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The Centers for Medicare & Medicaid Services Recovery Audit Contractor Program

By Nancy J. Beckley, MS, MBA, CHC

The Centers for Medicare & Medicaid Services (CMS) Recovery Audit program has been under way for more than 6 years. Following a demonstration program that ran from 2005 through 2008 in several states, the Recovery Audit Contractor (RAC) program was permanently implemented in the Tax Relief and Health Care Act of 2006. According to CMS, the mission of the RAC program is to identify and correct Medicare improper payments through the efficient detection and collection of overpayments made on claims of health care services that are provided to Medicare beneficiaries. It also identifies underpayments to providers so that the CMS can implement actions to prevent future improper payments in all 50 states.

Outpatient therapy providers have likely experienced RAC reviews for claims over the $3,700 therapy threshold in 2013 when CMS transferred the manual medical review program from the Medicare Administrative Contractors (MACs) to the RACs on April 1, 2013. Although CMS authorized the RACs to conduct manual medical reviews of therapy claims over $3,700 in 2014, the RAC program was paused at the end of February 2014, to let the claims under review at that time process through the system while CMS awarded contracts for the new RACs.

In January 2015 CMS authorized the RACs to resume manual medical review of therapy claims over the $3,700 threshold to clear the backlog of claims over $3,700 that were paid from March 1 through December 31 of 2014. As of February, CMS was recommending five distinct cycles of Additional Documentation Request (ADR) to clear the backlog of claims slated for review. Each ADR period is consistent with the RAC ADR 45-day cycle. Each cycle would allow for an increasing percentage of claims to be reviewed until 100 percent had been achieved at the end of the fifth ADR cycle.

Q: Who are the current recovery auditors? And how do we know which RAC will potentially request our records? Can more than one RAC request the same records?

A: The current legacy RACs continue to work under a contract extension from CMS, while a bid protest in three of the four A/B regions for the new round of RACs is under way. The legacy RACs and their websites are:

Q: How does the RAC determine which providers and which records will be reviewed?

A: CMS has a process in which “issues” are approved to be reviewed by the RACs. Following that approval process the RAC is given authorization to begin review for each issue. The RACs are required to post the approved issue to their website and include regulatory citations and references related to that issue. Not all issues are posted in each region, so a provider in region A may undergo an RAC audit for issues that are not posted as an issue in region C, for example.

Q: Is it true that the RACs are paid to find errors in therapy records?

A: The RACs are paid on a percentage of the savings that they return to the Medicare Trust Fund. The percentage is determined during contract negotiations with CMS. The current “legacy” RACs percentages are as follows:

  • Region A – 12.45 percent
  • Region B – 12.5 percent
  • Region C – 9 percent
  • Region D – 9.49 percent

While the RACs do have a financial incentive under their contract to find errors, there may be some solace in knowing that small therapy claims are not likely to return enough money to support the skilled review. However, CMS expects that the RACs will do a cross section of providers and not just focus on high dollar hospital claims.

Q: What is an automated review? I had some money recouped by my MAC, and I was unaware that they could do that. When I inquired, I was told the money was recouped because of an automated review that I was not aware of.

A: The best way to think of an automated review is to think of a computer-based claims analysis for errors that can be detected on the claim. For example, one of the first automated reviews by the RACs in 2008 involved billing of therapy untimed codes in units greater than one. An analysis of claims data would demonstrate when an untimed code—for example, unattended electrical stimulation (G0283)—is billed in units greater than one. In an automated review the medical record is not reviewed to make an overpayment determination. A demand letter is sent to the provider, and the provider has the opportunity to open a discussion period with the RAC as well as to appeal prior to the beginning of recoupment. In the instance that you mention, it would appear that the MAC recouped the money and you potentially overlooked or did not receive the demand letter that listed options for responding.

Q: How do I appeal an RAC audit?

A: Appealing an RAC audit is the same process for appealing a denial from the MAC (Medicare Administrative Contractor). Keep in mind, as noted in previous compliance articles, that the CMS appeals process is currently backlogged, and pending the clearing of claims at the third level of appeals (Administrative Law Judge [ALJ]), it is likely to take two-and-a half to three years to get an ALJ hearing. The ALJ level is where most therapy providers get the best opportunity to present their case and get a denial overturned.

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Q: If I am a private practice and also enrolled as a durable medical equipment (DME) supplie, will I be subject to additional RAC audits? What will the RAC be looking for related to our hand therapy program and the fabrication of splints?

A: DME suppliers, including physical and occupational therapists, have always been subject to RAC audits based on the posted approved issues. However, in 2015, the likelihood of an RAC audit for a DME supplier has significantly increased. CMS awarded a contract on December 30, 2014, for a nationwide recovery auditor to focus on DME, home health, and hospice. The contract was awarded to Connolly, currently the legacy region C RAC.

If you are a DME-enrolled supplier it is important that you are aware of all the requirements inherent in being a supplier. Four regional DME MACs exist, and all of them have provider manuals that should be referenced. All of the DME MACs offer provider outreach and education including seminars and webinars. Many therapy providers fabricating and issuing splints as part of a therapy program often overlook the requirements for the mandatory delivery ticket. The delivery ticket and compliance with all the required components is a good place for a therapy clinic to start in terms of ensuring documentation for splints (and other DME) is complete.

As with all therapy programs, your compliance monitoring and auditing program should be set up to ensure oversight of the required DME supplier standards that must be met. The DME regional MACs and their websites are:

Q: I am having trouble with RAC reviews that were conducted by prepayment review in 2013 in which there were no findings, but our practice has not received payment.

A: A lot of providers have reported communication problems not of their making. Due to the unique requirement for communication to providers on manual medical review of therapy claims over $3,700, providers find themselves with the RAC indicating it is an MAC problem and the MAC indicating it is a RAC problem. Meanwhile, the provider is left without payment or assistance on how to approach the problem.

In mid-2014, CMS announced the establishment of a Provider Relations Coordinator, which will help increase RAC program transparency as well as to offer more efficient resolutions to providers affected by the medical review process. According to CMS they established the Provider Relations Coordinator role to improve communication between providers and CMS. CMS has emphasized that providers should continue to take questions about specific claims directly to their RAC or (MAC) who conducted the review. However, providers can raise more global issues with the Coordinator.

CMS cites as an example “If a provider believes that a Recovery Auditor is failing to comply with the documentation request limits or has a pattern of not issuing review results letters in a timely manner, CMS would encourage the provider to contact the Provider Relations Coordinator Latesha Walker at RAC@cms.hhs.gov (for Recovery Auditor review process concerns) or MedicareMedicalReview@cms.hhs.gov (for MAC review process concerns/suggestions).”1


1. The Centers for Medicare & Medicaid Services (CMS) Recovery Audit program. Accessed March 2015.


Nancy J. Beckley, MS, MBA, CHC, is certified in health care compliance by the Compliance Certification Board, and is a frequent speaker and author on outpatient therapy compliance topics. She advises practices on compliance plan development and audit response. Questions and comments can be directed to nancy@nancybeckley.com.

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