The document discusses strategies for home health agencies to prepare for Recovery Audit Contractor (RAC) audits, including identifying high risk areas like therapy thresholds, reviewing documentation practices, and establishing an internal RAC response team to handle medical record requests and appeals. It also outlines the RAC review and appeal processes and provides tips for submitting supporting information to improve the chances of a favorable decision.

1. Is Your Agency Prepared for a RAC
Audit? Is your Coding Specific?
Susan Carmichael, MS, RN, CHCQM, COS-C, ICM, FAIHQ
Executive Vice President
Chief Compliance Officer
Select Data
History, Expectations, and Strategies to
Assist The Home Health Leader to Prepare
for the RAC Attack

2. Learning Objectives
• Discuss what we might learn from the RAC
history
• Illustrate the purpose of the RAC audits
• Outline the appeal process
• Identify potential RAC targets and preventive
strategies
• Suggest strategies to help prepare for RAC
audits

3. What is a RAC: Recovery Audit
Contractor
• “The RACs detect and correct past improper
payments so that CMS and carriers, fiscal
intermediaries (FI), and Medicare
Administrative Contractors (MAC) can
implement actions that will prevent future
improper payments” (NGS, NAHC Convention,
LA, 10/2009)

4. RAC Program
• The RAC program has been mandated by:
– Section 302 of the Tax Relief and Health Care Act
of 2006 and
– Overseen by CMS and
– Statute approved contingency-based payments to
RACs
• The RAC rationale is to protect the Medicare trust
fund as improper payments of the past are seen
as exhausting the fund

5. 3 year Demonstration Project
(March/05 – March/08)
• Required by the Medicare Modernization Act, Section
306
• Found over $1.3 Billion dollars “improper payments” in
6 states
• $900+ million in overpayments (96%)
• $ 32+ million in underpayments
• Demonstration states: Florida, California,
Massachusetts, South Carolina, Arizona, and New York

6. The drive behind the RAC
• CMS processes $2 Billion in claims for 1 Billion
providers
• Baby Boomer have arrived
• RACs have been cost effective in
demonstration:
– $0.20/$1.00 recovered
– RACs recovered on 96% of all claims audited =
$1.3 Billion

7. RAC Jurisdictions

8. Who are the RACs?
RAC A Website
• Region A: Recovery Inc. of Livermore CA, prior to August, 2012,
was known as Diversified Collection Services
RAC B Website
• Region B: CGI Technologies and Solutions Inc of Fairfax, Virginia
http://racb.cgi.com racb@cgi.com
RAC C Website
• Region C: Connolly Consulting Associates, Inc. of Wilton,
Connecticut www.connollyhealthcare.com/RAC
RACinfo@connollyhealthcare.com
RAC D Website
• Region D: HealthDataInsights of Las Vegas, Nevada
• racinfo@emailhdi.com

9. The New RAC
• Effective 2014, CMS has established a RAC
team devoted exclusively to the Home Health,
Hospice, and Durable Medical industries.
• 33% of RAC reviews under the demonstration
project that had issues were coding related
• How specific is your coding?
• What do your quarterly coding audits reflect?

10. What does a RAC do?
RAC review process
RACs review claims on a post-payment basis
• RACs use same policies as carriers, FIs, and MACs:
National Coverage Determinations (NDC) and Local Coverage
Determinations (LDC), and CMS Manuals
• RACs are required to employ a staff consisting of
nurses, therapists, certified coders, and a physician medical director
(CMD). Must provide credentials of reviewers upon request.
• Two types of review:
– Automated (no medical record needed)
– Complex (medical record required)

11. RAC Reviews
• There are two types of RAC reviews; automatic reviews and
• complex reviews. Each type of review is meant to have a different
• focus.
• The automatic reviews require no person to review the records
• because the audits are driven by a computer generated
• algorithm with a focus on the easier incorrect claims, where an
• obvious overpayment exists; e.g. duplicate claim.
• The complex reviews are more time consuming requiring the RAC
• team of clinicians and coders to actually review the medical
• records of the audited claims. A record request will be sent to an
• agency. The focus of this audit is more indepth, expected to
• involve areas of medical necessity, therapy, and coding errors,

