This is the first such call conducted by CMS since the permanent RAC Program was allowed to go forward after a legal challenge by prospective contractors delayed the program start, from November 2008 to February 2009. The transcript of the call, which was held on April 8, 2009, has been posted to the CMS Web site, with a link to an MP3 audio file, a recording of the call. (Links are available at the end of this article.)

News in Several Major Topics

Several items surfaced during the call to which we want to call your attention. Some of these items appear to be new, or at least there are new details we have not seen before in any RAC documents or outreach sessions. These topics are of high importance for all providers:


  • A special code will be used on Remittance Advice documents to help providers track RAC denials;
  • A Discussion Period exists, providing an opportunity to avoid a denial and appeal;
  • Records Request Limits have changed, will continue to change, and the rules for applying the limits are still confusing;
  • A “limited number” of Complex Reviews can begin without CMS approval;
  • Providers are being encouraged to directly contact CMS project officers;
  • RAC websites are beginning to appear, (2 of 4 anyway);
  • Medical Necessity guidelines, such as InterQual and Milliman, will only be guidelines for the RACs.

This last topic is one of the scariest topics for all providers.

Special Code for RACs

All Medicare providers are reimbursed by a carrier, Fiscal Intermediary (FI) or Medicare Administrative Contractor (MAC), assigned by CMS to their area. When the carrier/FI/MAC makes reimbursements, they issue a Remittance Advice to the provider, listing each reimbursement along with a code, signifying the reason behind the credit or debit.

CMS confirmed that RAC denials will also appear on these statements, and to make it easier to track these RAC adjustments, there is a special code assigned to them: the code is N432, which stands for “adjustment based on recovery audit.”

Discussion Period Noted

During the RAC Demonstration, there was a time period between the date a RAC notified a provider that they had identified an overpayment, and the date of the actual demand letter sent to the provider. This was called, at that time, the Rebuttal Period. It was simply a time meant to give the provider an opportunity to respond to the RAC and perhaps offer additional records or documentation that might explain why the claim looked like an overpayment.

During the Rebuttal Period, if the overpayment could be explained to the RAC’s satisfaction, then the demand letter would not be generated, and the claim denial would be eradicated, thereby eliminating any need to begin the lengthy and costly appeals process.

In the conference call, CMS emphasized that providers should definitely take advantage of this period, now being called the Discussion Period. It has the same purpose as before – it gives the provider a window of opportunity to provide evidence that a claim was properly paid, not overpaid, thereby avoiding the entire denial/appeal process.

CMS did admit, that there is, unfortunately, no set length of time for this period, and it is different for automated reviews, versus for complex reviews. This is what was said in the conference call, but this is different from what we have previously been told about the discussion period.

At a recent summit in Washington, DC, we heard that the discussion period would allow 40 days from the date of the Demand Letter. If a provider begins a discussion with the RAC, then the recoupment would be delayed. If an appeal is filed within 120 days of the date of the Demand Letter, recoupment would be suspended pending the outcome of the appeal. If no appeal is filed in time, then the recoupment would happen by offset or by payment from the provider. We are trying to clarify this with CMS and will report on it further in Part Two of this article.

Why Have Discussion?

The goal is, if possible, to convince the RAC that you can provide additional information (documentation or some kind of written record) that will explain the claim better, and show that payment of the claim as billed does not violate any CMS rules or regulations.

If you can do this before the adjustment is made by your carrier/FI/MAC, the entire denial process stops. There is then no adjustment made, and therefore no need to use the lengthy appeal process.

So it is a window of opportunity, albeit undefined, and perhaps woefully short. For so-called automated reviews, it is truly short, but you have a longer window in the case of a complex review.

Automated Review Discussion Period

Automated reviews and denials are determined by pure data analysis of claims, and do not involve records reviews.

Actually, records may be reviewed by the RAC and CMS in order to determine that an issues exists, but that all happens beforehand, and we are not talking about that process here. (To be clear, there are cases where a RAC may request records as “samples.”

A provider might receive a letter requesting up to ten records, but the letter will state that they are for the specific purpose of “sampling” records to investigate some suspected issue. These samples may later be used by the RAC to support the viability of doing automated reviews. That is a completely separate process. Since such “sample” reviews do not directly produce a denial, there is no report to the provider, no discussion period, and hence no appeals process.)
At any rate, a RAC does not request medical records from a provider for purposes of conducting an automated review. They simply perform analysis, based upon a CMS approved issue, and issue a demand letter to the provider. Note that RAC Demand Letters will come from the RAC, and not from your carrier/FI/MAC, as happens for other types of audits and/or denials.

The Discussion Period for an automated review begins on the date of the Demand Letter, and ends when the adjustment is made by the carrier/FI/MAC.

As soon as you receive a Demand Letter from the RAC, you should look at the claim and decide as soon as possible if you disagree with the RAC’s conclusion. If you disagree, you should immediately contact the RAC and begin a conversation. This conversation can begin as a phone call, but should be followed up immediately by a letter to the RAC, to document your call and the discussion itself. Remember, the goal is to overturn the decision of the RAC and avoid both the denial and the adjustment by the carrier/FI/MAC.

