The RAC Audit: Beware

May 4, 2021

How often have you or an HHA that you know, undergone a CMS Audit? These days it’s becoming more popular for the government to audit HHAs on the grounds of overpayment, no or insufficient documentation, incorrect coding, fraudulent activities, or any one of ten other things. In 2013 alone, CMS has recouped over $3.1 billion mainly due to insufficient documentation. The RAC audit is one of the many audit types, which was developed during the Bush Administration to protect the Medicare Trust Fund and taxpayers against over payments. This blog will give you a basic understanding of the RAC audit, the common myths surrounding a RAC audit, and tips on how to prepare for a RAC audit.

Understanding the RAC Audit

Recovery Audit Contractors (RAC) are privately contracted audit firms that are given authorization to scour your organization’s records to identify and correct improper Medicare Part A & Part B payments. RAC audits are very comprehensive and quite lethal in nature as they can recoup payments up to a look back period of three years from the date the claim was paid or at the earliest October 1, 2007. RAC audit firms employ certified coders, nurses, therapists, and even a physician CMD so you can be certain that they have the technical knowledge to find any discrepancies. RAC auditors receive contingency payment meaning they are generally paid between 9 to 12.5 percent of the recouped amount as compensation. All the more reason for RAC audits to be more
aggressive and thorough in nature.

There are three types of RAC audit reviews described below:

  • Automated – no medical record required.
  • Semi-Automated – claims review using data and potential human review of a medical record or other documentation.
  • Complex – medical record required.

Which HHAs are more likely to be given a RAC audit?

  • Agencies with high volume of claims
  • Duplicate claims submitted
  • Agencies with a history of survey and claim problems
  • Failure to provide claim supportive documentation
  • Agencies with outliers, LUPAs, and exceeding therapy thresholds
  • Services are medically unnecessary or there is a delayed implementation
  • Agencies with coding inconsistencies and errors
  • Services are incorrectly coded and sequenced.

Common RAC Myths

Although RAC audits are deemed as one of the more serious audits, they are often exaggerated to the extent that people feel that their HHA is doomed once they receive a RAC audit request. Here are the top 10 most common myths circulated about RAC:

  • Myth #1: RACs deny every claim that they review
  • Myth #2: RACs have a contingency fee of between 30 to 50 percent
  • Myth #3: Every RAC denial is overturned on appeal
  • Myth #4: RAC have non-clinicians conduct review of medical records
  • Myth #5: RAC create their own policies and are not bound by CMS regulations, NCDs, or LCDs
  • Myth #6: RACs can review as many claims as they want from a provider
  • Myth #7: RACs don’t have physicians on staff
  • Myth #8: RACs are focusing complex reviews on Critical Hospital claims
  • Myth #9: RACs don’t tell anyone what they are reviewing
  • Myth #10:RACs do not issue detailed result letters

Preparing for a RAC Audit

Once you know that your HHA has been targeted for a RAC audit, you should immediately conduct an internal review. In some scenarios, it may be necessary for you to seek experienced legal counsel to mitigate the risk of the audit. Below is a set of guidelines your HHA might want to follow to be thoroughly prepared for your audit.

  • Start a Compliance Committee within your organization. You will want to involve several different departments such as finance, risk management, legal, compliance, medical records, etc. in order to identify key billing issues, overpayment, and develop a corrective plan to remedy any outstanding issues.
  • Review common issues that could lead to common billing errors such as
    • Inadequately trained staff
    • Lack of time
    • Not following recommendations in Federal Register bulletins
    • Misinterpreting rules
    • New staff
  • Select a knowledgeable point person from your firm to handle all the RAC requests and communication/coordination with all other departments. Your point person should also develop rapport with the regional RAC because it is up to him/her to communicate all information in a timely manner.
  • Review historical information from the past and see if you have encountered particular errors before. Review ORT and CERT findings of the past.
  • Religiously read the CMS website and RAC updates to ensure that your agency is up to date on all rules and regulations.
  • Educate and reeducate your personnel on all key findings.

Remember the most important thing for any audit is to be organized and prepared. Do not assume that you can hide anything from the auditors as they have the skill and experience to find all of your issues. Therefore, I reiterate the importance of compliance. Agencies that use compliance-driven software and follow best practices can and will fend off RAC attacks.

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