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RAC Audits: Not Just a Nuisance Anymore

Just a few years ago, requests for records from recovery audit contractors (RAC) were something that did not significantly worry most practices because these audits were not very frequent. However, since the January 1, 2012 implementation of the new Medicaid RAC program, practices have many more reasons to be aware of RAC requests. Because the government is taking steps to increase its efforts to proactively stop Medicare and Medicaid fraud, the number of requests that practices receive from RACs is increasing. In order to be prepared for any possible audits, your practice must know how RACs identify issues and how the process works. With this knowledge in hand, your practice should be better prepared if you receive a records request from a RAC.

Keep in mind, there are two ways RACs typically identify overpayments. The first involves an automated approach where the contractor uses proprietary software to find unambiguous instances of overpayment. An automated approach can only be used when one of the following conditions is present:

  1. There is a clear policy—statute, regulation, coverage determination, etc.—that serves as the basis for the overpayment decision.
  2. The claim is deemed as not a medical necessity.
  3. The healthcare practice does not respond in a timely manner to a RAC’s medical record request letter.

With this approach, once a RAC has identified overpayments, it notifies the practice of these overpayments and the reasons behind the findings. This approach doesn’t include a medical record request.

The second, more complex method of RAC audits involves a medical record request, where contractors review documentation and coding in the medical record 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. In many cases, the effort involved in gathering these medical records and sending them to the RAC can be substantial.

The best strategy for navigating either of these RAC audits is to have a well-defined process in place. This may involve designating a full- or part-time staff position to oversee medical record request activity. This individual should receive all requests and ensure timely record retrieval, copying and mailing.

It’s also important to note that the Centers for Medicare and Medicaid Services (CMS) has instituted a reimbursement cap on RAC requests. Beginning April 1, 2012, a practice can be reimbursed up to $25/medical record for photocopying and mailing costs. To verify your practice receives the appropriate reimbursement, your practice will need to have a reliable approach for documenting costs. So keep the reimbursement rate in mind when budgeting for RAC efforts.

You should also consider 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.

So what’s the bottom line? Your practice can no longer hope to fly under the radar regarding RACs. Educating your staff on the nuances of the program and planning for a systematic response will help you prepare to successfully respond to a recovery audit.

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