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Navigating the RAC Program - From Prevention to Audit Protection

In an effort to identify improper payments made on claims of health care services provided to Medicare beneficiaries, the U.S. Congress passed a resolution in the 2006 Tax Relief and Health Care Act which resulted in the creation of the Recovery Audit Contractors (RAC) program. Administered by the Centers for Medicare & Medicaid Services (CMS), the RAC program permits CMS hired contractors to conduct audits on any relevant medicare stakeholders including "hospitals, physician practices, nursing homes, home health agencies, durable medical equipment suppliers and any other provider or supplier that bills Medicare Parts A and B."

In every state, Texas included, the RAC program has resulted in the recovery of hundreds of millions of dollars due to improper Medicare payments. The program, however, is not without controversy. The American Medical Association (AMA), along with a number of national and state medical associations (including the Texas Medical Association), believe that the RAC program places far too heavy of an emphasis on auditing physician-based practices making good-faith efforts to comply with Medicare program requirements. The priority, the AMA argues, should instead focus on identifying "the best way to reduce common billing and coding mistakes," which make up the majority of improper payments.

Further complicating matters is the unprecedented action of paying RAC's on a commission basis. The more RAC's are able to conduct audits and find improprieties, the more money they add to their bottom line. Quite simply -- the ability for a RAC to profit is determined by its ability to audit your practice.

When researching improper payments, RAC's utilize a function referred to as data mining. Data mining works to identify "outliers or practitioners whose billings for Medicare services are higher or lower than the majority of their peers in the community."

According to the Texas Medical Association, RAC's "scour claims data to identify the most frequently billed codes and to compare that information across specialty areas...The data banks then generate physician profiles based on that information."

If at that point, the RAC determines that an audit is necessary, a letter is sent to the practice detailing:

  • The coverage, coding, or payment policy in violation;
  • The reason for the review;
  • A description of the overpayment;
  • Recommended corrective actions;
  • An explanation of the physician's right to submit a rebuttal statement prior to recoupment of any overpayment;
  • An explanation of the procedures for recovery of overpayments;
  • Notification of the physician's right to request an extended repayment schedule; and
  • Information on the physician's right to appeal.

If you've received a letter from a RAC notifying you of their intent to audit, it's important not panic. You have the right to appeal the decision.

There are five different levels of RAC appeals:

Level 1 -- Redetermination by a Medicare Administrative Contractor

  • Must file request for redetermination within 120 days from the date of receipt of the initial determination.
  • Must be filed in writing.
  • Decision typically issued within 60 days of receipt.

Level 2 -- Reconsideration by a Qualified Independent Contractor

  • Must file a request for reconsideration within 180 days of receipt of the redetermination decision.
  • Must be filed in writing.
  • Decided by a qualified independent contractor.
  • Decision typically issued within 60 days of receipt.

Level 3 -- Administrative Law Judge (ALJ) Hearing or Review by Office of Medicare Hearing and Appeals

  • Must file within 60 days of receipts of the reconsideration decision letter.
  • Must submit in writing.
  • May only request an ALJ hearing if a certain dollar amount remains in controversy following the QIC's decision.

Level 4 -- Review by the Medicare Appeals Council

  • Must file your request for Council review within 60 days of receipt of the ALJ's decision.
  • Must submit in writing.
  • The Council makes the decision. If the Council cannot complete its decision in the applicable timeframe, it will inform you of your rights and procedures to escalate the case to U.S. District Court.

Level 5 -- Judicial review in U.S. District Court

  • Must file a request for judicial review within 60 days of receipt of the Council's decision or after the Council ruling timeframe expires.
  • You may only request a judicial review if a certain dollar amount remains in controversy following the Council decision.
  • The U.S. District Court makes the decision.

The reality is no one likes being audited. They're expensive, time-consuming, and invasive. Furthermore, according to the Texas Medical Association, a RAC audit "can have serious ramifications for a physician's status with Medicare and could place his or her medical license in jeopardy or possibly expose him or her to civil liability."

With over 200 years of cumulative experience, the professional team at Hendershot Cowart P.C., is proud to be an industry leader in health law. If you're being audited by an RAC, we can help guide you through the onerous appeal process, ensuring that all necessary documents are provided and deadlines are met. We can also help you create an internal review process aimed at identifying areas most likely to trigger an RAC audit, and the necessary steps required to eliminate those areas of vulnerability.

If you have questions or concerns related to the RAC program, and how the regulations in the 2006 Tax Relief and Health Care Act may impact your medical practice, contact us today.


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