Recovery audit contractor (RAC) audits are in-depth reviews done on healthcare providers to uncover Medicare and Medicaid overpayments or underpayments. Since the RAC program started in 2005, the audits have become increasingly common. The primary objective of the audits is to seek reimbursement from healthcare providers by thoroughly examining the entire practice to uncover discrepancies such as coding errors, duplicative services, and more.
This post delves into RAC audits, with a particular focus on orthotics and prosthetics (O&P), to provide you with a better understanding of:
- what a RAC audit is and its role in healthcare compliance and billing,
- why O&P practices are affected,
- how to prepare your practice for RAC audit,
- and ways to ensure long-term compliance.
Understanding RAC Audits: An Overview for Orthotic and Prosthetic Practices
Usually, there are two types of RAC audits – complex and automated. Complex audits involve detailed claim assessment, often requiring the provision of medical documentation to identify any improper payments. On the other hand, automated audits do not require document submission but rely on claims data analysis and policy knowledge to identify suspicious claims.
The Role of RAC Audits in Healthcare Compliance and Billing
An audit may discover an overpayment (due to coding errors, duplicate claims, payment for medically unnecessary service, etc.) or underpayment (e.g., submitting a claim for a simpler procedure than what was offered). A RAC audit involves in-depth scrutiny of the entire practice, meaning you could pay Medicare a hefty sum if it uncovers overpayments.
If the audit discovers a discrepancy, it could lead to reputational damage, which can have far-reaching effects on your profitability. To avoid these consequences, practices must implement proactive measures to tighten their compliance and billing to avoid the risk of triggering RAC audits. Some measures include ensuring coding accuracy, providing proper claim documentation, confirming claimable services meet medical necessity criteria, and billing the right payer.
Why Orthotic and Prosthetic Practices are Affected
Medicare reimbursement presents unique compliance challenges for orthotic and prosthetic practices. Coverage restrictions, unique regulatory requirements, and coding complexity are common challenges that characterize O&P’s reimbursement processes. As a result, the high risk of non-compliance increases the possibility of triggering a RAC audit.
Preparing Your Practice for a RAC Audit: Proactive Measures
Implementing proactive measures increases your readiness for a RAC audit. For instance, reviewing your documentation for coding errors and billing compliance minimizes the possibility of triggering a RAC audit. In the event you receive an audit request, it’s important to work with a consultant, have the records reviewed internally before submitting, and consider self-disclosure where necessary to increase the chances of favorable RAC findings.
Documentation and Compliance Strategies
Lack of documentation or providing insufficient documentation are common causes of RAC denials. Once you receive an audit request, you should provide all the necessary documentation for a successful outcome. The documentation should accurately indicate the service provided and billed codes and clearly outline the medical necessity of the service provided.
In addition, developing and implementing a compliance framework is essential to ensuring your policies and procedures are always up-to-date with the latest regulatory changes. Developing a compliance program helps minimize non-compliance risk, increasing your practice’s readiness for RAC audits.
O&P RAC audits may request additional documentation requests (ADRs) for specific suppliers as follows:
- Medical Supply Company with Prosthetist
- Medical Supply Company with Orthotist-Prosthetist
- Individual Certified Prosthetist
- Individual Certified Prosthetist-Orthotist
- Medical Supply Company with Orthotist
- Individual Certified Orthotist
Identifying Common Areas of Scrutiny in Orthotics and Prosthetics
All providers and suppliers of Medicare/Medicaid covered services are subject to RAC audits, including orthotics and prosthetics. Common areas of scrutiny for O&P include:
- Cervical orthoses: To determine whether requirements for reasonable useful life were met (automated review)
- Upper extremity orthoses: To determine whether requirements for reasonable useful life were met (automated review)
- Diabetic shoes: To determine if the prescription was reasonable and necessary (complex review)
- Knee-ankle-foot orthosis/angle foot orthoses: To determine whether requirements for reasonable useful life were met (automated review)
- Knee orthosis: To determine whether requirements for reasonable useful life were met (automated review)
- Lumbosacral orthosis/thoracolumbosacral orthosis: To determine if the prescription is reasonable and necessary and the spinal orthoses meet coverage criteria for Medicare (complex review)
The RAC Audit Process: What to Expect and How to Respond
Once you receive a RAC letter, you should prepare to respond promptly. In this section, we elaborate on what to expect once contacted by a RAC and how to respond.
A Step-by-Step Guide Through the RAC Audit Process
A successful RAC audit outcome depends on how well you prepare and handle the process. Mainly, a RAC audit process involves the following steps:
- RAC analyzes your claims data to identify discrepancies
- RAC requests the healthcare provider additional documentation for review
- Healthcare provider collects, reviews, and submits documentation (may engage an expert to guide them through the process)
- If there are discrepancies, RAC sends the healthcare provider a notification of improper payment (NIP). The payer may appeal the audit findings if unsatisfied with the decision.
Effective Responses to RAC Audit Findings
Once you receive a RAC audit letter, you have 45 days to respond. Alternatively, you can file an extension if you need more time. If you fail to submit a timely response, RAC may proceed to make a finding of overpayment or underpayment.
Once you respond and RAC determines you overpaid, you receive an overpayment demand letter. You should reply to the letter within 15 days by paying the amount owed in full, requesting a repayment extension, or filing an appeal.
For an effective RAC audit findings response, you should respond promptly and answer all the review questions.
Beyond the Audit: Ensuring Long-term Compliance and Success
For long-term compliance and success, you should look beyond the audit. For instance, consider developing a proactive compliance structure to minimize claim errors and stay up-to-date with compliance regulations.
Developing a Sustainable Compliance Framework
Creating a robust compliance framework is a multi-step process. Here are some of the essentials to focus on:
- Embark on proactive claim reviews to identify errors before an audit is requested.
- Always ensure accurate and complete documentation of services billed.
- Stay up to date with compliance regulations.
- Automate your billing to minimize errors.
CBS Medical Billing, Your Partner in Managing RAC Audits
RAC audits are an expected occurrence in orthotic and prosthetic practices. Taking proactive measures to enhance your compliance minimizes the likelihood of triggering an audit and ensures your practice is always ready should you be subjected to one.
At CBS Medical Billing & Consulting, we help O&P practices enhance their readiness and manage RAC audits through comprehensive billing and coding solutions – from claims remittance to billing and coding compliance. Contact us today for assistance if you need a partner to help you manage your RAC audits.
