of adverse
action to be issued within 60 days of the federal deadline (currently 60 days). The fiscal note
assumes this means that all notices must be issued within 120 of identifying an overpayment,
codifying current practice and resulting in a minimal impact; see Technical Note.
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April 28, 2025 SB 25-314
Audit Limitations
The bill’s audit limitations may decrease HCPF revenue. Audits are currently being conducted
within the audit limitations specified in the bill. If substantial evidence arises to indicate that
overpayments were made on claims outside of these limitations, the fiscal note assumes that
federal regulations will require HCPF to conduct audits to recover these funds and, per the bill,
HCPF would not be bound by the limitations and no recoveries would be lost.
Workload Impacts
The bill may decrease workload for HCPF if the requirement that providers request an informal
reconsideration before submitting a formal appeal results in fewer formal appeals.
The bill requires HCPF to review all RAC vendor audit proposals and regularly review all vendor
work. This codifies current practice and therefore does not impact workload.
All other requirements of the bill minimally increase workload for HCPF to promulgate rules,
conduct provider outreach, and prepare reports. This work can be accomplished within existing
resources.
Technical Note
The bill requires HCPF to issues notices of adverse action within 60 days of the federal deadline,
which is currently 60 days. Neither the bill nor the federal statute (42 CFR 455.508 (e)(4))
specifies what action triggers the deadline. The fiscal note assumes that the trigger is
identification of an overpayment. Currently there is no federal consequence for missing the
deadline, but, under the bill, HCPF will forfeit the state share of the recovery.
Effective Date
The bill takes effect 90 days following adjournment of the General Assembly sine die, assuming
no referendum petition is filed.
State Appropriations
For FY 2025-26, the bill requires and includes a net zero change in appropriation to the
Department of Health Care Policy and Financing that includes an increase in appropriations of
$20,900,588 from the Recovery Audit Contractor Recoveries Cash Fund and a corresponding
decrease in General Fund, cash funds, and federal funds appropriations from recoveries and
recoupments.
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April 28, 2025 SB 25-314
State and Local Government Contacts
Health Care Policy and Financing Joint Budget Committee Staff
The revenue and expenditure impacts in this fiscal note represent changes from current law under the bill for each
fiscal year. For additional information about fiscal notes, please visit the General Assembly website.