Practical Steps for Providers

Started as a demonstration project in 2005, the Recovery Audit Contractor (RAC) program has become a permanent mechanism by which Medicare will identify and recover overpayments from its fee-for-service providers. In 2008, Medicare awarded contracts to four RAC entities that will perform post payment review on providers in their assigned region, and receive as compensation a percentage of all overpayment and underpayment amounts they identify. The RAC for Michigan (Region B), CGI Technologies and Solutions, Inc. of Fairfax, Va., has begun its review activities in Michigan, and is likely to begin issuing requests for medical records early this fall. Here are some practical steps all providers can take to prepare for and respond to RAC activity.  

What You Can Do Now  

  • Confirm that your organization is following all Medicare billing, coverage and medical necessity requirements. RACs are required to follow all existing Medicare rules, guidelines, coverage criteria and requirements when conducting their audits; RACs are not permitted to establish any new requirements. Make sure that your organization’s audit and claim assessment system is functioning so that it identifies improper claims before they are submitted, and makes the necessary corrections. If you do not have a claim audit mechanism, institute one.  
  • Learn which improper payment issues your RAC is focusing on. RACs must post on their websites what types of improper payment issues they are looking for when they review claims. Check the RAC website regularly and adjust your organization’s audit and assessment procedures according to the RAC’s areas of focus. CGI’s website is  
  • Assign one individual in your organization to receive and process all medical record requests from the RAC. Medicare requires each provider to notify its RAC with its contact information, and to submit its contact information via the RAC website by 2010. A provider must submit the requested records to the RAC within 45 days of receiving a request for records, although the RAC may, upon request, extend this period in extenuating circumstances. If the provider fails to submit records within 45 days (or the permitted extension period), the RAC may issue a denial of the claim(s) in question.  
  • Establish a procedure for filing and tracking appeals to any overpayment Demand Letters issued by the RAC. Institute a welldefined process in your organization for receiving and responding to overpayment Demand Letters now before you ever receive such a letter. Failure to respond within specific time limits can mean loss of appeal rights.  
  • Self-disclose any overpayments of which you become aware. If your organization becomes aware of improper payment through its ordinary audit process, you should self-report that overpayment. Any improperly paid claims that are appropriately self-reported by a provider are automatically excluded from review by a RAC. What to DoWhen You Receive a Medical Records Request • Confirm that the request is directed to the contact person you designated to receive such requests, and make the necessary correction with the RAC if it is not. Recall that your organization must designate an individual and address to receive medical record requests. Requests sent to the wrong department, address or person may cause delays in your response, which may result in loss of appeal rights. So, confirm correct contact information, especially with regard to the first medical record request you receive, and any requests you receive after notifying the RAC of a change in address or contact person.  
  • Confirm that the RAC has not exceeded the maximum number of permitted record requests. Medicare RAC regulations limit the number of records a RAC may request during a 45-day period. These limits vary depending on the type of provider. You may wish to have the individual designated to receive RAC record requests keep track of the number of record requests to ensure that the RAC does not go beyond its permitted limit.  
  • Confirm that the claims for which you receive medical record requests were not paid prior to October 1, 2007. RACs are not permitted to open claims that were paid prior to 10/01/07, or, going forward, are more than three years old.  
  • Submit the requested records within 45 days of receiving the request or ask for an extension. If a provider does not submit the requested records within 45 days of a request, the RAC may issue a denial as to those claims. RACs will permit an extension of the 45-day period upon reasonable request.  

What to Do If You Receive a Review Results Letter or a Demand Letter  

  • Take advantage of the Discussion Period option. Under the RAC program, a provider has an opportunity to discuss with the RAC the issues cited in the RAC’s “Review Results Letter,” the precursor to the Demand Letter. This opportunity is in addition to the regular Medicare appeals process. During these discussions, you may be able to address any obvious mistakes by the RAC, or gain insight into why the claim was denied, which, in turn, can help you craft your appeal. Gather the information necessary to speak knowledgeably about the claim promptly, and have your RAC discussion as soon as possible after receiving the Review Results Letter. As explained below, interest may begin to accrue on the overpayment amount not long after the Demand Letter is issued and recoupment will begin shortly after that.  
  • Follow existing Medicare appeal procedures. Recall that the Medicare appeal process has five (5) levels: Level 1 Appeal – Redetermination; Level 2 Appeal – Reconsideration; Level 3 Appeal – Administrative Law Judge (ALJ) Hearing; Level 4 Appeal – Medicare Appeals Council (MAC) Review; and Level 5 Appeal – Federal District Court. Each step has filing timelines that are strictly observed. As suggested above, a provider should have an individual within the organization designated to shepherd the provider’s appeals through the process, and should have a well-defined mechanism for making appealrelated decisions along the way.  
  • Carefully consider your repayment and appeal options, being mindful of the timelines. The RAC Demand Letter will explain the provider’s options for appeal or repayment, and the associated deadlines. The options for repayment are (1) prompt payment in full by check; (2) recoupment by the Medicare program from future amounts due to the provider, and (3) a longer-term repayment plan. If no other payment options are exercised or plans made, Medicare will begin recoupment on the 41st day after the date of the Demand Letter. If the overpayment is not made in full, or a valid appeal is not filed within 30 days of the date of the Demand Letter, interest on the overpayment amount will begin to accrue on day 31.  
  • Submit all supporting information about a claim no later than the Level 2 Appeal – Reconsideration stage of the Medicare appeals process. Remember that under the existing Medicare appeal process, a provider must submit any and all supporting information (medical records, physician statements, etc.) no later than the Reconsideration level in order for such material to be considered at the later levels of appeal. This means that a provider should conduct a complete analysis of both the clinical and legal aspects of a potential claim as soon as possible in the appeal process.  
  • AHA members may wish to participate in the AHA’s RACTrac Program. The American Hospital Association is encouraging its members to submit data on their RAC denial experience to “RACTrac,” a collective data base managed by the AHA. RACTrac is designed to help AHA members discern patterns in their own RAC denials, and to help the industry gather data needed to permit the AHA to make suggestions on how to improve the RAC system. Participation in RACTrac is currently optional and free for AHA members.