Recovery audit contractors (RAC) working for the Centers for Medicare and Medicaid Services (CMS) review providers’ program billings on a post-payment basis. As a result, RAC audits present substantial risks—including the risk of providers being forced to repay Medicare using funds they may or may not have.

Along with financial liability, RAC audits can present other risks as well. For example, in some cases, these audits can lead to pre-payment review. While pre-payment review is intended to prevent future improper payments, it can also delay valid reimbursements by weeks (or even months in some cases). In cases involving allegations of egregious Medicaid fraud, program exclusion is a very real risk as well.

“Healthcare services provided under Medicare are subject to strict billing rules and regulations. Billing errors uncovered during RAC audits can trigger substantial penalties, so a strategic defense focused on challenging auditors’ allegations of noncompliance is essential.” – Dr. Nick Oberheiden, Founding Attorney of
Oberheiden P.C.

With this in mind, healthcare providers, durable medical equipment (DME) companies, and other entities that bill Medicare need to take RAC audits very seriously. This starts with understanding the RAC audit process. Once you know what to expect, then you can build and execute a defense strategy focused on protecting your medical practice or business to the fullest extent possible.

About CMS’s Recovery Audit Program

RAC auditors operate under CMS’s fee-for-service recovery audit program. This program is intended to protect taxpayers and Medicare beneficiaries by ensuring that healthcare providers and other entities do not submit claims for non-covered services or provide medical services solely for the purpose of billing the federal government.

If your medical practice or business is facing a RAC audit, here are three key facts to know about CMS’s recovery audit program:

1. The RAC Program Exists to Expose Medicare Billing Fraud

The fee-for-service recovery audit program—and the RAC program specifically—exists to expose Medicare billing fraud. It focuses on efficient detection of overpayments, and it is designed to allow CMS to correct past improper payments without the need for litigation.

2. RAC Auditors Work on a Fee-for-Service Basis

RAC auditors work for CMS on a fee-for-service basis. This means that they receive a contingency fee when they help CMS correct improper payments. As a result, when RAC auditors review claims, their goal is to identify overpayments that CMS can use to pursue recoupments and/or other administrative enforcement action.

3. The RAC Team is Not on Your Side

Since RAC auditors work on a fee-for-service basis, this means that the RAC team is not on your side during an audit. While RAC auditors’ contracts with CMS require them to identify both overpayments and underpayments, audits tend to focus almost exclusively on identifying reimbursements paid improperly.

What to Do When Facing Scrutiny from a Medicare Recovery Audit Contractor (RAC)

Due to the risks involved, responding to a RAC audit requires an informed and strategic approach. Here are seven key steps to take if a RAC auditor is preparing to assess your health care practice’s or business’s Medicare billing compliance record:

1. Engage Experienced Medicare Fraud Defense Counsel Promptly

When facing a RAC audit, it is critical to have experienced defense counsel. Targeted providers and businesses need to engage a defense team that can communicate effectively on their behalf, challenge auditors’ authority, and help steer the audit toward an accurate determination of coverage. Flawed Medicare coverage determinations during RAC audits are not uncommon, so engaging a defense team that is familiar with the complex substantive and procedural issues involved in these inquiries is essential.

Another important reason to engage experienced defense counsel at the outset of a RAC audit is the need to preserve issues for appeal. Even with an informed, strategic, and proactive audit defense, it will still be necessary to navigate the Medicare appeals process in some cases. Along with raising and confronting issues during the audit process, experienced defense counsel will also be able to document these issues so that they can be raised on appeal if necessary.

2. Keep Copies of All Communications with the RAC Auditor (and All Other Relevant Documentation)

To ensure that your practice’s or business’s defense counsel has all of the information needed to provide effective representation, you should be sure to keep copies of all communications with the RAC auditor. This includes the initial audit notice and all subsequent communications in all forms. Once you receive an audit notice, you should generally rely on your practice’s or business’s defense counsel to communicate with the RAC team on your behalf. But, if you have engaged in any communications before engaging counsel, your defense team will need to review these communications as well.

