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What Is an RAC Audit?

Categories: Health Care Law

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Trust the Experience and Expertise of our Recovery Audit Contractor Defense Attorneys

Every year, Medicare pays billions of dollars in false and fraudulent claims. The federal Medicare system is so vast – and the billing rules and regulations are so complex – that even with their vast resources, the Centers for Medicare and Medicaid Services (CMS) and the Department of Health and Human Services (DHHS) are unable to effectively police participating providers on their own.

In need of help, CMS implemented a “fee-for-service” recovery program pursuant to the enabling legislation provisions of the Medicare Modernization Act of 2003. Under this program, CMS pays private government contractors to identify providers that appear to be engaging in Medicare fraud, to audit these providers, and to seek recoupments for fraudulently-billed claims. There are several different classifications of these contractors, each with its own unique scope of authority.

One of these classifications is the Recovery Audit Contractor, or “RAC.” Under the fee-for-service recovery program, RACs are tasked with uncovering fraudulent billings under Medicare Part A and B and Medicaid. They get paid for this service on a contingency-fee basis. This means that – while they have a mandate to identify both overpayments and underpayments – health care providers facing RAC audits can generally expect to be accused of overbilling CMS rather than waiting for a check in the mail.

However, the risk of being forced to pay recoupments for overbilled amounts is only one aspect of facing an RAC audit. There are two much larger considerations as well:

  • Due to the fee-for-service model, RACs tend to aggressively pursue allegations of overpayments, and they will often incorrectly assert that recoupments are due.
  • If an RAC accuses a provider of falsely or fraudulently billing Medicare, the provider can face additional financial penalties (beyond recoupments), loss of federal program eligibility, and possibly even criminal prosecution by the U.S. Department of Justice (DOJ).

As a result, when facing an RAC audit, health care providers need to take a cautious and strategic approach. While there is an appeals process for fee-for-service contractor audits, the process can be costly, and the first several stages of appeal involve taking your case before other audit contractors and administrative bodies. In fact, it is not until the fifth level of appeal that health care providers who have been unjustly accused of overbilling Medicare get their day in court. Taking a proactive approach is the best way to minimize the consequences of an RAC audit, and this starts with hiring experienced federal health care defense attorneys who can spot the flaws in RAC auditors’ calculations and ensure that the appropriate Medicare standards are applied to each of your billings that is subject to review.

Understanding Your RAC Audit

1. An RAC Audit Can Cover Three Years of Medicare Part A and B Billing Records

RAC audits can be invasive and disruptive procedures. Recovery Audit Contractors have the ability to review up to three years of billing records for Medicare Part A and B, and also for Medicaid. For large facilities and busy pharmacies and medical practices, this can potentially mean tens of thousands of records are subject to review.

2. RACs Prioritize Uncovering Overpayments as Opposed to Identifying Underpayments

Despite the stated policy of CMS’s fee-for-service recovery program to identify both overpayments and underpayments, RACs greatly prioritize uncovering overpayments during the audit process. Once again, this is due to CMS’s contingency-fee payment structure, which provides a clear financial incentivize for RACs to claim the largest net overpayment possible.

3. The RAC Audit Process is Fallible

Recovery Audit Contractors rely on both technological resources and human auditors, both of which are prone to error. As a result, health care providers cannot simply take RACs at their word, and they cannot assume that the RAC audit process will end in a fair and just result. If you question an auditor’s methods or conclusions, there is a good chance that you have a very good reason for doing so. Mitigating the consequences of an RAC audit requires the ability to spot these types of issues and the ability to effectively communicate with RAC personnel about flaws in the audit process.

4. RAC Auditors Do Not Always Apply the Correct Medicare and Medicaid Billing Standards

One of the most common mistakes that RAC auditors make is applying the incorrect Medicare and Medicaid billing standards. Health care providers are only subject to the billing rules and regulations that apply when they actually bill the federal government; yet, RAC auditors frequently seek recoupments based on outdated or subsequently-enacted billing standards. Health care providers facing RAC audits must carefully review all audit determinations in order to confirm that:

  • the RAC is not applying superseded Medicare or Medicaid billing regulations to recent billings; and,
  • the RAC is not applying currently-effective Medicare or Medicaid billing standards to reimbursement requests from prior months or years.