Complex Review Discussion Period

Complex reviews are slightly different. These reviews require the RAC to look at the medical record for a claim. A RAC can (with an exception we will discuss in Part 2) only request these records from a provider if the issue being addressed has been approved beforehand by CMS and listed as “vulnerabilities” on the CMS and RAC websites.

The RAC, with approval by CMS, can select an issue for complex review and send requests to a provider for a limited number of specified medical records. From the date of the Records Request Letter, the provider has 45 calendar days to deliver the requested records to CMS, with a grace period of 10 days (this to allow for slow mail delivery).

If the records are not received during that period, the RAC automatically issues a denial for all of those records.

After reviewing records submitted for a complex review, the RAC will issue a review results letter, which nevertheless will communicate neither the amount of overpayment, nor your appeals rights. The Discussion Period for a complex review begins with the date of the review results letter, but ends whenever the carrier/FI/ MAC makes an adjustment, as noted in a Remittance Advice.

The Review Results Letter

One quick note about the review results letter. During the Demonstration Project, the RACs did not do a good job of communicating their findings to the providers. CMS stated in this call that the RACs in the permanent program are required to issue this review results letter, to notify a provider of the results for every record reviewed.

The review results letter will explain any findings from the RAC’s review. If there is no finding by the RAC, the review of that record stops. If there is a finding, the RAC notifies the provider via the review results letter, then the RAC notifies the carrier, FI or MAC, and finally issues a demand letter to the provider.

The Demand Letter

The demand letter from the RAC will communicate overpayment amounts and appeals rights. A remittance advice notice from the carrier, FI or MAC “should” arrive (per CMS) at the same time as the demand letter.

Forty-one (41) days from the date of the demand letter, the carrier, FI or MAC will begin recouping by offset, unless a payment has been made or an appeal has been filed by the provider.

You Can Always Appeal Later

Don’t forget: the discussion period is not a part of the appeals process.

It does not affect your right to appeal, and its only affect is to offer a provider a chance, albeit a slim one, to avoid the denial entirely and not have to go through the appeal process for something that is not an error or overpayment to begin with. If you fail to overturn the denial in the discussion period, you can still file an appeal within 120 days of the date of the demand letter.

Records Request Limits

If you’ve been following the implementation of the permanent RAC program, you know that during the Demonstration Project, the contractors had rather broad rules for requesting medical records. Under the permanent program, however, CMS has placed some specific limits on the RACs, including how many records they can request from a provider during a reasonable time period.

The Medical Record Request Limits have changed since they were first published in the original RAC Statement of Work. Also, CMS warned during this conference that these limits are likely to change again.

Every provider should read the limits carefully, and notice the differences between numbers of claims versus services.

Here is a summary of the current RAC Medical Record Limits (as of 4/23/2009):

Inpatient Hospital, IRF, SNF, Hospice

  • 10% of average monthly Medicare claims (max of 200) per 45 days

Other Part A Billers (Outpatient Hospital, Home Health)

  • 1% of average monthly Medicare services (max of 200) per 45 days


  • Solo Practitioner: 10 medical records per 45 days
  • Partnership of 2-5 individuals: 20 medical records per 45 days
  • Group of 6-15 individuals: 30 medical records per 45 days
  • Large Group (16+ individuals): 50 medical records per 45 days

Other Part B Billers (DME, Lab)

  • 1% of average monthly Medicare services per 45 days

Counting Claims versus Services

CMS was asked to comment on the difference between a “claim” versus a “service.” They defined a service as a paid service line item in a claim. That is, a claim is the actual claim, with one or more services, or service line items. A service is one of the paid line items in a claim.

CMS stated several times that their goal in limiting the records requests was to not overwhelm the medical records departments at the providers. That does explain some of their logic in the limits they have set, to date.

Complications in Counting

If you are a special case – say you are a “chain” provider with 200 facilities in multiple states, or you have multiple entities with separate NPI numbers under a single Tax ID number – it may be difficult to get a definitive answer about how many records a RAC can request from you. Stay tuned to Part 2 for further discussion of this area.

Preparing for RAC Audits

In the final analysis, we highly encourage our readers to beef up their education and training, especially concerning Medical Necessity and its documentation. Sign up for the courses at RAC University, particularly the Special Offer, covering the main topics needed for correctly coding and documenting to support optimum reimbursements.

Also, see the upcoming LIVE webinar on Protecting Reimbursements of 1-Day Stays for Cardiac Services. Watch RACMonitorEnews and check your emails for updates.

And of course, read Part 2 of this article in Thursday’s RACMonitorEnews.

Upcoming LIVE Webinar

Watch for news about our upcoming LIVE webinar. RAC Monitor and RAC University, powered by eduTrax, are uniquely suited to help prepare you and your staff for the coming storms that are the RACs.

Links: Full CMS Conference Call Transcript and MP3 Audio Recording

On Thursday, April 30, be sure to read RACMonitorEnews for Part II, covering news about how the RACs will evaluate Medical Necessity in your claims.




Share This Article