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Guide to Understanding RACs: 5 Steps for Your ASC to Become Better Prepared

With Recovery Audit Contractors dedicated to making significant recoveries from healthcare providers, it is critical that all providers are compliant with Medicare coding and reimbursement requirements. Upfront compliance is essential to avoiding overpayments and/or underpayments as a result of incorrect coding and billing.

The goal of the recovery audit program is to identify improper payments made to healthcare providers for services provided to Medicare beneficiaries. Improper payments may consist of overpayments and underpayments. According to CMS, healthcare providers that might be reviewed include hospitals, surgery centers, physician practices, nursing homes, home health agencies, durable medical equipment suppliers and any other provider or supplier that bills Medicare Parts A and B.

A national RAC permanent program was developed as a result of a successful three-year RAC demonstration program that initially identified Medicare overpayments and underpayments to healthcare providers and suppliers in the pre-selected states of California, Florida, New York, Massachusetts, South Carolina and Arizona.

The three-year RAC demonstration resulted in approximately $900 million in overpayments being returned to the Medicare Trust Fund and nearly $38 million in underpayments returned to healthcare providers between 2005 and 2008.

The permanent RAC program began operating in several states March 1, with implementation for the remaining states tentatively scheduled after Aug. 1. Congress has required that the permanent RAC program be fully implemented by Jan. 1, 2010.

Four permanent RACs will advance the collection efforts for Medicare:

  • Region A: DCS Diversified Collection Services of Livermore, Calif. (DCS) - (866) 201-0580 — www.dcsrac.com — covering CT, DE, DC, ME, MA, NH, NJ, NY, PA, RI and VT.
  • Region B: CGI Technologies and Solutions of Fairfax, Vir. – (877) 316-7222 — http://racb.cgi.com — covering IN, MI and MN. IL, KT, OH and WI will be added to RAC Region B in 2009
  • Region C: Connolly Consulting Associates of Wilton, Conn. –(866) 360-2507 — www.connollyhealthcare.com/RAC — AL, AR, CO, FL, GA, LA, MS, NC, NM, OK, SC, TN, TX, VA, WV and the territories of Puerto Rico and U.S. Virgin Islands.
  • Region D: HealthDataInsights, Inc of Las Vegas, Nev. - Part A: (866) 590-5598, Part B: (866) 376-2319 — http://racinfo.healthdatainsights.com — AK, AZ, CA, HI, IA, ID, KS, MS, MO, ND, NB, NV, OR, SD, UT, WA, WY, Guam, American Samoa and Northern Marianas,

Note: The four RACs will contract with subcontractors to supplement their efforts. PRG-Schultz will serve as a subcontractor to HDI, DCS and CGI in regions A, B and D. Viant Payment Systems will serve as a subcontractor to Connolly Consulting in region C.

What your facility should know

  • RACs review Medicare claims on a post-payment basis with the reviews being either an automated (no medical record needed) or complex (medical record required) review.
  • RACs cannot conduct widespread complex reviews without CMS approval (pilot studies are an exception although monies from the study cannot be recovered unless CMS later approves the issue). Approved issues will be posted to RAC Web sites before widespread review.
  • RACs don't need approval for automated reviews (billing errors such as duplicate claim filings, etc.).
  • RACs are limited in the number of accounts that can be reviewed. The number of records a RAC can request from a provider is determined by the size of the physician practice (solo, # in physician group, etc.) or a percentage of the average monthly Medicare paid claims for an inpatient/outpatient hospital, per 45 days. Furthermore, claim review is limited to a three-year period, meaning the RAC contractor cannot go back more than this timeframe from the date of the initial determination of a claim. To learn more, click here to review "RAC Medical Record Request Limits" (pdf).
  • RACs use the same Medicare policies as carriers, FIs and MACs: NCDs, LCDs and CMS Manuals.
  • RACs are required to employ a staff consisting of nurses, therapists, certified coders, and a physician medical director.
  • RACs are required to accept images of records on CD or DVD if a facility goes this route. CMS is still reviewing the recommendation of reimbursing for costs of the more traditional duplicating/copying of records for RAC requests.

