Problem Solvers

RAC Audits Version 2: Time to Prepare

As new RAC auditors are coming on board, the instances of RAC audits will increase.

Audits aren’t going away anytime soon, and they will likely increase in coming months, so now is the time for HME providers to prepare. Why? CMS has been finalizing contracts for a new RAC, and the agency’s intent was to award the contract likely sometime around when HMEB subscribers will be reading this article in October, according to Wayne van Halem, president of audit consulting firm The van Halem Group, a division VGM Group Inc.

“They stated that their intent is to have the contract awarded by the end of summer,” van Halem says. “If everything goes as planned, I would anticipate the RACs starting at the beginning of their fiscal year, which is Oct. 1.

“So we’re not far away from that point,” he continues. “The reason that it is so important is because the RACs look at post-payment claims. So they’re going to come back and look at the claims that providers are submitting now.”

Expect an Expanded Scope of Audits

In terms of categories, van Halem says an easy way to predict what the RACs will focus on is as easy as looking at what CMS approved them to review during the first round of RAC audits. In addition to automated reviews, the RAC auditors also engage in complex review of claims, in which they request medical records and examine those. In the case of those complex reviews, van Halem says the RAC auditors focused on ventilators, low air-loss mattresses, beds, power wheelchairs, oxygen, lower-limb prosthetics, knee orthotics, pneumatic compression and TENS units, to name several key categories.

“I anticipate that because they already have those as approved issues that they will go right into focusing on those again,” van Halem says. “And of course they’re going to look at new issues, as well. … So my guess is that if I’m a RAC, and those are approved issues, I’m going to start with those right away.

And then all of the automated review, all those automated checks will go back in effect. Those include in-patient claims, which is a significant category, according to van Halem.

“They went back three years, and they found any claims that had been billed when the patient was in an in-patient facility,” he explains. “That happens a lot actually. And when [RAC auditors] can determine that the hospital might not have submitted the claim by the time the DME company did, and the DME company got paid, well now they’re going to take the money back because the patient was still in the hospital.”

And providers can expect the RAC auditors to increase their oversight. “Essentially they have the right to audit anything that they get an approval for from CMS,” van Halem explains. “Their job will be not only to identify all the ones that they’ve received approval for, but identify new categories for review. My guess is CPAP and biPAP are probably going to fall in that category … oxygen has been a big focus; and certainly ventilators and orthotics are going to be a big focus.”

In terms of who will be the contractor, the industry does not yet know who that will be. The initial award went to a company called Connolly Healthcare, which previously was the RAC in Region C, and was known as an aggressive auditor. The losing contractor bidders protested the award, and after it was discovered that an error was made, CMS decided to re-bid the work. So all the companies have once again submitted responses to the RFP, and at press time CMS was in the process of reviewing those proposals and making a decision, but the outcome might already be apparent.

“Often times, CMS will re-bid the work, and it gets awarded to the same company that it was previously awarded to,” van Halem explains. “… Unless there’s something out of the ordinary, that usually doesn’t change. … I would anticipate that Connolly Healthcare will be the contractor once again, but that’s not definite.”

The Game Plan

So knowing that there will be increased RAC audits, and that the contractor that will likely be conducting those audits is aggressive, how should providers prepare?

“Just like with any audit, the devil is in the details,” van Halem advises. “The premise of the RAC program is that it is contingency-based; they receive payment for finding errors. So providers must make sure i’s are dotted and t’s are crossed, and that they have implemented some [quality assurance] process on claims to make sure that all the required elements are met prior to those claims being submitted.”

For instance, van Halem says his company offers pre-screen services for clients that bill claims for power mobility, ventilator and other high-end products so that they have some assurance that if a RAC comes back and audits their previous claims that the claim was reviewed and approved as accurate prior to submission.

“My concern is that, because the RACs have been inoperable for the last year or so, that people have gotten complacent in doing that [pre-screening claims],” he adds. “And now all those claims that have been submitted [during that time] are going to be the ones that the RACs are reviewing.”

So now is the time for providers to review their claims processes, ensure they have been billing correctly and that staff members are following them to the letter.

“RACs are incentivized to find errors,” he summarizes. “Being careful and diligent is really the only defense.”

This article originally appeared in the October 2016 issue of HME Business.

About the Author

David Kopf is the Publisher HME Business, DME Pharmacy and Mobility Management magazines. He was Executive Editor of HME Business and DME Pharmacy from 2008 to 2023. Follow him on LinkedIn at and on Twitter at @postacutenews.

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