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Avoid the Hot Seat: How to prepare for a CMS audit

by Christopher Guadagnino, PhD •

In February, the Centers for Medicare and Medicaid Services (CMS) began rolling out its national Recovery Audit Contractor (RAC) program, aimed at ferreting out improper payments and preventing fraud, waste and abuse in the Medicare system. If you bill for Medicare fee-for-service, you are fair game for a RAC audit. A three-year demonstration of the RAC program, which ended in March 2008, heavily targeted bronchoscopy, injectable drugs and IV hydration therapy. But auditors are rapidly expanding the list, and the permanent program will include adenoidectomies, tonsillectomies, thyroidectomies and other otolaryngology-related procedures.

Program Rationale and Process

CMS has contracted with four regional RACs for the permanent nationwide program; each will use proprietary auditing software to review paid claims from Medicare Part A and B providers to ensure they meet Medicare’s statutory, regulatory and policy requirements and regulations.

The RACs are ramping up their claim review activities in all states, said Connie Leonard, director of CMS’s Division of Recovery Audit Operations. When overpayments are confirmed, the RACs issue letters demanding that you repay your Medicare carrier or intermediary within 30 days. For confirmed underpayments, your carrier or intermediary forwards the additional payment to you, Leonard said.

You can repay an overpayment by check or installment plan on or before 30 days after receiving the RAC demand letter. If you haven’t made your payment by day 41, your Medicare contractor can recoup fees previously paid to you. If you wish to dispute overpayment charges, you can take your case through the usual Medicare claims appeal process. Leonard also explained that RACs offer a “discussion period,” which lasts from the date you get a “Detailed Review Results” letter until the date of recoupment, to give you the opportunity to discuss an improper payment determination outside the normal appeal process.

Some RACs are targeting adenoidectomy, tonsillectomy and several thyroidectomy codes as once-in-a-lifetime procedures.

RAC Obligations

Some physicians audited during the demonstration project found the experience onerous and abusive. In response, CMS has modified the program in several ways, Leonard said. For example:

  • RACs cannot audit claims earlier than three years from the start of the program, with a maximum look-back date of October 1, 2007;
  • RACs are limited to requesting 10 medical records per 45 days from a solo physician, 20 medical records from a small practice of two to five physicians, 30 from a group of six to 15 and 50 from a large group of more than 16 physicians;
  • Each RAC must hire a physician medical director and certified coders, and you may request the credentials of your auditor and ask to speak to your RAC’s medical director regarding a claim denial; and
  • RACs must have a Web-based claim status platform that will allow you to track the status of medical record submissions to RACs.

Codes to Watch

The majority of improper payments under the RAC demo program stemmed from providers billing for services that were incorrectly coded or did not meet Medicare’s medical necessity policies, according to the CMS.