12. RAC Review Process
• How many records will be open to review?
– Look back period limited to three years
– RACs able to look back three years from date
claim was paid
– Home Health Care: 1% of average monthly Medicare
services every 45 days, maximum 200 claims
– Hospice: 10% of average monthly claims every 45
days with a maximum of 200

13. What does a RAC do?
The review process
• RACs are required to employ a staff consisting of
nurses, therapists, certified coders, and a physician medical director
(CMD). Must provide credentials of reviewers upon request.
• RACs must return the contingency fee if the provider
prevails at any step of the appeal process
• CMS has hired a program validation contractor
(located in Erie, PA) to produce accuracy scores for
each RAC
• RACs can apply extrapolation to collect
overpayments

14. Extrapolation?
• RAC math can exacerbate damage…
• Extrapolation of the error rate means applying
a statistical sampling methodology
retroactively and prospectively, assuming that
existing trend will continue or has occurred in
the past. In this case, a denial rate will be
applied.
• Source: Beacon Health, February 5, 2010

15. 5 LEVELS OF APPEAL
The Appeal Process

16. The Appeal Process
• Five levels in the RAC Appeal Process:
• Medicare offers a five level appeal process
and the RAC process is no different.
• Redetermination by an FI, carrier, or MAC
• Reconsideration by a QIC
• Hearing by an Administrative Law Judge (ALJ)
• Review by the Medicare Appeals Council
• Judicial Review

17. Level 1 Redetermination
42 CFR 405.940-58
• Level 1: Redetermination is an examination of a claim
by a FI or MAC using different personnel than those
who made the initial determination. The appeal must
be filed within 120 days from the date of receipt of
the initial claim determination. To make the request,
download form CMS -20027 from CMS.
Include any supporting documentation that would aid
in the redetermination decision. There is no minimum
monetary threshold and expect a decision within 60
days. (Contractor may extend timeframe by 14 days)

18. Level 2 Reconsideration
42 CFR 405.960-78
• Level 2: Reconsideration can be filed if there is dissatisfaction
with the findings of the redetermination. In requesting a
reconsideration, which will be completed by a QIC, follow all
instructions on the Medicare Redetermination Notice received.
Clearly explain why there is disagreement and include any support
documentation for review. If evidence is not included at this appeal
stage, it may be excluded from all further appeals. Must file within
180 calendar days (or 60 days to avoid recoupment)
There is no minimum monetary threshold and a decision is usually
completed within 60 days of the reconsideration request. If the QIC
cannot render a decision within that timeframe, a notice will be
sent
stating the right to elevate the case to an ALJ.

19. Reconsideration: reviews involving
Medical Necessity
• Medical necessity reviews must be performed
“by a panel of physicians or other health care
professionals, and be based on clinical
experience, the patient’s medical records, and
medical, technical, and scientific evidence of
record to the extent applicable”
• 42 CFR 405.908 (a)

20. Reconsideration Binding Authority
• The QIC is bound by National Coverage Decisions,
CMS rulings, and applicable laws and regulations
• The QIC is not bound by Local Coverage
Decisions, Local Medical Review Policies, or CMS
program guidance such as program manuals.
(The QIC is not bound to follow coverage
decisions of the Intermediary regarding Hospice)

21. Level 3: ALJ Hearing
42 CFR 405.1000-64
• Level 3: Administrative Law Judge Hearing may be requested
within 60 days of receipt of the reconsideration provided the
dollars in dispute exceed $130. For post-payment audit cases, the
intermediary can begin to withhold after the QIC issues its
reconsideration decision. Follow the directions closely for
this appeal, such as notifying all parties of the QIO
reconsideration and so note it on the written request for the ALJ.
These hearings may be held by telephone or video-teleconference
or a face to face hearing may be requested. That decision is at the
discretion of the ALJ. CMS, after notifying the ALJ, of their intent,
may attend the hearing.
A decision is usually rendered within 90
days of the hearing request. 42 CFR 405. 1016

22. ALJ delays
• It was reported recently that the 65 ALJs are
behind 3 years or 400,000 appeals. CMS is
aware, but no word as to a remedy for the
situation.

