Prepare for Recovery Audit Contractors as they come online

Medicares new audit program is ramping up, and the College offers practical advice onhow to reduce the administrative cost of compliance.

Medicare has multiple programs in place to detect and correct claims payment errors. In 2003, spurred by government reports and audits that showed extensive administrative and resource waste in the health insurance program, Congress mandated a new type of audit demonstration program called Recovery Audit Contractors (RACs).


In 2006, Congress passed legislation that will expand this program throughout the U.S. by 2010. CMS set up the RACs to detect and resolve past payment errors in Medicare fee-for-service claims. CMS recently implemented a permanent RAC program following a three-year demonstration project that ran from 2005 to 2008 in selected states. Throughout this process, ACP has advocated for program transparency to minimize the administrative and resource burdens that its members anticipate in future compliance efforts.

ACP joined with other medical societies in sending a March 2009 letter to CMS recommending that RACs:

  • be prohibited from reviewing claims for evaluation and management services,
  • be prohibited from extrapolating the results of review of a limited to sample to a broader universe of claims to arrive at a higher overpayment amount, and
  • be limited in the number of claims they can review.

The letter also recommends that CMS ensure that physicians receive adequate education regarding the RAC program.

A June 2008 ACP Internist article provides additional background on the RAC program. Below is information describing recent developments.

Q: When will the RACs begin reviewing claims and contacting physicians?

A: The following dates are the scheduled RAC activation dates for the indicated states. RACs for most states have already begun their work:

  • October 2005: New York, California, Florida
  • July 2007: South Carolina, Arizona, Massachusetts
  • January 2009: Maine, Vermont, New Hampshire, Connecticut, Rhode Island, Minnesota, Wisconsin, Illinois, Michigan, Indiana, Ohio, Kentucky, West Virginia, Virginia, North Carolina, Tennessee, Alabama, Georgia, Montana, North Dakota, South Dakota, Wyoming, Utah
  • July 2009: Pennsylvania, New Jersey, Maryland, District of Columbia, Delaware, Colorado, New Mexico, Oklahoma, Texas, Arkansas, Louisiana, Mississippi, Washington, Idaho, Oregon, Hawaii

Q: Who is actually doing the claims reviews, and what rules do they follow?

A: The RACs must be staffed by nurses, therapists and certified coders, and a full-time physician contractor medical director (CMD).

In conducting their audits, the RACs are required to follow the same regulations as other Medicare contractors do: the CMS manuals, local coverage determinations, national coverage determinations, U.S. Department of Health and Human Services Office of the Inspector General (OIG) work plan (as an indicator of current areas of concern for the agency), and previously identified RAC claims issues. Before beginning widespread audits, the RAC must receive CMS approval for pursuing that line of audit, and then those issues must be posted on the RAC Web site for public notice before the audit begins.

A major point of contention for ACP members is the possibility of audits of evaluation and management coding. The College recently conveyed its concerns to CMS. Although the demonstration program prohibited audits of evaluation and management coding, the permanent RAC program does not. Even so, RAC program officials have stated publicly that they do not foresee that a RAC would base audits on what are essentially professional judgment calls, such as distinguishing between similar levels of office visits.

RACs can review claims as far back as three years from the current date (no claims prior to Oct. 1, 2007 will be included).

Q: Will medical records be requested for all claims reviews?

A: There will be two basic types of reviews: automated reviews in which no medical records are needed, and complex reviews in which medical records will be requested from the physician. There are parameters set for 2009, in terms of how many medical reports they can be requested from physicians for complex reviews:

  • sole practitioner: 10 medical records per 45 days per national provider identifier (NPI)
  • partnership (2-5 individuals): 20 medical records per 45 days per NPI
  • group (6-15 individuals): 30 medical records per 45 days per NPI
  • large group (16+ individuals): 50 medical records per 45 days per NPI

For 2010 and beyond, CMS has some discretion in modifying the medical records request limits.

Q: What can we do to prepare our practice for the RAC audits?

A: We advise physicians to begin preparing for the RACs by conducting self-audits of their own practices, to ensure that their claims will be coded and submitted according to Medicare rules. Other steps that physicians should take include:

  • Identify the types of claims payment errors that have been identified by the RACs, by referring to the RACs' Web sites (most are not yet operational) and matching that information to any patterns of denied claims within their own practice or facility.
  • Implement your own procedures to promptly respond to RAC requests for medical records.
  • Familiarize yourself with the Medicare appeals process, and be prepared to file an appeal before the 120-day deadline if you disagree with the RAC finding.
  • Keep track of denied claims and take action to correct any previous errors.
  • Determine the corrective actions your practice will need to take to assure future compliance with Medicare regulations and coding requirements.

Q: Where can I learn more about the RAC program?

A: Provider outreach and education is being provided by CMS. At this time, the CMS Web site is the most current source of updates; currently, only CGI (Region B) has an operational Web site. The RAC-specific Web sites will be brought online later in the year.

CMS is hosting in-person sessions in some states; there are also periodic national conference calls to learn about RAC topics. Watch for announcements of these sessions at CMS's RAC Web site.

Additionally, you can request automated e-mail updates for the RAC program by signing up for the listserv.