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Recovery Audit Contractor
CMS contractor that audits Medicare claims for improper payments.
Reviewed by Christian Espinosa, Founder, Blue Goat CyberLast reviewed May 5, 2026
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. What the regulation says
The Centers for Medicare & Medicaid Services (CMS) established the Recovery Audit Program to identify and correct improper payments made in the Medicare fee-for-service program. While not a direct regulatory body for MedTech in the same way as FDA, RAC findings influence reimbursement, which is critical for MedTech product viability and market access. Manufacturers must understand coverage and payment policies (e.g., as outlined in Medicare National Coverage Determinations (NCDs) and Local Coverage Determinations (LCDs)) that RACs enforce during their audits.What this means in practice
Devices with high RAC denial risk (e.g., certain cardiac, sleep, and DME categories) require strong documentation and appeals support.Examples
- A manufacturer of an implantable cardiac device reviews RAC denial data to identify common documentation deficiencies among providers using their product, then develops targeted educational materials.
- A MedTech company analyzes RAC audit findings related to their durable medical equipment, identifying a pattern of denials due to insufficient physician attestation of medical necessity, leading them to revise their provider training.
- A team responsible for market access at a MedTech firm monitors RAC activity on similar devices to anticipate potential reimbursement challenges for their new product launch.
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.
Frequently asked questions
RAC audits primarily affect MedTech manufacturers indirectly by influencing provider reimbursement. High denial rates for a particular device can lead to providers hesitating to use it, impacting market adoption and revenue for manufacturers.
Related terms
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Federal program providing discounted drugs to safety-net providers.
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Ambulatory Payment Classification(APC)
The Medicare grouping system that determines hospital outpatient payment amounts under OPPS, analogous to MS-DRGs for inpatient.
Reimbursement
ASC Site-of-Service Shift
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Budget Impact Model(BIM)
Financial model that estimates the total cost consequences of adopting a new technology to a payer's budget over a defined horizon.
Cited by
Where this term appears across MedTech Terms.
Ecosystems (2)
Sources
3 sourcesEvery citation below opens the original document. Each is graded against our source-tier hierarchy so you can see what rests on binding law versus commentary.
Tier 2Regulator guidance and consensus· 1Tier 4Trade press and expert commentary· 2
Link health: 3 verified· last checked 2026-06-20
CMS·1AMA·1AdvaMed·1
- 1CMS RACTier 2 VerifiedCMScms.gov
- 2AMA CPT ResourcesTier 4 VerifiedAMAama-assn.org
- 3AdvaMed - Payment & CoverageTier 4 VerifiedAdvaMedadvamed.org
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