23. ALJ Hearing Discovery
• Remember that discovery is only permitted
when CMS elects to participate in the hearing
as a party
• Providers, under 42 CFR 405.1037, can
request a copy of QIC notes and the ALJ
hearing file
• CMS (or its contractors) may participate in an
ALJ hearing without joining as a party (42 CFR
405.1010

24. Level 4 Appeals Council Review
42 CFR 405.1100-40
• Level 4: Appeals Council Review if there is dissatisfaction with
the results of the ALJ hearing. The request for this level of appeal
must be made within 60 days of receipt of the ALJ decision and
must clearly list the issues being contested. The ALJ decision letter
will identify the exact procedures to follow when filing the request
to the Appeals Council.
There is no specific monetary requirement required for this step
and
the Council will usually issue a decision within 90 days.
If the Council fails to act within 90 days, the appellant may request
that the appeal, other than an ALJ dismissal, be escalated to federal
district court. 42 CFR 405.1132

25. Level 5 Judicial Review
42 CFR 405.1136
• Level 5: Judicial Review in the US District
Court would require a disputed claim in
excess of $1260.00.
• A request for this level of appeal must occur
within 60 days of receipt of the decision from
the Appeals Council.

26. Appeal Timeframes
Know the timeframes involved in each level of
appeal. If you are late, you may have already
lost the appeal.

27. Appeals
• Agency needs to evaluate the financial net gain
of appeal
• Agency needs to evaluate future potential
ramifications
• First three steps of the appeal usually most viable
• Rebuttal should occur during first 15 days after
demand letter is issued
• Rebuttal is best when new documentation is
available but not usually effective for medical
necessity denials

28. Appeal Strategies
• Treating Physician Rule: CMS Ruling 93-1:
With respect to Part A claims states that
treating physician opinion is evidence, but not
presumptive, so there remains a need to
make a case specific argument why the
physician’s opinion is the best evidence. (No
similar rulings seen with respect to Parts B, C,
and D). Providers should consider the
argument that the opinion of the treating
physician is the best evidence.

29. Appeal Strategies: Consider a
Challenge to the Statistics
• The Guidelines for conducting statistical
extrapolations are set forth in the Medicare
Program Integrity Manual (CMS Publication
100-08, Chapter 3, 3.10.1 through 3.10.11.2

30. Appeal Strategies Arguing the Merits
Preparation of Rationales
Expert Involvement
Reviewer Credential Issues:
The RAC teams must have clinicians (not
necessarily home health RNs) and
credentialed coders (not necessarily home
health coders)

31. Appeals involving Position Papers
• Legal analysis of the denial
• Medical expert involvement
• Do you expect evidenced-based arguments in
highlighted portions of the record.

32. What is different?
• Though RAC appeals process is same as other
CMS appeals, RACs will offer an opportunity
for the provider to discuss the improper
payment determination. This does not alter
timeline.
• Issues reviewed by the RAC will be approved
by CMS prior to widespread review
• Approved issues will be posted to a RAC
Website before widespread review

33. Responding to a RAC Request
• Notify your designated RAC
• Respond to the letter of request: 45 days
• Submit clinical record copies: via photocopies,
CDs, or DVD
• Track the records submitted on the RAC
website or phone
• Can request reimbursement for copies
• RAC response within 60 days

34. Suggestions for RAC Information
Submission
• Have your RAC contact information nearby
and already have reviewed the RAC site
• Do not wait the 45 days to submit the
requested clinical records.
• Assemble the RAC Response Team
• Start to review the record(s) and the issue(s)
under focus.
• Duplicate the information submitted
• Maintain the RAC Log and track info/records
submitted

35. The Collection Process
• Same as for carrier, FI, and MAC identified
overpayments
• Carriers, Fis, and MACs issue Remittance
Advice
-Remark Code N432: Adjustment based on
Recovery Audit”
-Carrier, FI, and MAC recoups by offset unless
provider has submitted a check or a valid appeal

36. YOU WILL RECOVER NOTHING FOR
CERTAIN, IF YOU DO NOT APPEAL
Remember

37. IDENTIFY RISK AREAS
Targets

38. We Can Learn from History
• Know where previous improper payments
were found:
-In 1995 -1999 Operation Restore Trust
recovered $524 million in fines, recoveries,
and audit disallowances, and settlements
-Achieved a 45% drop in improper payments
-Is credited with preventing $11 billion in
inappropriate claims paid

39. We Can Learn from History and ORT
• ORT Findings included:
Homebound criteria not met
Services without Physician orders
Lack of adequate documentation for care
Coding
Inappropriate visits and unnecessary services

