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How Far Back Can a Medicare RAC Audit Go

May 27, 2013


There has been an abundance of improper Medicare and Medicaid payments made. Recovery Audit Contractors (RAC) are retained by the US Government to identify any under payments or overpayments made to health care providers. Another responsibility they have is to make payment adjustments in order to correct identified errors.

In 2007 nearly $11 billion improper Medicare payments were reported. In addition many Medicare claims were non-compliant in terms of billing, coverage, coding or payment rules. Because of the huge number of inconsistencies, the US Congress created the RAC program. RAC contractors receive an initial fixed payment for each occurrence of improper payment. In addition they receive a percentage of recovered funds. Not surprisingly, the AMA likens RAC to bounty hunters and deeply disapproves of this organization.

RAC will not review claims reviewed by other entities. 4 regions have been created covering the US and each has one RAC contractor.

How Do Mistakes Happen?

According to the American College of Emergency Physicians overpayments can occur when health care providers submit claims that fail to meet coding or medical policies. Underpayments can occur as well. These happen when health care providers submit claims for a simple procedure when the actual procedure that was performed was more complex. Types of providers eligible for review include any facility that submits Medicare claims. Included are physicians, hospitals, nursing homes, medical equipment suppliers and home health agencies. 

How Far Back Can a Medicare RAC Audit Go? The initial Medicare look back audit period was four years, but vehement objection from the AMA reduced this period to 3 years.

Expansion of RAC and Hospitals

At the close of 2010 the RAC Program was expanded to include Medicare and Medicaid parts C and D. To be able to pass a look back audit hospitals should have a RAC team in place. This team should monitor relevant websites periodically for updates. Hospitals should also have a process for RAC appeals. Creating a central location for medical requests is advisable as well.

RAC Truth Vs. Fiction

CMS provides the following RAC Audit myths you should know about the RAC audit program.

  1. RAC always denies all claims.
  2. Every RAC denial is overturned when appealed.
  3. RACs do not notify organizations about what they are reviewing.
  4. RACs outsource medical review work to staff in India and the Philippines

Download: RAC Audit Checklist – Simple Action Plan for RAC Audit Compliance

Factors that are significant in terms of review are:

  1. Available documentation
  2. Medical necessity
  3. Correctness of coding overpayment
  4. Correctness of coding underpayment
  5. Other

CMS Medicare RAC Appeals Process

Physicians can appeal a RAC determination by following the appeals process documented below.

Medicare RAC Appeal Level

Days to Submit Appeal

Claim Reviewer

1. Redetermination


Medicare Administrative Contractor (MAC), carrier, or Fiscal Intermediary (FI)

2. Reconsideration


Qualified Independent Contractor (QIC)

3. Administrative Law Judge (ALJ) hearing



4. Medicare Appeals Council review


The Appeals Council is within HHS

5. U.S. District Court


U.S. District court judge

What Are RAC Program Benefits?

The RAC program greatly enhances the accuracy of Medicare and Medicaid reporting. It makes sense for work done under government programs and guidelines to be audited for accuracy. This program has already reaped many tangible results. indicates that in May 1, 2012 nationwide audit statistics showed a substantial 33% in overpayments.



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