Recovery Audit Contractors (RACs) are individuals dispatched by the Centers for Medicare & Medicaid Services (CMS) to look for overpayments to physicians. Since they are paid a contingency fee for locating discrepancies, they are quickly becoming viewed as bounty hunters by many practices.
“RACs are tasked by CMS to go out and find overpayments and underpayments for Medicare services,” said Abby Pendleton, Esq, from The Health Law Partners, PC, in Southfield, Michigan. “The reality is that they are really out there looking for overpayments. Their percentage of any recovery runs between 9% and 12%.”
The Recovery Audit Program was initiated under the Medicare Modernization Act of 2003. Following a 3-year RAC test program, the Tax Relief and Healthcare Act of 2006 mandated the implementation of a nationwide RAC program. There are currently four assigned RAC agencies, each representing roughly 25% of the country (Figure
Figure. RAC Jurisdictions in the United States
RACs review claims on a post-payment basis. They are supposed to use the same Medicare policies as carriers, fiscal intermediaries, and similar Medicare programs and follow the CMS manuals.
Unlike other types of auditing, these contractors can only look at specific issues approved by CMS prior to the review. Although many of these will probably be the same from contractor to contractor, others may be suggested by the RAC subject to CMS approval.
Currently, the look-back period is 3 years. CMS also limits the number of medical records that can be demanded, based on the number of physicians in a given practice.
If they find a concern, they can use statistics to extrapolate how much money should be returned to Medicare. This is not always based on chart audits.
Jeffery C. Ward, MD
“Contractors are not required to show everything you have done wrong,” said Jeffery Ward, MD, Clinical Practice Committee Chair for the American Society of Clinical Oncology. “For example, if they audit a sample of ten charts out of 1000 a practice submitted for a specific code and they think two of them are wrong, they will ask for repayment for 200 patients.”
This means that all practices should take audits very seriously.
“I don’t think there is any question that a RAC audit has the potential to destroy a practice financially,” noted Ward. “These audits can very easily turn into big dollar losses and decimate a practice.”
The next question becomes, what can a practice do to avoid being audited? Apparently there is very little.
“We are often asked what can someone do to avoid audits,” said Jessica Gustafson, Esq, also with The Health Law Partners. “I believe that it isn’t a matter of if, but rather when, an audit takes place.”
For RAC audits, and most others, the best defense is good charting. Since every RAC gets specific marching orders from CMS, it is also suggested that the practice contact their contractor to see what they can review and concentrate on those issues.
“Physicians in particular have to pay special attention to enhancing their documentation knowing that at some time it will be reviewed by someone,” said Pendleton. “Include information on medical necessity so when an auditor comes in it is very apparent to someone who doesn’t know the patient why something was done.”