40. We Can Learn from History and ORT
• 140 Physicians signed POCs for claims not
allowed:
-65% physicians relied on agency to prepare
POC
-60% of physicians denied knowledge of
homebound requirement for home health
care
-8% admitted no knowledge of
patient condition

41. Focus on High Risk Areas
• Agencies with high volume of claims
• Agencies with history of survey and claim
problems
• Agencies with outliers, LUPAs, and exceeding
therapy thresholds
• Agencies with coding inconsistencies and
errors

42. Again: RAC Targets
• Services are medically unnecessary or there is delayed
implementation (Focus: Therapy)
• Patients are not Homebound
• Services are incorrectly coded and sequenced
• Failure to provide claim supportive
documentation
• Duplicate claims submitted
• Medicare secondary pay or improper payments
• Lack of order centricity

43. Preparing for the RAC Attack
• 1. Establish a RAC Response Team
• 2. Choose a RAC Team leader
• 3. Review ORT and CERT findings of the past
• 4. Study problem areas/vulnerabilities posted
on both the CMS and RAC websites
• 5. Study Medicare Benefit Policy Manual (CMS
Publication 100-2, Chapter 7)

44. Preparing for the RAC Attack
• 6. Monitor Physician exclusions
• 7. Analyze agency practices in the high risk
areas; look for vulnerability such as Coding
lacking substantive documentation
• 8. Calculate and track case mix weights
• 9. Analyze QA findings
• 10. Educate and reeducate personnel

45. Preparing for the RAC Attack
• 11. Look at HR practices:
-Hiring and orientation
-Make certain qualifications of personnel meet all federal rules
and state licensing or certification requirements
- Knowledge and support of the Corporate
Compliance Plan with emphasis on no
tolerance for fraudulent behavior
-Certifications and Continuing Education
-Personnel knowledge of home health
requirements
-Annual Evaluations and clinical competency
reviews

46. Preparing for the RAC Attack
• 12. Look at evidence-based practices utilized at agency
Look at Best-Practices used
• 13. Look at QA of outcomes based on the above
especially admissions and medical necessity
Comments by physicians re POC
Admissions/recertifications and Medical Necessity
Review RFA>discipline specific careplan> POC> clinical
notes> physician orders> outcomes

47. Preparing for the RAC Attack and
Medical Necessity
• Focus on reasonable and necessary care by
looking at current illness
• Focus on ICD-9 Coding and sequencing with
adequacy of substantiation for every code
• Should you be looking at third party coding
experts?
• Look at needs of patient and clinician
interventions
• Look at med profile: new, changed, review

48. Preparing for RAC Attack and Medical
Necessity
• Clearly document patient knowledge of
disease
• Clearly document patient teaching/learning
• Identify involvement of
caregivers/family/friends
• Verify goals are clear, measureable, and
worthy of an episodic payment

49. Preparing for RAC Attack and Medical
Necessity
• Full or partial denial because the clinical
documentation:
Did not support the medical necessity of the
skilled services billed
Did not demonstrate a reasonable potential for
change (improvement) in the medical condition
or
Sufficient time had been allowed for teaching or
observation of response to treatment in prior
episodes of care.

50. Preparing for a RAC Attack: Therapy
and Your Diagnoses
• 14. Therapy services:
• How many therapy visits are you averaging per
episode? Percentage of patients Low Utilization
episodes – 6, 7, 8 visits? (how frequently)
 Of the patients who receive therapy, what is the
distribution (%) across the ranges?
 How does your agency compare with your peers
regionally or nationally?
 Do response levels on functional M items
correlate with therapy referrals? High-Low levels
of impairment?

51. Take a Look at Therapy
continued…
• Do therapy treatment plans and progress notes have:
Clear functional goal statements? Any recerts with no
changes?
Document progress toward goals objectively?
 How is care coordinated among therapists? Among all
disciplines?
 How can you support “reasonableness and medical
necessity?”
What is the patient treatment: diagnoses? Restoration/maintenance
of function affected by illness? Frequency and duration of services
consistent with home care client’s: medical history, disease, prior to
end of episode level of function, and risk identification.

