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Navigating Medicare RAC Audits: The Best Defense Is a Good Offense

The words “RAC audit” can strike fear in any medical practice. These audits are the process through which recovery audit contractors (RACs) review Medicare claims to identify improper payments, including overpayments and underpayments. Although these audits have been occurring for awhile, most practices still find them challenging to navigate. And, in just a few days—January 1, 2012, to be exact—the Medicaid RAC program will take effect. That means RACs will start reviewing Medicaid claims as well.

There are two ways RACs typically identify overpayments. The first takes an automated approach where the contractor uses proprietary software to find unambiguous instances of overpayment. This approach doesn’t include a medical record request.

The more complex method involves requesting medical records and reviewing your documentation and coding to determine whether an overpayment was made. While RACs are limited to the number of medical records they can request during a specific time period, the volume of records can be quite significant depending on the number of physicians in your practice.

Should a RAC decide your practice was overpaid for a claim, they will recoup the excess funds. Although you do have an opportunity to appeal this decision, the appeal process can be equally time consuming and onerous. So the key to making a RAC audit as unobtrusive as possible: don’t be caught unprepared.

To best prepare for RAC audits, you first must overcome your fears and proactively create a specific process for responding to medical record requests. This may involve designating a full- or part-time staff position to oversee the effort—including gathering, photocopying, and mailing any paper-based medical records.

Consideration should also be given to how to best tackle the appeals process if a RAC audit finds overpayments you’d like to challenge. In some cases, appealing may not be worth the time or money, but in others it may be justified. For example, if an overpayment decision relates to a procedure or treatment your practice does frequently, it may be worth appealing—not only to overturn the specific overpayment, but to prevent similar overpayment decisions in the future.

Just as with almost any audit, your ability to justify medical necessity is crucial during RAC audits. According to the Centers for Medicare and Medicaid Services (CMS), lack of medical necessity justification is a common reason for overpayment decisions. More often than not, however, the only real problem is that the provider didn’t sufficiently document why the treatment was appropriate. To avoid overpayment decisions, you must make sure your documentation: 1) is comprehensive, and 2) fully illustrates medical necessity.

A good way to ensure this is to regularly conduct internal documentation audits for each physician in your practice. They don’t have to be expansive—even reviewing 10 records per year per physician can help you discover documentation issues and put corrective plans in place. The more your documentation reflects the reasons behind a medical decision and treatment plan, the more likely you are to avoid costly overpayment decisions.

For further information on the RAC program and how it could affect your practice, go to www.cms.gov/rac.