Everything You Need to Know About RAC Audits


The goal of the Medicare Recovery Audit Program was to identify and reduce overpayments to Medicare beneficiaries. A RAC tracker is responsible for identifying these in roughly a quarter of the country.

RACs are reimbursed based on a percentage of the improper payments they find or recover, paid on a contingent fee basis. It is contingent on the amount of money received from or reimbursed to providers on the amount of the contingency fee.

An additional fee must be paid after an incorrect payment has been recouped or reimbursed and not before. That is, the RACs must return the money on reversal of an overpayment or underpayment at any appeal stage.

What is a RAC audit?

RAC Audit began in 2005 to identify and recover improper payments in Medicare and Medicaid transactions between providers and payers through the use of Recovery Audit Contractors (RACs, or RA). Recovery Audit Contractors (RACs) provide them with all.

Contractors contact providers to evaluate specific claims to guarantee fair payment. If an auditor determines that a payment was made incorrectly and one party was over or underpaid, funds are exchanged to correct the amount based on the auditor’s findings.

The role of RAC audits has decreased over time. But recovery audits have decreased in frequency and intensity. Healthcare providers should still be aware of the best practices for RAC audit response and how to translate these tactics into an optimized reaction to other audit types.

What is the function of a recovery audit contractor?

A total of $73 million was recovered by the RAC program in 2018 from about $89 million in overpayments. Since 2009, the Medicare program has recouped nearly $10 billion.

The RAC program uses a variety of audit contractors to detect and recover incorrect payments across 16 distinct Medicare programs to achieve these goals (e.g., Inpatient Hospital, Outpatient Imaging). The federal government pays most of these claims as overpayments because facilities or providers provided incorrect information about beneficiaries’ services.

Types of RAC Audit

Automated audits and complex audits are the two most common Medicare RAC audits.

1. Automated Audits

Audits, or automated reviews, are designed to look for and flag any potentially fraudulent claims from healthcare providers. They rely on their in-house algorithms to ensure that healthcare providers aren’t overcharging or undercharging.

2. Complex Audits

On the other hand, complex audits rely on medical records to determine whether a claim is false. These guidelines also answer whether or not a service rendered is medically necessary and can be covered.

To identify any improper payments, the CMS utilizes the services of outside consultants. The agency pays these contractors a percentage of what they can collect from the healthcare provider on a contingency fee basis. The entire business model encourages Medicare RAC audit contractors to be more aggressive in their approach. Some have even criticized contractors’ aggressive tactics for this.

Although rates vary by state, RAC auditors earn between 9 and 12 cents for every dollar the CMS recovers. When an auditor discovers an error in a claim payment, the provider is notified immediately.

Types of Healthcare RAC Audits

For this discussion, we’ll look at Recovery Audit Contractor audits.

Healthcare providers confront two primary types of audits: internal and external.

1. Healthcare Internal Audits

It is impossible to conduct an external audit outside of a hospital. Therefore, hospitals can commission an internal review of their finances to discover issues related to patient safety or the level of service. They essentially also conduct audits to improve the process.

2. Healthcare External Audits

An external healthcare audit examines hospital services, payments, and systems. The purpose of the audit is to maintain the appropriate standard of care and pay fairly to the provider for their services. A hospital’s audits might uncover either underpayments or overpayments, in which the payer owes more money to the hospital than it paid.

3. Healthcare Commercial Insurance Audits

An insurance company’s audits are a given when a hospital signs a deal with them. What can be audited and how hospitals are required to respond to an audit are defined by contracts.

4. Healthcare Government Audits

Government audits, in contrast to commercial ones, are based on federal and state rules and regulations, not on the parameters of a negotiated contract. Medicare and Medicaid are two examples of government-sponsored health care programs, and RACs can audit both.

5. Medicare

Third-party Recovery Audit Contractors (RACs) undertake Medicare audits at the federal level.

6. Medicaid

Third-party RAC auditors do Medicaid audits, too. Most importantly, RAC auditors must have extensive knowledge of a particular state’s Medicaid rules to conduct an audit. Understanding Medicaid legislation and the frequency of audits in each state is critical to spotting fraudulent payments.

Concerns Regarding Recovery Audit Contractors

Implementing the RAC program across the country is met with three significant challenges.

  1. Overly Aggressive RACs: CMS used to pay RAC audit fees on a contingency fee basis, which means that the more money the RACs denied and “recovered,” the higher the RACs’ costs became. Due to this model’s emphasis on aggressive auditing, RACs are more likely to target hospitals with high-value claims.
  2. More Paperwork, Less Time: It took more time and effort to respond to the influx of medical record requests. As a result, many providers were denied care because they could not meet the deadline for responding and submitting the records.   Visit here: liangzhongmiye
  3. Overwhelmed Appeals Process: The appeals process for Medicare claims became overburdened in a short period. In fact, the response time for appeals has slowed to an unbearable crawl.

The change was inevitable, and RAC audits began to slow down due to the many issues causing providers to have a difficult time. In the mid-2010s, CMS slashed the frequency of RAC audits and the number of documents it requested from RACs, according to various accounts.


You should seek out the guidance of an attorney when responding to a RAC audit.

The ideal method to get ready for a RAC audit is to have a specific team member tasked with the job. Accountability is ensured, and you can send an immediate response to the RAC’s notifications.

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