Moving the HME Industry Forward


Changes to the Medicare Recovery Audit Program

June 29, 2015

AMARILLO, TX – The Recovery Audit Contractors, or RACs, are Medicare’s bounty hunters. These auditors are paid a contingency fee to identify improperly paid claims.

While RACs are paid a contingency fee to identify over and underpayments, suppliers are hard pressed to come up with an example of any RAC ever identifying an underpayment. A RAC audit is not as menacing as a Zone Program Integrity Contractor (ZPIC) audit. However the mere mention of a RAC audit is enough to make a supplier want to stop taking Medicare business altogether.

For DMEPOS suppliers, RACs have not been overly active. The RACs concentrated on large providers, such as hospitals. Most RAC audits were automated reviews that centered around issues such as whether or not a patient was in a skilled nursing facility when supplies where furnished.

Automated reviews are “on the record reviews” where medical records are not requested but a decision can be made based purely on the claim submission data. RACs can also conduct complex medical reviews where medical records are requested and reviewed.

The previous RACs conducted very few complex reviews for DMEPOS. The most common complex audit issue in the last round of RAC contracts was related to the medical necessity of power mobility devices. This is about to change.

In the next round of RAC contracts to be awarded, CMS will award a contract for a new Region—Region 5. The Region 5 Contract will be a national contract that will encompass all DMEPOS, home health, and hospice claims.

In June of 2014, the previous round of RAC contracts was wound down. The new round was awarded to Connolly, LLC, in December 2014. There was a post award protest that, as of this date, has not been cleared. However, once the protest is resolved, there will be one national RAC that will only examine DMEPOS, home health, and hospice claims. As a result, these providers will see an increase in additional documentation requests (ADR) from the RAC. There will be no corresponding decrease in audits from other CMS entities. This is another tool available to CMS and will be one more audit entity that must be dealt with as a part of doing business.

The RAC audit program started out as a demonstration program. CMS continues to learn from the feedback it receives about the RAC program. CMS continues to make changes to the RAC program. With this next round of RAC contracts, CMS will also implement a number of changes designed to improve the program by reducing the burden placed on providers, improve CMS oversight, and increase transparency.

Reducing Provider Burden
One of the biggest challenges for providers was often responding to the large number of requests for complex medical review from a RAC. Previously, a RAC records request from a DMEPOS supplier was limited to 10 percent of all claims submitted for the previous calendar year divided into eight periods (45 days).

Although RACS could go longer than 45 days between ADRs, a RAC could not make requests more frequently than every 45 days. Moving forward, ADR limits will be established based on a provider’s compliance with Medicare rules. This means that if a provider has a lower error rate, the provider will be subjected to fewer ADRs. Those who have high error rates will have higher ADR limits.  

Further, as the supplier’s compliance improves, so will the ADRs. This change will reward suppliers that are in compliance with Medicare regulations and will focus more scrutiny where it should be by allowing a RAC to request more records from a supplier that has a higher error rate.

In the past, suppliers had to wait up to 60 days before being notified of the results of a complex review. In the future, the RACs will have 30 days to complete complex medical reviews. By providing more immediate feedback, suppliers will be in a position to correct errors sooner. This will stop the supplier from perpetuating the error and bring the supplier into compliance sooner―saving money for both the supplier and the Medicare program.

Once the RAC notifies a supplier of an overpayment, the RAC must wait 30 days to allow a discussion request before sending the claim to the MAC for adjustment.  This is true regardless of whether or not the supplier files an appeal.

Another important change is that the RAC must confirm receipt of any written correspondence within three business days of its receipt. This will allow suppliers to know if an item has been received or if it has gone astray in the mail.  In the past, the uncertainty was maddening, wondering if your documents had been received or simply disappeared into a black hole.

In prior RAC rounds, each RAC’s webpage was formatted differently and showed different information.  In the next round, CMS will work with the RACs to improve their provider portals so suppliers can expect more consistency.  Since there will only be one RAC that will cover the entire nation, this is not as important for Region 5 providers.  However, having CMS work with the RAC on the provider portal will insure that minimum requirements are met and minimum information will be available.

RACs will not be paid the contingency fee until the second level of appeal is exhausted.  Previously, the RAC was paid after recoupment from the supplier regardless of whether or not the provider chose to appeal.  By waiting until after the second level of appeals has been exhausted, CMS believes that the RAC will make better decisions that are more correctly based on Medicare statutes, coverage determinations, regulations, and manuals.

Changes to Enhance CMS Oversight
There has been plenty of confusion about the RAC program.  Suppliers have repeatedly reported receiving RAC audits when really the audits were coming from another CMS entity.  All people really know about RACs is that they are the bounty hunters for CMS and that they are paid on a contingency basis.  To correct this, CMS is going to provide further information about the RAC program, including increased public reporting of data such as appeals, quality assurance, and timeliness standards.  The additional data will allow the provider community to see that RACs are following the program requirements.

An important change is that RACs will be required to maintain an overturn appeal rate of less than 10 percent at the first level of appeal.  Claims that were denied for no or insufficient documentation will be excluded from this figure.  If a RAC has a higher overturn rate, the RAC could be placed on a corrective action plan or could have decreased ADR limits.  This step is important because, by holding the RAC accountable for its actions, it will ensure that the RAC is correctly reviewing claims and making valid decisions.

In addition, RACs will be required to maintain an accuracy rate of at least 95 percent with its automated reviews.  Failure to do so will result in a progressive reduction in ADR limits.  The RAC validation contractor will continue to be used to assess new issues and determine whether or not the proposed issues are appropriate for audit.

Increasing Program Transparency
In the past, providers were unsure of who to contact for help when experiencing problems with a RAC.  CMS will establish a provider Relations Coordinator who will work with providers to resolve issues that cannot be resolved by dealing directly with the RAC. By establishing this position, providers will have a name and contact information for an individual that can be contacted to resolve issues when discussions with the RAC have resulted in a solution. In addition, CMS will continue to post provider compliance tips to its website and provide education and publish MedLearn Matter articles to ensure providers have the most current information available.  

CMS is also considering whether or not to develop a Provider Satisfaction Survey.  Development of such a survey would allow providers to give CMS valuable feedback on the job being done by the RAC.  A carefully developed survey could identify problems with the RAC and allow CMS to take corrective action before the problem gets out of hand.

RACs will continue to be required to provide consistent and detailed information about the new issues it is reviewing.  A supplier should have someone in their office assigned to review the RAC’s website and identify issues that are relevant to the supplier’s company.  When an issue is posted that affects the supplier’s company, the supplier should conduct a self-audit to determine compliance and take any corrective action.  That way, when the RAC comes calling, and it will, the supplier will be ready.

Medicare has plenty of tools in its arsenal.  RACs are but one of many tools available.  A supplier can expect to see an increase in audits from RACs due to the awarding of one national contract to review DMEPOS, home health, and hospice claims.

A number of changes to the RAC program are being implemented with this next round of RAC contracts. The best advice for a supplier hit with a RAC audit is to be familiar with these changes and prepare a response plan. It’s not a question of if a supplier is going to get a RAC audit but when a supplier is going to get a RAC audit.

This material is provided for informational purposes only and is not legal advice.  Readers should contact their own counsel to obtain legal advice with respect to any specific issue.

Denise M. Leard, JD, is an attorney with the Health Care Group at Brown & Fortunato PC, a law firm based in Amarillo, Tex. She represents pharmacies, infusion companies, HME companies, and other health care providers throughout the United States and Puerto Rico. Leard is Board Certified in Health Law by the Texas Board of Legal Specialization, and can be reached at (806) 345-6318 or