Updated on: June 22, 2012

RACs Must First Show Why Claims Might Contain Errors

Original story posted on: December 29, 2008

cservais120dsRACs will need CMS approval first to initiate a target review -

As you are contemplating how the Recovery Audit Contractors will approach their targeted review, you can follow along as we work our way through the process together.


The RACs will receive the Medicare claims database for providers in their area.  The oldest claims will be those for services performed on or after October 1, 2007.  CMS will update the claims database quarterly.  Eventually, each RAC will have a database that contains three years of claims data.


In selecting claims to review, the RAC cannot use a purely random sample other than to establish error rates.  The RAC also cannot target high dollar claims.  In order to review a claim or group of claims, the RAC must show the reasons that the claim(s) are likely to contain payment errors and obtain approval from CMS for proceeding with the targeted review.


The RACs will look to other government agencies to help determine areas for review.  Targets will come from the Medicare Administrative Contractors (MACs), Office of Inspector General (OIG), Government Accountability Office (GAO), Quality Improvement Organizations (QIO), and Comprehensive Error Rate Testing (CERT) reports.


There are two types of RAC reviews.  The first type of review is an automated review.  In this instance, the RAC is able to identify payment errors by the use of the data mining technique alone (e.g. duplicate claims, payment errors, etc).  In the second type of review, the RAC uses their data mining capabilities to identify claims that have a high likelihood of containing payment errors.  For these claims, the RAC will request a copy of the medical record from a provider and determine from record review if a payment error exists.


In the complex review process, the RAC will request copies of medical records from a provider.  The provider has 45 days to submit the copies to the RAC.  If the provider does not submit the copies, the dollars originally paid to the provider for the claim will be recouped.  RACs may accept imaged or electronic records; however, the process has yet to be defined.


In the permanent RAC process, CMS placed limits on the number of medical records the RAC can request at one time.  For inpatient hospitals, inpatient rehabilitation facilities, skilled nursing facilities, and hospices, the number of medical records the RAC may request is limited to 10% of the average monthly Medicare claims for the facility up to a maximum of 200 records every 45 days.


For other Part A billers (e.g. outpatient hospital departments, home health agencies), the RAC may only request the number of records equal to 1% of the monthly Medicare claims for the provider up to a maximum of 200 records every 45 days.


For physicians in solo practice, the RAC may request 10 records every 45 days; 2 – 5 member physician practice – 20 records; 6 – 15 member physician practice – 30 records; and over 16 members – 50 records.  For other Part B billers (e.g. Durable Medical Equipment, Lab), the number of medical records that the RAC can request is limited to 1% of the average monthly Medicare Claims for the provider every 45 days.


In summary, the review process for the permanent RACs will differ from the process used in the demonstration in the following ways.


Demonstration RAC

Permanent RAC

Audited whatever they wanted

Must obtain CMS approval for audit topic

Claims had to be a year old or more before they became part of the database

Can audit any claim once it has been paid

Could go back 4 years

Can only go back 3 years, but can’t audit any paid claim prior to Oct 1, 2007.

No limit on number of records requested /month from a provider

CMS has limited the number of records requested by provider type and size

No requirement for a physician reviewer to be on staff

RAC required to have physician reviewer

RAC paid for record copies quarterly

RAC must pay for record copies by 10th of month ($.12/page for PPS providers; $.15/page for non-PPS providers)

No certification requirements for reviewers

Coding reviews must be done by certified coders; medical necessity reviews by therapists or RNs


The RAC is to notify providers of the results of the record review within 60 days of receipt of the records.  The findings may indicate – no change in payment, identification of overpayment and the amount of funds to be recouped, or identification of underpayment and the amount of funds to be paid to the provider.


The next article will present the ways in which a provider can respond to RAC findings.


By: ByCheryl E. Servais, MPH, RHIA

Ms. Servais, MPH, RHIA, is Vice President, Compliance and Privacy Officer for Precyse Solutions

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Cheryl E. Servais, MPH, RHIA

Cheryl Servais has more than 25 years of experience in Health Information Management. In her position at Precyse Solutions, Ms. Servais' responsibilities include planning, designing, implementing and maintaining corporate-wide compliance programs, policies and procedures, and updating them to accommodate changes in federal and other regulations. In addition, she oversees training and development programs related to ethics, compliance and patient privacy; develops and chairs compliance and privacy advisory committees at the Executive and Board levels; and takes an active role in professional organizations.

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