Recovery Audit Contractor (RAC) FAQ

As part of the efforts to fight fraud, waste and abuse in the Medicare program, the Tax Relief and Health Care Act of 2006, required a national Recovery Audit Contractor (RAC) program to be in place by January 1, 2010. The goal of the recovery audit program is to identify improper payments made on claims for services provided to Medicare beneficiaries. Improper payments may be overpayments or underpayments.

Overpayments can occur when health care providers submit claims that do not meet CMS coding or medical necessity policies. Underpayments can occur when health care providers submit claims for a simple procedure, but the medical record reveals that a more complicated procedure was actually performed. Providers that could be reviewed include hospitals, physician practices, nursing homes, home health agencies, durable medical equipment suppliers and any other provider or supplier that submits claims to Medicare.

None are currently planned.

In March 2020, CMS suspended RAC reviews due to the 2019-Novel Coronavirus (COVID-19) Public Health Emergency (PHE). However, in August 2020 RAC audits resumed.

CMS recently modified the RAC program in response to many concerns raised. These modifications in the program have been made to reduce provider burden, according to CMS. Improvements include the following:

The RACs in Regions 1-4 perform postpayment review to identify and correct Medicare claims that contain improper payments (overpayments or underpayments) that were made under Part A and Part B for all provider types other than Durable Medical Equipment, Prosthetics, Orthotics and Supplies and Home Health/Hospice. The Region 5 RAC is dedicated to the postpayment review of DMEPOS and home Health/Hospice claims nationally. In May 2016, CMS revised the method used to calculate additional documentation requests (ADR) limits for institutional providers (Facilities).

No. Other entities such as Medicare Administrative Contractors, Medicaid, Program Safeguard Contractors, Office of Inspector General or Quality Improvement Organizations (QIOs) could still review a provider's claims. The RACs will not review a claim that has previously been reviewed by another entity. One new entity is the Supplemental Medicare Review Contractor (SMRC). The Centers for Medicare & Medicaid Services (CMS) has contracted with Strategic Health Solutions, LLC, a Supplemental Medical Review/Specialty Contractor (SMRC) to “perform and/or provide support for a variety of tasks aimed at lowering the improper payment rates and increasing efficiencies of the medical review functions of the Medicare and Medicaid programs”.

SMRC will be conducting nationwide medical review as directed by CMS. The medical review is performed on Part A, Part B, and DME providers and suppliers. Provider Compliance Group/Division of Medical Review and Education (DMRE) will select the services and provider specialties that will be reviewed. SMRC will evaluate medical records and related documents to determine whether Medicare claims were billed in compliance with coverage, coding, payment, and billing practices. CMS internal data analysis, the Comprehensive Error Rate Testing (CERT) program, professional organizations and Federal oversight agencies will contribute to determining what is to be audited. Once errors are identified, CMS will be notified of the improper payments and/or noncompliance with documentation requests.  At that point, the MAC may determine to initiate claim adjustments and/or overpayment recoupment actions through the established Medicare overpayment recovery process.

The country has been divided into five regions. Each region has been awarded to a contractor. The RACs were selected under an open bidding process. The RACs will be paid on a contingency fee basis on the overpayments and underpayments they identify.

RACs in Regions 1-4 will perform post payment review to identify and correct Medicare claims specific to Part A and Part B.

Region 5 RAC will be dedicated to review of Durable Medical Equipment, Prosthetics, Orthotics, and Supplies (DMEPOS) and Home Health / Hospice.

Medicare Fee for Service RAC Contact Information

Providers should first attempt to contact the Recovery Audit Contractors (RAC) through the customer service line. If that does not answer the provider's questions and/or concerns, then the provider can email CMS. 

The RAC contractors are tasked with identifying improper payments made on claims of health care services provided to Medicare beneficiaries. Each RAC uses their own proprietary software and the RAC's interpretation of Medicare rules and regulations. These payments may be underpayments or overpayments. This will be done by focusing auditing efforts on companies and individuals whose billings for Medicare services trend higher than the majority of providers and suppliers in their community. In these cases, the RAC proprietary software has determined there is a possibility that the claim may contain an error.

Under most circumstances, the RAC will request medical records from the provider to determine whether overpayment(s) and/or underpayment(s) have occurred. When medical records are submitted, the process is called a Complex Review. In these cases, the RAC proprietary software has determined there is a high probability (but not certainty) that the claim contains an overpayment.

In some situations, the RAC may use automated reviews to demand monetary recoupment (where NO medical record is involved in the review) in situations where the RAC proprietary process determines with certainty that the claim contains an overpayment. An automated review must:　

1. Have a clear policy that serves as the basis for the overpayment ("clear policy" means a statute, regulation, National Coverage Determination, coverage provision in an interpretive manual, or Local Coverage Determination that specifies the circumstances under which a service will always be considered an overpayment);
2. Be based on a medically unbelievable service; or occur when no timely response is received in response to a medical record request letter.　