52. Take a Look at Therapy
continued…
• Is therapy consistent with the nature and
severity of the condition? Any examples of PT
discharge as soon as thresholds met?
• Therapy services must be provided, expecting
that the condition of the patient will improve in a
reasonable period of time.
• Documentation of medical necessity should be
documented through evaluation, treatment
plan, and progress notes.
• Has your agency identified high risk diagnosis,
number of visits, or number of episodes?

53. Preparing for a RAC Attack: ICD-9
Coding
• 15. Coding services: WHO is doing your
coding? How are you auditing them?
• In the demonstration project over 1/3 or 33%
of findings were linked to coding
• Look at Primary Diagnosis and documentation
support/congruence with OASIS integrated
assessment. Do the same for co-morbidities.

54. In House Coders
• May tend to tolerate inadequate
documentation to support codes.
• Are You being put at Risk?
• What should you do? Do you want to continue
inhouse coding risk?
• Have you spoken to third party coding
specialists who are part of a professional
services company, like Select Data?

55. Coding Specificity and Co-morbidities
• The following are diagnoses/co-morbidites that should be
included and coded on a plan of care of a patient with these DX:
• DM
• CAD
• COPD
• CHF
• Blindness
• HTN
• Upper and lower limb amputation status
• Chronic diseases such as Parkinsons, MS, Lupus
• Hx of neoplasm if care is directed toward a current neoplasm
• What do your quarterly coding audits show?
Source: The Coding Clinic

56. Preparing for the RAC Attack and
Dependent Services
• 16. Look at Dependent Services; home health
aide and medical social worker services
These services can be denied if there is no
identified medical necessity
These services are automatically denied if
the qualifying service is denied

57. Preparing for the RAC Attack
Note: HHA services must have frequency and
duration approved by physician
Aide services cannot be paid simultaneously
for both Medicare and Medicaid
RN assigns all tasks on aide assignment as
“PRN” only
Note: MSW denials include:
Having MSW apply for patient Medicaid
MSW services to families/CG instead of
patient

58. Preparing for a RAC Attack: Billing
• 17. Conduct internal billing audits:
• Audit when RAPS are dropped/compliance
• Look for duplicate bills
• Look for order centricity
• Look for 1 visit bills
• Look at outlier payments; insulin injection
payments
• Choose Medicare rules and verify compliance

59. RAC ATTACK
• The quality of your documentation will dictate
reimbursement.
• The quality of your documentation
determines if you will survive an audit.
• When all is said and done ……..
• It is not the revenue you generate that is as
important, as the revenue you will keep.

60. CMS
•Be a frequent visitor to the CMS website and
also the RAC website particular to your region

61. RAC CONTACT INFORMATION
The Four Approved RACS

62. Who are the RACs?
• Region A-Performant Recovery Inc. of Livermore, CA:
• Connecticut, Delaware, District of Columbia, Maine,
Maryland, Massachusetts, New Hampshire, New
Jersy, New York, Pennsylvania, Rhode Island, and
Vermont
Email: DCSRAC@dcswins.com
Before August 12,2012, the company name was
Diversified Collection Services, Inc

63. Who are the RACs?
• Region B- CGI Technologies and Solutions (CGI)
Illinois, Indiana, Kentucky, Michigan, Ohio, and
Wisconsin
Email: racb@cgi.com (customer support)

64. Who are the RACs?
• Region C- Connolly Consulting Associates, Inc of
Wilton, Connecticut:
• Alabama, arkansas, Colorado, Florida, Georgia,
Louisiana, Mississippi, New Mexico, North Carolina,
Oklahoma, Puerto Rico, South Carolina, Tennessee,
Texas, US Virgin Islands, Virginia, and West Virginia
www.connollyhealthcare.com
Email: RACinfo@connollyhealthcare.com

65. Who are the RACs?
• Region D- Health Data Insights of Las Vegas,
Nevada
Alaska, American Samoa, Arizona, California,
Guam. Hawaii, Idaho, Iowa, Kansas, Missouri,
Montana, Nebraska, Nevada, North Dakota,
Northern Mariana Islands, Oregon, South Dakota,
Utah, Washington, and Wyoming
www.healthdatainsights.com/RAC.aspx
Email: racinfo@emailhdi.com (customer support)

66. Thank you
Susan Carmichael MS, RN, CHCQM, COS-C, ICM,
FAIHQ
EVP, CCO, Select Data
(714) 524-2500x235
susanc@selectdata.com