5 steps your facility should take to prepare for and respond to a RAC audit
1. Appoint a RAC committee. This team should include representatives of your facility's health information management, patient financial services, compliance and clinical departments. Your RAC team will be responsible for analyzing past RAC demonstration reports, assessing your ASC's risk, reporting findings of potential financial impacts and establishing new internal policies and procedures for RAC reviews. Your RAC committee should be charged with addressing RAC requests and denial processes while at the same time keeping your ASC departments informed as to RAC proceedings and findings.

2. Assess your facility's past and present policies (medical records, documentation, coding, and billing practices). Upfront compliance is essential to avoiding overpayments and/or underpayments as a result of incorrect coding due to insufficient or questionable documentation. A strong working relationship between the facility and its physician(s) is fundamental to improving documentation of conditions, surgical procedures and medical necessity.

3. Utilize past audit findings. Healthcare providers are encouraged to analyze the RACs service-specific findings from the initial RAC demonstration and any subsequent reviews. This will provide insight into procedures and services targeted in recent months by the RACs. ASC facilities should already have a written internal audit plan in place. Use your facility's past internal and/or external audit findings to identify areas of vulnerability and potential financial impact.

4. Utilize RAC Web sites. Permanent RAC findings will be listed on the RACs' Web sites, as well be a list of CMS-approved audit issues. Facilities should visit their RAC Web sites for the approved audit issues and future updates. As of this writing, CMS has recently approved the following audit targets for both Connolly Healthcare and HealthDataInsights with a few minor differences in states affected and types of claims (Part A or Part B) reviewed:
  • blood transfusions;
  • untimed codes;
  • IV hydration therapy;
  • bronchoscopy services;
  • once-in-a-lifetime procedures;
  • pediatric codes exceeding age parameters; and
  • J2505: Injection, Pegfilgrastim, 6 mg.


RAC Web sites will provide the approved audit issues, description of the issues, dates of services impacted, states affected and documentation sources. It is recommended that providers do a focused internal review of those applicable procedures or services.

5. Appeal unfavorable RAC determinations. Don't be intimidated by the RAC audit findings. A facility that never appeals or rebuts any audit when warranted could find itself under the microscope more frequently than it would prefer. Remember, each RAC is paid based on a percentage of the improper payments corrected by the RACs. If your facility isn't taking the time to provide documentation to support its position for each account found to be incorrect, why would RAC close the window of opportunity for future recoupment? Don't become an ongoing target. Develop a strategy for appealing unfavorable RAC determinations. Remember, during the RAC demo, many appeals were won by providing current and credible documentation (i.e. Local Coverage Determinations, CMS guidelines, etc.).

Facilities need to respond quickly should they receive a notice of an impending recoupment. While CMS offers five levels in the Part A and Part B appeals process, the RAC program allows the opportunity for an optional 15-day rebuttal not considered part of the five levels. Furthermore, RAC deadlines for the appeals process should be considered if a facility is hoping to postpone a recoupment. Consider the following deadlines:

  • The provider has 15 calendar days to submit a rebuttal after receiving a notice signaling an impending recoupment. This is an optional step, not included in the five levels of the appeals process for Medicare
  • The provider has 30 calendar days to file an appeal for Redetermination. Medicare will begin recoupment of overpayments on the 41st day from the date of the demand letter. Under Medicare's Five Levels of Appeals, a redetermination appeal has to be filed within 120 days.
  • Facilities will need to be geared to act within 40 days so recoupment will be postponed while the appeal is considered.
  • The provider has 60 calendar days from a partial determination or full affirmation of an overpayment redetermination to file an appeal for a second level reconsideration as opposed to the maximum 180 days of receipt of the redetermination.


Ms. Bentin (cristina@ccmpro.com) is a principal with Coding Compliance Management, a consulting company specializing in coding support, reimbursement and training for ASCs and specialty hospitals. Learn more about CCM at www.ccmpro.com.

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