The RAC will also work directly with beneficiaries to ensure they received the durable medical equipment or home health services for which Medicare was billed and that the items and services were medically necessary. The RAC's will review paid claims for all Medicare Part A and B providers to ensure their claims met Medicare statutory, regulatory and policy requirements and regulations.

Payments will be deemed improper when:

1. Payments are made for services that were medically unnecessary or did not meet the Medicare medical necessity criteria.
2. Payments are made for services that are incorrectly coded (e.g., the provider submits a claim for a certain procedure, but the medical record indicates that a different procedure was actually performed).
3. Providers fail to submit documentation to support the services provided when requested or fail to submit enough documentation to support the claim.
4. The provider is paid twice because duplicate claims were submitted.
5. Other errors are made (e.g., carrier pays the claim according to an outdated fee schedule).　

Medicare pays a claim that should have been paid by a different health insurance company (e.g. beneficiary is employed and gets health benefits through his or her job, that health insurance company-not Medicare-that may be the primary payer of the beneficiary's health care services).

The RAC Contractor has the ability to perform extrapolation based on improper payments identified during a review.

When RACs choose to do extrapolation, they will have to follow all of the same instructions that the CMS carriers, FIs and MACs have to follow about selecting a statistically valid random sample using a statistician and any other requirements for using extrapolation.

Interest will accrue from the date of the final determination and be charged on an overpayment amount for each 30-day period that payment is delayed. Any payments received from a provider will be first applied to any accrued interest and then to any remaining principal balance.

If a request is received for records from a RAC contractor, the records requested must be sent in a timely manner. The response must be received within 45 calendar days or request an extension within those 45 days. The RAC may make a finding than an overpayment or underpayment exits if there is no timely response to a request for medical records. When you receive a records request from a RAC, you should have the claim in question reviewed internally and start preparing to file an appeal in the event that the RAC determines that the claim was overpaid.

1. RAC request for medical records: Providers must respond within 45 days to a RAC request for medical records. Providers may request an extension at any time prior to the 45th day by contacting the RAC. Notify the RAC of the precise address and contact person they should use when sending Medical Record Request Letters. Confirm RAC receipt of the medical records. The RAC may request a site visit to review medical records. The Provider may deny a RAC on-site access to its facility and records. The RAC cannot make an overpayment determination based on lack of access. The RAC would need to obtain copies of the records by submitting a request in writing. Beginning April 1, 2012, CMS began instituting a reimbursement cap of $25 per medical record. Providers submitting medical records to a Recovery Auditor after April 1, 2012 will receive a maximum of $25 per medical record. This includes both the $0.12 per-page cost for photocopying, as well as first class postage.
2. Overpayment Demand Letter received: Call the RAC within 15 days from the date you receive the demand letter to discuss the overpayment and send any evidence to counter an offset. Note: Calling your RAC does not constitute a formal appeal. Recoupment a) payment is not received in full, or b) an acceptable request for an extended repayment schedule, or c) a valid request from a provider for a contractor redetermination is not date stamped in the Medicare contractor's mailroom by day 30 from the date of the demand letter.

Note: if an appeal is filed later than 30 days, the contractor will also stop recoupment at whatever point that an appeal is received and validated, but Medicare may not refund any recoupment already taken.

3. If you believe the request for overpayment is unjustified, you must file an appeal. If you do so within 30 days of receipt of the overpayment demand letter, you will avoid a Medicare recoupment action.  Interest begins to accrue 31 days from the receipt of the overpayment letter, regardless of whether an appeal is filed. No interest accrues if repayment occurs within 90 days.

There are five levels of appeal:

1. 1st Level Appeal: You have 120 days to file the first appeal, which is known as a "redetermination." Redeterminations are conducted by Carriers or Medicare Administrative Contractors (MAC). While you have 120 days to file the first appeal, you can only avoid a Medicare recoupment action if you do so within 30 days. The carrier's decision is usually issued within 60 days from receipt of the redetermination request.
2. 2nd Level Appeal: You have 180 days to appeal to the 2nd level. Second level appeals are called "reconsiderations." Reconsiderations are conducted by Qualified Independent Contractors (QICs). The QIC's decision is usually issued within 60 days from receipt of the reconsideration request.
3. 3rd Level Appeal: You have 60 days to appeal to the 3rd level. At the third level of appeal, an Administrative Law Judge (ALJ) will review your case. If the ALJ level process reverses the Medicare overpayment determination, Medicare will refund both principal and interest collected, and pay interest on any recouped funds that Medicare took from ongoing Medicare payments. The ALJ will generally issue his or her decision within 90 days of receipt of the hearing request.
4. 4th Level Appeal: 60 days to appeal to the 4th level. At the fourth level of appeal, an HHS Department Appeals Board (Medicare Appeals Council) will review your case. The MAC will generally issue its decision within 90 days from receipt of your request for review.
5. 5th Level Appeal: Again, 60 days to appeal to the 5th level. At the fifth level of appeal, a Federal District Court will review your case. At least $1,220 must be in controversy following the MAC review, and this amount will be increased annually.

