Are You Prepared for a Medicare Recovery Audit Contractor (RAC) Audit?

By Kathleen Stillwell, MPA/HSA, RN, Senior Patient Safety Risk Manager, The Doctors Company

Themission of the CMS Medicare Fee for Service (FFS) Recovery Audit Program is to identify and correct improper payments made on claims for healthcare services provided to Medicare beneficiaries. In January 2010, the Social Security Act authorized the Recovery Audit Program expansion nationwide and extended it to Medicare Parts C and D.

Any medical practice submitting claims to a government program can on Improper Payment Rates and Additional Data, between 2012 and 2022, RAC identified improper payments under the Medicare Fee-for-Service program ranging from a high of 12.7 percent in 2014 to a low of 6.26 percent in 2021. Improper payments may include fraud or abuse. Most improper payments are from unintentional errors or insufficient payment documentation.

The RACs detect and correct past improper payments so that CMS can implement actions to prevent future improper payments. CMS anticipates the following benefits:

• Providers can avoid submitting be subject to a Medicare Recovery Audit Contractor (RAC) audit. RAC audits—which may be triggered by an innocent documentation error— are not one-time or intermittent reviews. They are part of a systematic and concurrent operating process created to ensure compliance with Medicare’s clinical payment criteria and documentation and billing requirements. The RACs are charged with finding “improper payments”— which could be either an underpayment or an overpayment.

The RACs use proprietary software programs to identify potential payment errors in areas such as duplicate payments, fiscal intermediaries’ mistakes, medical necessity, and coding. RACs also conduct medical record reviews and are required to employ a staff consisting of nurses, therapists, certified coders, and a physician medical director.

According to the CMS report claims that do not comply with Medicare rules.

• CMS can lower its payment error rate.

• Taxpayers and future Medicare beneficiaries are protected.

Who Is Subject to a RAC Audit?

The following entities are subject to RAC audits:

• Hospitals.

• Physician practices.

• Nursing homes.

• Home health agencies.

• Durable medical equipment suppliers.

• Any provider or supplier that submits claims to Medicare or a government program.

Who Is the RAC Auditor?

CMS contracted with RAC auditors for five regions in the United States and designated one for each region. It is important to identify the RAC auditor in your region so you