Reimbursement
Recovery Audit Contractor(RAC)
In one line
CMS contractor that audits Medicare claims for improper payments.
Definition
RACs review paid Medicare claims to identify and recover improper payments. RAC findings can drive billing changes and impact device coverage operationally.
Recovery audits were made permanent by the Tax Relief and Health Care Act of 2006 and are paid on contingency based on recovered amounts. CMS approves the topics RACs can review and publishes them. Providers can appeal findings through the Medicare appeals process, and common targets include medical necessity and coding errors.
Why it matters
Devices with high RAC denial risk (e.g., certain cardiac, sleep, and DME categories) require strong documentation and appeals support.
Common pitfalls
- •A common pitfall is underestimating the impact of RAC audits on post-market surveillance data, as denials can sometimes signal issues with product use or documentation in real-world settings.
- •Failing to provide comprehensive clinical documentation that clearly substantiates the medical necessity of a device is a frequent cause for RAC claim denials.
- •Assuming that a device with FDA clearance or approval automatically guarantees Medicare coverage and positive reimbursement outcomes is a misconception, as RACs enforce coverage criteria independently.
- •Inadequate appeal processes for RAC denials can lead to significant unrecovered revenue and skewed perceptions of product value.
- •Overlooking the need to educate providers on correct coding and documentation practices, which directly affects RAC audit outcomes, is a critical error.
Sources
- CMS RAC · CMS