Government-hired contractors working under the Recovery Audit Contractor (RAC) umbrella are on the hunt for Medicare overpayments caused by reimbursement claims that:

• lack medical necessity;
• contain incorrect codes; and
• charge for undocumented or duplicated services.

If you haven't yet been targeted, here's how to stay prepared for a visit from CMS auditors.

1 Identify your RAC contractor. The 4 RAC contractors are responsible for covering a region of the country:

2 Understand the RAC scope of work. To protect your rights, understand what does and doesn't fall under the jurisdiction of the RAC auditors and how they're required to work. RAC contractors must have a medical director and certified coders on staff to audit medical records. They can audit claims going back 3 years from the date of payment, but can't audit services paid before Oct. 1, 2007. The RAC must refund the contingency fee to Medicare if you win an appeal to overturn an overpayment determination.

The services that are approved for audit are located on the RAC website (www.cms.gov/rac). Review the site regularly, checking your region for updates on auditable services. Services excluded from the permanent RAC program include Medicare managed care or Medicare drug programs and cost report settlements.

3 Know audit types. Two types of RAC audits are performed: automated, which don't require medical record review, and complex, which do. The auditors can perform automated reviews only when the improper payment was obvious (a duplicate claim was filed, for example) or a written Medicare policy, Medicare article or Medicare-sanctioned coding guideline (CPT statement, CPT Assistant statement or Coding Clinic statement, for example) existed and precisely described the coverage conditions. Not all errors can be determined by the claim alone, however. Auditors will investigate medical records to determine if the service in question met medical necessity and was documented and coded correctly.

4 Identify a point person. This responsible individual will handle record requests submitted by the RAC contractor. It is vitally important to provide the medical records requested by the due date. Failure to do so implies that you don't have the documentation to support the service being audited, which often results in an overpayment request levied against your facility. If the retrieval of the medical record will take longer than the mandated deadline, call the RAC auditor, explain the circumstances and request an extension.

There's a limit on the number of medical records that a RAC can request in a 45-day period. The limit is determined based on your facility's ZIP code and tax ID number. (If your facility has 1 tax ID number and 2 locations in the same ZIP code, auditors will consider the facilities as 1 campus.) As a basic rule, the number of allowed record requests equals 1% of your total Medicare claims in a year, divided by 8. For example, if you submit 100,000 claims, RAC auditors can request 125 records (100,000 x .01/8) every 45 days, but no more than 300 total.

5 Review audit findings. The RAC auditors target services based on reports by the Office of Inspector General, Government Accountability Office and Comprehensive Error Rate Testing. The OIG Office of Audit services reports audit findings on the OIG website. Check in regularly to see not only errors made by facilities similar to yours, but also recommendations made by the OIG to prevent and correct those errors.

6 Grasp the appeal process. Contact the RAC contractor within 41 days (recoupment begins then) to discuss an overpayment determination if you disagree with the ruling. If that fails, submit a redetermination form with your Medicare claims processing contractor within 120 days of receiving the overpayment determination letter. If that fails, continue with the 4 successive levels of appeal: reconsideration by a qualified independent contractor, hearing by an administrative law judge, review by the Medicare Appeals Council and, finally, judicial review in the U.S. District Court.

No better critic
Develop an internal audit process to identify overpayment risk areas. Perform periodic audits before claim submission (prospective) or after payment (retrospective). This will let you identify errors in documentation, coding and claims processing. Review medical records and the codes your staff selected for each case. When performing a retrospective audit, review the remittance advice to make sure the claim was processed correctly. Audits will help you identify not only charges submitted in error, but also missed charges that are a potential loss in revenue.