What is a RAC Audit?

RAC stands for recovery audit contractors. Do not be confused RAC with medical auditors who audit medical records, but RAC is totally different concept. Presently there are four RACs in the United States each for a specific region. Each RAC is responsible for identifying overpayment and underpayments in approximately ¼ of the country.

The goal of the recovery audit program is to identify improper payments made on claims of health care services provided to Medicare beneficiaries. Improper payments may be over payments or underpayments. Over payments can occur when health care providers submit claims that do not meet Medicare’s coding or medical necessity policies. Underpayments can occur when health care providers submit claims for a simple procedure but the medical record reveals that a more complicated procedure was actually performed.

How RACS works
RACS are companies who has been selected by CMS to identify improper payments to the providers by Medicare. Presently there are four Recovery Audit Contractors. These contractors uses their own software and methods to find discrepancies and identify improper payments. They are facilitated with the database of claims paid by the medicare and they use this database for their investigation of improper claims payment. Suspicious claims are picked and their medical records are requested from the providers. The providers are required to promptly respond to RAC requests for medical records. These medical records are then manually reviewed by expert and certified coders and other staff to find any discrepancy and providers are notified of it if any. If the provider disagrees with the RAC determination, they can file an appeal within 120-days. If it is determined that an overpayment has been made then the providers has to return the overpaid amount to the Medicare Trust. If there is an underpayment then the underpaid amount is paid back to the provider by the Medicare Trust.

Usually overpayment results from incorrect coding, duplicate submission of claims, and overcoding.

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