Five Key Defense Strategies for Preventing Claim Denials

Providers need to be proactive when defending against RAC and MAC audits.

The Recovery Audit Contractor (RAC) program was created through the Medicare Modernization Act of 2003 – can you believe it was 20 years ago? It was originally created to detect fraud, waste, and abuse (FWA) by reviewing medical records, with the goal of identifying and recovering improper Medicare payments made to healthcare providers. The Medicaid program audits shortly followed.

The RAC program divides the United States into four regions, and includes a fifth region for nationwide Durable Medical Equipment (DME) and Home Health/Hospice (HHE) claims.

Each audit claim contains two components:

1. A payment component, which includes monies owed to providers; and
2. A recovery component, which allows companies conducting the audits to recoup some of the cost of conducting the target audits.

I recently received a question from a client. What is the difference between a Medicare Administrative Contractor (MAC) and a RAC?

A MAC is a private healthcare insurer hired by the Centers for Medicare & Medicaid Services (CMS) to handle and process Medicare Part A and Part B claims or DME claims for Medicare fee-for-service (FFS) beneficiaries. MACs also help with audits of claims from home health hospice providers. MAC audits are powerful and intrusive procedures that have the potential to lead to serious federal charges for healthcare entities.

The limit for looking back is a lot longer than that of the RACs. MACs can go back four to six years. If fraud is alleged, the limits could be extended.

A RAC reviews claims and identifies overpayments from Medicare so that CMS and other auditors are able to prevent improper payments in the future. RACs work to uncover instances of fraud within healthcare providers’ billing practices and pursue recoupments if needed. If evidence of fraud or other misconduct is uncovered during a RAC audit, the RAC can refer the matter to other federal agencies, such as the U.S. Department of Justice (DOJ) or the U.S. Department of Health and Human Services (HHS) Office of Inspector General (OIG) for further investigation.

Juxtapose this with MACs, and the lookback period for RACs is only three years. So, if the question is, do they abide by the same rules? The answer is no. Regulations are specific to MACs and RACs.

Five Key Defense Strategies

Providers need to be proactive when preparing and defending against RAC and MAC audits. The list compiled below provides strategies to take when preparing for audits and preventing further federal investigation.

1. Retain legal counsel early in the audit process.

There are several factors that providers need to keep in mind when hiring an attorney for healthcare audits: federal experience, experience dealing with the government, results, teamwork, and commitment. RAC/MAC audits are complex events, with varying requests and deadlines. Hiring an attorney can help strengthen your compliance department when dealing with an ongoing audit. If you receive a negative audit review, you may wish to appeal the finding. The appeal process is time-consuming and highly intricate, demanding the assistance of an attorney. An attorney can also help evaluate the effectiveness of your business’s compliance program and its ability to detect and respond to internal weaknesses.

2. Understand the types of audits that are possible.

It is important to recognize the types of audits that are possible, and the different procedures that accompany each. For instance, RAC audits can be automated, semi-automated, or complex. The response the provider develops can vary depending on the type and scope of the particular audit.

3. Stay abreast of all legal and regulatory changes in healthcare audits.

CMS websites often post information about the latest changes and news involving RAC and MAC audits. Healthcare providers ought to continuously monitor these websites for updates in audit procedures.

4. Ensure that all documentation regarding billing procedures and medical records is properly recorded in a thorough and legible manner.

The best evidence is recorded documentation. RACs especially scrutinize a provider’s ability to demonstrate medical “necessity.” Therefore, it is imperative that all practices are properly documented and retained. Personnel should be trained on how to maintain and organize documents. Such information will be a necessity if the provider receives a negative audit review and needs to file an appeal.

5. Maintain a robust and comprehensive compliance program that identifies, corrects, and monitors internal weaknesses.

The compliance program should be reviewed intermittently and updated as the law and other internal changes dictate. For instance, if changes in Medicare billing requirements are announced, all provider personnel should be informed and trained on such changes. The compliance program should also have detailed policies in place for recording and documenting key company information.

Healthcare fraud is on the rise. To combat the increase in Medicare FWA, CMS works with private contractors to root it out. Providers face a serious risk of recoupment from auditors. MAC and RAC audits collect millions of dollars in overpayments from fraudulent Medicare claims annually.

Medicare audits can lead to additional challenges down the road, including payment suspensions, prevention from working with governmental programs, civil investigative demands, government subpoenas, and sometimes, criminal prosecutions.

It is important for providers to be prepared for these audits. This means taking the first step to retain legal counsel early in the audit process, as well as understand the types of audits and the regulatory environment. As noted, providers must also ensure that their billing practices are properly documented and that they maintain a comprehensive compliance program.

Programming note: Listen to Knicole Emanuel’s RAC Report every Monday on Monitor Mondays with Chuck Buck at 10 a.m. EST.