Preparing For RAC's 2017 Statement Of Work

The Centers for Medicare & Medicaid announced last October the award of a new round of contracts for the Medicare Fee-for-Service Recovery Audit.


Contractors (RACs).  Contracts were awarded to:
Region 1 – Performant Recovery, Inc.
Region 2 – Cotiviti, LLC
Region 3 – Cotiviti, LLC
Region 4 – HMS Federal Solutions
Region 5 – Performant Recovery, Inc.

Regions 1- 4 will perform post review to identify and correct Medicare claims that contain improper payments that were made under Part A and Part B for all provider types other than Durable Medical Equipment, Prosthetics, Orthotics, and Supplies and Home Health/Hospice.  Region 5 will be dedicated to the post payment review of DMEPOS and Home Health/Hospice claims nationally.

The addition of Region 5 may be due to high incidences of improper payment and lack of documentation to support services rendered for Home Health/Hospice and DMEPOS.

Keys to Success:

  • Centralizing your audit team:  As the new round of RACs roll out even the most experienced RAC response team will need to understand the challenges we face with the CMS changes for 2017.  Every effort should be made to ensure teams are centralized, efficient and organized with excellent communication skills.
  • Reduce denial rateUnder the new rules additional documentation request rates will be affected by your denial rate. More denials will result in more requests and denials still mean a lot of work for the provider and a long appeals process.
  • Send out complete medical record for each case: Include all required documentation necessary to support each case.  If a physician orders a test, the order, results and interpretation should all be legibly and easily found in the medical record.
  • Improve response rate and efficiency:  Takebacks from lack of response to ADRs requests are more common than you think.   Implement the process improvement necessary to avoid this costly takeback.
  • Audit! Audit! Audit!:  Confirm all diagnoses are coded to the highest level of specificity.  Ensure all medical documentation entries are consistent.  Verify internal auditors are auditing the same data elements reviewed by RAC, including principal diagnosis, secondary diagnosis, procedures potentially affecting DRG, POA indicators, and discharge disposition codes.
  • Focus on challenging inpatient diagnoses:  What diagnoses and procedures challenge coders the most? Sepsis, respiratory failure, renal failure, congestive heart failure, pneumonia, spinal surgeries, skin procedures.
  • Follow the “Issues Under Review” on RAC websites:  RACs are required by CMS to keep an updated provider portal that includes a list of issues under review. This resource shows: issue name, type of review, provider type, status impacted, date posted, and a detailed description of the issue. It is a good idea to build your internal audit plan around this list and the OIG work plan.
  • Make certain your inpatient charts have a complete discharge summary:  The discharge summary should accurately reflect all confirmed diagnoses and all care administered during the patient’s hospital stay without introducing new information.
  • Don’t Clone:  Cloning or copy/paste is being seriously addressed by CMS.  RAC auditors may be looking at progress notes for confusion among caregivers due to copy/paste overuse.

Educate your RAC response team on changes to RAC Rules:

  • Universe of Claims for Review:  Patient status reviews are being limited to a 6-month look back period and must be referred by the QIO.  All other claims are three years after the initial payment determination.
  • Extrapolation:  RACs are encouraged to use extrapolation for low-dollar claims that require complex review and have a history of high-error rate.
  • ADR Reductions:  CMS may reduce ADRs if an RAC fails to maintain an overturn rate of less than 10% at the first level of appeal.  CMS may also reduce ADRs if RACs fail to maintain an accuracy score of at least 95%.
  • Diversification of claims:  CMS requires that ADRs be diversified across claim types for a facility (i.e. inpatient and outpatient).  Historically, RACs reviewed more inpatient high-dollar accounts and were criticized for only looking for “low-hanging fruit”.
  •  ADR Limits:  Providers with low denial rates will have lower ADR limits, while providers with high denial rates will have higher ADR limits. Historically, RACs have not done a good job of policing themselves, therefore providers should bkeep track of ADRs to ensure RAC compliance.
  • Review Topics:  CMS will require RACs to broaden their review topics. They must include all provider claim types and may include required reviews based on referrals from the OIG report.
  • Timelines:  RACs will have 30 days instead of 60 to complete complex reviews and notify providers. Complex reviews that are not completed on time will not be paid.   RACs must wait 30 days to allow for discussion request before sending the claim to MAC for adjustment.  RACs must confirm receipt of discussion request within three business days.

What will challenge providers most as new RACs start up?

  • Recent coding updates:   There are recent updates in both ICD-10 CM/PCS and CPT coding systems that providers and coders are still getting used to. Auditing and continuous feedback to coders will ensure they are using the new and revised codes correctly.
  • Interdisciplinary teams:  Your RAC response team must include a clinician for clinical validation.  With the publication of the 2017 Official Guidelines for Coding and Reporting and the Clinical Documentation Toolkit from AHIMA, it is clear that clinical validation is a separate function from coding. Best practice requires both clinical and coding expertise to team up.
  • Clinical validation:  The attending physician is ultimately responsible for determining diagnoses.  Providers can base their decision on any clinical indicators they determine to be relevant. Remember who has eyes on the patient. Ask them to document their thought processes including clinical indicators seen and those expected but absent, including their rationale for diagnosis determination. 
  • Clinical documentation Improvement:  Don’t rely on suboptimal documentation to support clinical validation, diagnosis code, procedure code assignment, or medical necessity.  Diagnoses affect the DRG, severity of illness/risk of mortality, and now, possible risk adjustments, so documentation will continue to be scrutinized more than ever.
  • EHR issues:  New challenges came into our world with the EHR.   In the past, patient records were challenging due to illegibility issues. Problems of illegibility remain, but they are different.  Instead of handwriting challenges we are trying to move through pages and pages of copied and pasted notes, while at the same time seeing many abbreviations that often create illegibility for the reader.    

The question remains, When will RACs fully begin their new statement of work?  CMS’s website originally said the 3rd quarter of 2016, but now the industry is expecting them to begin during the 1st quarter of 2017.   The time to prepare is now.


  3. Centers for Medicare and Medicaid Services, RAC Overview. 


About the Author

Laura Legg


Laura Legg, RHIT, CCS, CDIP, AHIMA Approved ICD-10 CM/PCS Trainer, has over 30 years of health information management experience working with acute care hospitals, critical access hospital, and home services.  Laura has worked closely with HRG's HIM department and many healthcare providers nationwide.



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