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The RAC Review — What Providers Need to Know

August 7, 2013

what you need to know about rac reviewWhat is the RAC program?

The Recovery Audit Contactor program (RAC) was established through the Tax Relief and Health Act of 2006 to fight Medicare waste and fraud, and implemented by January 1, 2010. The intent is to identify incorrect payments to providers of Medicare services, which can be either over or underpayments.

According to the CMS website, over-payments can occur if a provider’s claims do not meet the CMS regulations for medical necessity or coding, often through clerical billing error or other mistakes discussed below. An underpayment occurs when the provider bills for a simple procedure that medical records show was more complex. Providers can be physicians or other care providers, hospitals, nursing agencies, durable equipment vendors or other providers and suppliers submitting Medicare claims.

The country is divided into four regions, each with its own contractor. The RACs were awarded through an open-bidding process, with the auditors paid on a contingency basis, based upon identified improper payments.

What happens during the RAC review process?

Through the use of their proprietary software, as well as their interpretation of Medicare’s regulations, auditors look closely at facilities and individuals whose Medicare billing patterns trend higher than the expected norm for a given area.

Improper payment of claims occurs when:

  • Services that were paid are later determined to not be medically necessary or meet Medicare’s criteria for medical necessity
  • Services were coded incorrectly, as when a submitted claim fails to match with the actual medical record. Due to the new ICD-10 coding changes, practices and facilities should be aware of the need for competent trained billing staff or outsourced billing services
  • Providers either fail to honor requests for submitting medical records or do not send sufficient documentation
  • Duplicate claims were submitted, resulting in multiple payments
  • Medicare paid a claim that was the responsibility of another carrier, as with an employer’s insurance plan
  • Other mistakes were made, such as a carrier paying claims using outdated fee schedules

If it is determined that the claim(s) may contain errors, the RAC usually requests supporting medical records from the provider to confirm whether and over or underpayment occurred. The review becomes a Complex Review once records are submitted. As a rule, in those cases, the proprietary software has determined that an overpayment occurred.

The RAC may use Automated Reviews to request recovery of overpaid funds in situations where no medical record is involved. Automated reviews must:

  • Include a statute, regulation, Coverage Determination or other forms of a ‘clear policy’ that stipulates which circumstances will render a service to be an overpayment
  • Be based upon a medically unbelievable service, or
  • Be the result of lack of provider timely response following a request for medical records

The RAC works with Medicare beneficiaries to confirm the medical necessity and whether they received billed home health services or durable medical equipment. The RACs also review all claims paid to Medicare Part A and B providers to ensure compliance with Medicare’s statutory, regulatory and other policy requirements.

What should a provider do if audited?

It is important to contact the RAC immediately through their designated customer service numbers. If that fails to provide the information you need, you may contact CMS, at their email address set up to handle audit inquiries.

M-Scribe Technologies, LLC, a leader in medical billing, coding and medical documentation , offers their Pre-RAC Audit Program. This program can identify a practice’s weak areas that could trigger an audit. For more information about this specialized service, please contact M-Scribe to save money now and prevent audit problems down the road.


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