5. If You Receive an Unfavorable Audit Determination – You Only Have a Limited Amount of Time to File an Appeal

As we already mentioned, when facing an RAC audit, health care providers should not wait to rely on the appeals process. Preventing an unfavorable determination is a far better (and less costly) option, and it also eliminates the uncertainty of going through the appeals process.

But, if you find yourself in a situation where you need to file an appeal, it is important to understand that deadlines apply. For the first stage of appeal – redetermination by a Fiscal Intermediary (FI) – the deadline to file is 120 days. However, recoupment liability can accrue within as little as 30 days; and, as a result, health care providers will often need to file quickly in order to avoid paying recoupments that are not actually due.

6. An Unfavorable RAC Audit Can Potentially Lead to Federal Prosecution

While RACs are private contractors, they work closely with CMS, and the information they supply to the government can lead to civil, or even criminal, charges. The DOJ, CMS, DHHS and other federal agencies all pursue cases of Medicare fraud and abuse, and they often rely heavily on RACs and other private parties to supply the information they need to launch investigations. Just as an audit does not have to lead to liability, a federal investigation does not have to lead to federal charges. However, to reduce your risk of facing treble (triple) damages, fines, loss of program eligibility, federal incarceration, and other penalties, it is critical to intervene in your audit or investigation and try to prevent charges from being filed.

7. You Can Influence the Outcome of Your RAC Audit, and an Experienced Attorney Can Help

As the foregoing discussion suggests, health care providers can – and should – influence the outcome of their RAC audits. Auditors do not operate in a vacuum, and they are not entitled to draw unjustified conclusions in order to increase the liability of any provider. Just as misinterpreting the Medicare or Medicaid billing records is not an excuse for overbilling the federal government (though it may provide a defense to criminal prosecution for health care fraud), it is also not an excuse for RACs to make mistakes. Accountability in the RAC audit process is critical, and this is one crucial area where a law firm with extensive experience in health care audits and investigations can help.

My Business or Practice is Being Audited. What Should I Do Now?

If your health care business or medical practice has been contacted by a Recovery Audit Contractor, there are several steps that you should begin taking as quickly as possible. A comprehensive defense strategy for an RAC audit should include:

  • Communications – All personnel within your organization should be instructed on appropriate communications with the RAC, and appropriate employees should be designated as exclusive points of contact for funneling all inbound and outbound communications. RAC auditors should also be instructed to refer relevant communications to the organization’s legal counsel.
  • Internal Assessment – It is always better to know what RAC auditors will find before they find it. Health care providers facing RAC audits should conduct thorough internal assessments of their billing records, policies, and procedures to determine whether any billing violations may have occurred.
  • Disclosure – In many circumstances, proactively addressing billing errors with auditors (and federal investigators) is the best way to mitigate the negative consequences of a Medicare or Medicaid inquiry. Honest mistakes are common, and both disclosing known issues and demonstrating that proactive measures are being taken to prevent future errors can significantly reduce the risk of facing federal charges. However, this requires a careful assessment of all of the potential legal implications, and is an issue that must be discussed with legal counsel.
  • Intervention – Intervening in an audit in order to challenge the use of inapplicable billing standards, faulty calculations, and other issues can help prevent an unnecessary unfavorable outcome. However, a tactful approach is critical, and providers need to be certain that their conclusions are correct.

Contact the RAC Audit Defense Lawyers at Oberheiden, P.C.

Oberheiden, P.C. is a health care fraud law defense law firm that represents providers in RAC audits and appeals. To schedule a confidential initial consultation, please call (888) 519-4897 or contact us online today.

Who Will Handle Your Case

When you hire us, you will not work with paralegals or junior lawyers. Each lawyer in our Health Care Practice Group has handled at least one hundred (100) matters in the health care industry. So, when you call, you can expect a lawyer that immediately connects with your concerns and who brings in a wealth of experience and competence.

Dr. Nick Oberheiden

Dr. Nick

Lynette S. Byrd

Lynette S.