What Is a RAC Audit? The Process and How to Respond
Gain clarity on Medicare RAC audits. Understand the audit process, effectively respond to findings, and confidently manage the appeals system.
A Recovery Audit Contractor (RAC) audit is a program established by the Centers for Medicare & Medicaid Services (CMS) to ensure the accuracy and integrity of Medicare payments. These audits aim to identify and correct improper payments, which include both overpayments made to healthcare providers and underpayments they may have received. The purpose of this initiative is to protect Medicare funds, ensuring that taxpayer dollars are spent appropriately and that the healthcare system maintains financial stability. It also prevents fraud, waste, and abuse within the Medicare system.
Key Aspects of RAC Audits
Recovery Audit Contractors (RACs) are private companies operating under contract with CMS. They review Medicare claims to identify and recover overpayments and to identify any underpayments. These contractors are compensated on a contingency fee basis, meaning their payment is a percentage of the improper payments they identify and recover or reimburse. Their review scope primarily covers Medicare Parts A and B claims.
RACs investigate various types of errors within these claims. Common issues include billing errors, such as incorrect coding or duplicate billing. They also scrutinize claims for medical necessity, ensuring that services billed were appropriate and essential for the patient’s condition. Other areas of focus include coding errors, where services might be miscoded, leading to incorrect reimbursement, and instances of duplicate payments for the same service. The goal is to ensure that providers adhere to Medicare’s billing and documentation requirements.
The RAC Audit Procedure
The RAC audit process typically begins when a healthcare provider receives a notification, often in the form of a record request letter. This letter indicates that specific claims or services are under review. RAC audits generally employ two main types of reviews: automated reviews and complex reviews. Automated reviews involve data analysis to identify clear errors without requiring additional documentation from the provider. These can include instances of duplicate billing or certain coding errors.
Complex reviews, however, necessitate the submission of medical records and other supporting documentation. Providers are typically given 45 calendar days to submit the requested medical records. Failure to provide the documentation within this period can lead to a determination of overpayment. Once the RAC receives the records, a team, which may include clinicians and coders, reviews them to assess compliance with Medicare regulations and medical necessity criteria. The RAC then communicates its findings, which could be an overpayment demand letter requiring repayment or an underpayment notification.
Responding to Audit Determinations
Upon receiving an unfavorable RAC audit determination, such as an overpayment demand, healthcare providers have specific options and deadlines. One immediate action is to fully repay the demanded amount, which can prevent further accrual of interest or additional recovery actions. Providers may also choose to submit a rebuttal statement to the RAC. This statement offers an opportunity to present arguments or additional documentation that might clarify the original claim and potentially overturn the RAC’s finding.
Timeliness is paramount. Providers must adhere to strict deadlines for each response option to preserve their rights. If a provider disagrees with the determination and the informal discussion or rebuttal does not resolve the issue, the formal appeals process becomes the next course of action. Engaging with the RAC directly through their customer service or discussion period can sometimes resolve issues before entering the formal appeals system.
Navigating the Appeals System
Providers who disagree with a RAC audit determination can utilize a multi-level Medicare appeals process. The first level is a Redetermination, conducted by the Medicare Administrative Contractor (MAC) that processed the original claim. Providers typically have 120 days from the date of the overpayment demand letter to request this review. The MAC performs an independent review.
If the Redetermination is unfavorable, providers can pursue a Reconsideration, which is the second level of appeal. This review is conducted by a Qualified Independent Contractor (QIC). The third level involves a hearing before an Administrative Law Judge (ALJ) at the Office of Medicare Hearings and Appeals (OMHA). This stage allows for a more formal presentation of evidence and testimony.
Should the ALJ’s decision also be unfavorable, the provider can request a review by the Medicare Appeals Council (MAC), which is the fourth administrative level. This council reviews the ALJ’s decision for errors of law or fact. The final administrative level, and the fifth overall, is Judicial Review in Federal District Court. This step allows providers to seek legal recourse in the federal court system if they have exhausted all prior administrative appeals.