Along with keeping copies of all relevant communications, you should also keep copies of all other relevant documentation. This includes (but is by no means limited to):

● Your practice’s or business’s Medicare compliance program documentation
● Your practice’s or business’s Medicare billing records
● Patients’ medical records and documentation of medical necessity
● Other documentation that substantiates your practice’s or business’s Medicare billings
● Employment records for doctors, nurses, other care providers, and Medicare coding
personnel

The RAC’s nurses, certified coders, and other personnel will expect to be able to access all of these records (among others) during the audit process. However, the extent to which your practice or business is required to provide access to these records will depend on the circumstances at hand, and your defense counsel will be able to assist with meeting your practice’s or business’s disclosure obligations while also ensuring that the RAC team does not overreach in its pursuit of uncovering overpayments.

3. Conduct an Internal (and Privileged) Medicare Billing Compliance Assessment

When facing a RAC audit, it is critical to know what (if anything) the RAC team is going to find. This involves promptly conducting an internal Medicare billing compliance assessment—and this assessment should be conducted with the oversight of your practice’s or business’s defense counsel so that it is protected by the attorney-client privilege.

The purpose of this assessment is not strictly to determine what grounds your practice or business has to defend against any potential Medicare billing fraud allegations, but rather to gain a comprehensive understanding of your practice’s or business’s risk exposure. If this assessment results in the identification of any Medicare billing errors, this will be important to take into account when developing and executing your audit defense strategy.

4. Be Prepared to Proactively Address Improper Medicare Payments

If the RAC team is likely to uncover any improper Medicare payments during the audit process, it will be important to address these overpayments proactively. If auditors allege that your practice or business has knowingly ignored overpayments, this could lead to serious consequences. Along with the audit-related consequences discussed above, this could potentially include a referral to the U.S. Department of Health and Human Services Office of Inspector General (HHS OIG) for civil or criminal enforcement action.

How your practice or business should proactively address improper Medicare payments will depend on the nature of the impropriety and the scope of the problem (among other factors). Here too, it will be important to rely on your defense counsel’s advice to ensure that you are making informed and strategic decisions focused on minimizing any potential financial responsibility and protecting your practice’s or business’s ability to bill Medicare going forward.

5. Be Prepared to Defend Against False Allegations of Improper Payments

When facing a RAC audit, it is critical to independently assess all allegations of impropriety. False allegations of improper payments are not uncommon; and, when auditors reach flawed conclusions, it is up to targeted providers to defend their program billings.

The records and information you have gathered earlier in the process will be key; and, once again, you should rely on your defense counsel’s advice and representation. It is generally best to address these kinds of issues as they arise, as one mistake will often lead to another.

6. Work with Your Counsel to Develop an Audit Defense Strategy

Taking into account everything discussed above, when facing a RAC audit, it is critical to follow a well-defined audit defense strategy. After taking all of the necessary preparatory steps, you should work with your practice’s or business’s defense counsel to develop and implement a strategy that is custom-tailored to the circumstances at hand.

An effective RAC audit defense strategy will consist of several key components. These include a clear internal chain of command, a plan for proactively addressing any outstanding overpayments, and a plan for responding to flawed allegations of noncompliance, among others.

7. Ensure Compliance with the Medicare Billing Rules and Regulations Going Forward

Finally, when facing a Medicare billing audit, it is also important to focus on ensuring compliance going forward. Mistakes as minor as inadvertent coding errors and innocent documentation errors can lead to serious consequences—so it is critical to avoid these mistakes as often as possible. In addition to defending against the audit, your defense counsel should be able to assist with implementing any necessary updates or additions to your practice’s or business’s Medicare billing compliance program—and, if your practice or business is facing substantial liability in the audit, this can help with mitigating the consequences of past billing mistakes as well.