Type of Audits in RAC Programs


There are three types of RAC reviews: automated, complex and semi-automated review. The automated review, also known as claims review, is an electronic analysis of claims. This type of review is based on algorithms that look for inconsistencies (Goedert, 2011). The second type of review is the complex review. This type of review is when auditors request a copy of the medical records so that it can be manually reviewed. It is also possible for an automated claim review to turn into a complex review; in this case this is called a semi-automated review (Centers for Medicare & Medicaid Services, 2013).


Auditors can review records as far back as three years from the date a claim was paid. Auditors may send one request every 45 days to hospitals. The number of medical records perrequest varies on the hospital campus size. CMS uses an equation to determine the maximum number of records that can be requested every 45 days per campus. This limit is then divided into 8 periods of 45 days each. Once the 45 day period has expired, auditors can send another request to replace the initial request. There is no guideline as to how many inpatient, outpatient and professional service records can be requested. The auditors will decide what percent of each service category (inpatient, outpatient or professional service) they want to review. This means that if auditors want to review only inpatient claims, they may do so (MedPlus, 2009).

How do auditors know which services, procedures, categories to audit?

Recovery auditors have proprietary methodologies to determine what services to audit. They data mine their own programs which are based on Medicare rules and regulations, coding and billing polices, sector reviews, etc. They also use reports from the Office of Inspector General (OIG), Government Accountability Office (GAO) and Comprehensive Error Rate Testing (CERT). Based on their findings and national reports, they identify top services and procedures that are most likely to have been improperly paid in their region. These qualifiers are then entered into the RAC database in order to identify Medicare participating providers and being the RAC auditing process (Clark et al., 2009). However, RACs work plan to investigate these qualifiers must be approved by CMS. Auditors must also submit a monthly progress report to CMS that includes updates to the work plan and identifies the next areas of RAC investigation. Hospitals may use these monthly progress reports to improve RAC monitoring and educating and to prevent claim denials (Ziemba, 2014). Hospitals should also understand the audit and appeals process to assist with claim denials. Below is a review of the audit and appeals process:
Overview of the Audit Process
Provider receives “Additional Documentation Request” (ADR) Letter from auditor. This letter specifies which claims RAC wants to review.
o Provider can request an extension prior to 45 days OR
o Provider can fulfil the request; they have up to 45 day to do so. (Clark et al.
RAC has up to 60 days to review the records and make a decision. Auditor sends a “Review Results” letter that specifies audit results (overpayment, underpayment or neither) and their reasoning (Clark et al. 2009). o If an overpayment is identified, the provider will receive a “Demand Letter.” This letter specifies the amount that was overpaid by Medicare and initiates the formal
Medicare appeals process (Clark et al. 2009). o “Rebuttal Process/Discussion Period” gives providers 15 days from the date of the Demand Letter to submit a rebuttal statement with proof that shows why the recoupment of money should not begin. The rebuttal process is optional and is not part of the formal appeals process (AHA, 2009). Even though a Medicare contractor has made a decision to deny a claim, hospitals have the right to appeal their decision (CMS Appeals Fact Sheet, 2014).