Medicare expects providers to “Stay in the know on proposed and approved topics that RAC's are able to review.” These topics will be updated monthly on the RAC reviews topic page and include:

1. Name of the Review Topic
2. Description of what is being reviewed
3. States / MAC regions where reviews will occur
4. Review Type (complex review / automated review)
5. Provider Types
6. Affected Codes
7. Applicable Policy References

 TOP ISSUES PER REGION 2020

Medicare published the latest available documentation on RAC recoveries for FY 2020 as follows:

CMS is requiring that the Recovery Audit Contractor post the list of issues that they are going to be reviewing on their website. All proposed new issues come from the RAC. They will be submitted to CMS and have to be approved by CMS. Once they are approved, the new issues will be posted to the RAC Website for each contractor.

RACs are able to review any and all services billed by a physician or any other provider who bills the fee for service under Medicare. RACs must follow the rules in place for all Medicare contractors for physician E/M services, and those rules currently state that a reviewer will review an emergency department claim under the 2023 guidelines.

You may want to consider being proactive in reviewing your company's coding, billing and documentation practices to assure Medicare compliance. Consider taking a sampling of your claims and review the documentation to assure that it supports the billed E/M coding, services billed, medical necessity, and services or test ordered.

1. Review information available from the RACs, CMS and the OIG to identify the types of claims where improper payments have been persistent. Compare these issues to similar claims within your own practice or facility.
2. Proactively audit areas of concern and take corrective actions to prevent future improper claims.
3. Implement procedures to promptly respond to RAC requests for medical records, review results letters and demand letters.
4. Be prepared to appeal any overpayment determinations.

RACs are able to look back three years from the dates the claim was paid.  In 2015, CMS limited the RAC look-back period to 6 months from the date of service for patient status reviews, in cases where the hospital submits the claim within 3 months of the date of service. That same look-back condition will continue in 2024.

The Recovery Audit Prepayment Review programs allow RACs to review claims before they are paid to ensure that the provider complied with all Medicare payment rules. The Targeted Probe and Educate (TPE) program, looks for providers and suppliers who have high claim error rate or unusual billing practices and for items and services that have a high national error rate and are a financial risk to Medicare.

Common claim errors identified are (a)missing provider signature; (b)encounter notes that do not support all elements of eligibility, and (c) Documentation that does not meet medical necessity, and; Missing or incomplete initial certifications or recertification. If chosen, providers receive a letter from their MAC. The MAC will review 20-40 provider claims and supporting medical records. If compliant, the provider will not be reviewed again for at least one year for the selected audit topic. If some claims are denied, the provider will be invited to a one-on-one education session and give a 45-day period to make changes and improve.

Medicaid has implemented RAC audits. The Affordable Care Act (ACA) requires Medicaid agencies to contract with Recovery Audit Contractors (RACs) to identify and recover overpayments and to identify underpayments. States must also develop processes for entities to appeal RAC determinations, and coordinate RAC efforts with other Federal and state law enforcement agencies.  Most states have developed comprehensive Medicaid RAC solutions to meet ACA requirements.

In addition to Medicaid RACs, Medicaid MIC’s (Medicaid Integrity Contractors) report directly to CMS and have the responsibility for Audit, Review and Education. There are five jurisdictions of MICs, New York (CMS Regions I & II); Atlanta (CMS Regions III & IV); Chicago (CMS Regions V & VII); Dallas (CMS Regions VI & VIII); and San Francisco (CMS Regions IX & X).

Yes. According to CMS, it has made changes to the review approval process to even further improve the RACs’ identifications, as well as the overturn rate of appeals. CMS now requires the MACs to validate the RACs’ proposed review methodology and policy interpretations for their particular jurisdictions to minimize incorrect findings. While the review approval process should minimize these occurrences, CMS assures that it will work quickly to resolve the issues, so the provider can avoid the burden of the appeals process when issues do occur.

Additional Reading

1. Medicaid Integrity Program Presentation 
2. FY 2018 Medicare FFS RAC Report to Congress - Appendices (PDF)