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Three Reasons Why the RAC Audit Reform Movement Is Important

May 8, 2013

reasons to support the rac audit reform movementRAC (Recovery Audit Contractor) audits have many additional names, but, because of their purpose–recovering reimbursements from medical practices and other health care providers–are usually aggressive and annoying. Although they are also known as Medicaid Audits and Medicare Audits, health care providers have the sole responsibility for compliance. Unfortunately, except for publishing basic guidelines, Medicare does not offer specific guidance of any kind to health care providers.

Reason #1: You Must Protect Your Practice

RAC audits are inherently onerous, dangerous and all-too-frequent. If you are a Medicare/Medicaid provider, you’ll face these regular audits which can be costly. Statistics indicate that many practices average around 62 percent coding errors. Along with billing errors, this all-too-high rate of coding mistakes will trigger more RAC audits, sprinkled with a healthy dose of examiner diligence.

Since RAC examiners’ fees depend on the number of errors they find, there is a natural, built-in incentive to find as many overbilling mistakes as possible. Since their fees come right out of your practice bank account, there is an equally strong incentive to help your coding and billing staff avoid coding errors and become a highly efficient–and accurate–team.

Reason #2: Medicare/Medicaid Overpayments Cost You Money

According to an update in April 2011, CMS has recently collected over $300 million thanks to RAC auditors. This recovery is down from the staggering $992 million in overpayments during RAC audits from 2005 to 2008. It’s assumed that physicians have taken steps to improve their staffs’ coding, billing and documentation submissions. However, $300 million in practice and hospital reimbursements is still too much.

Some RAC audit reform provisions in the bi-partisan Medicare Audit Improvement Act of 2013 (H.R. 1250) may help practices face less zealous audits. Since overpayments trigger more frequent RAC audits, supporting reforms that offer due process to help physicians review and/or appeal denials, can save practice reimbursement money.

Reason #3: Additional Document Requests (ADRs) May Be Reduced

RAC audit reforms, including the proposed federal legislation, would reduce and cap the number of ADRs that auditors can request. These requests for more and more documents strains personnel resources of medical practices and smaller hospitals. The typically overtaxed staff of busy medical practices must dedicate time they simply do not have to locating, copying and emailing, faxing, mailing or delivering the overburdening RAC auditor requests for documents.

The RAC audit reform legislation, as written, would establish a “hard cap” on ADRs to lessen the administrative time required for practice and hospital staff. This feature, if approved, benefits medical practices and hospitals in two ways. First, the administrative time needed to produce these documents would be less. Second, the time savings should result in staff spending their time where it’s really needed–delivering quality patient care. Both of these benefits are joined by a third–saving money.

Typically, RAC audits are not pleasant. However, arguments that the built-in incentives for the audit company and the high percentage of coding and billing errors auditors consistently discover contribute to practice staff and physician uncomfortability. While RAC audit reforms, if adopted, will help practices save administrative time, the real money savings result in reducing coding and billing errors. If RAC auditors weren’t so successful finding evidence of errors and overbilling, the number and intensity of these audits would decline. All physicians, nurses and practice staff should welcome the proposed RAC audit reforms, as some medical practice and small hospital viability may hang in the balance.


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