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RACs Incentivized to Find Even Smallest Billing Errors

Greg Freeman, February 5, 2014

By using a tool to calculate "extrapolated overpayment," Recovery Audit Contractors can allege fraud long after providers have received payment and thought there was no dispute, says one expert.

This article appears in the February 2014 issue of Managed Care Contracting & Reimbursement Advisor.

Medicare and Medicaid audits are increasing sharply, notes Stephen M. Azia, JD, an attorney with the law firm of Baker Donelson in Washington, D.C., who focuses on reimbursement, compliance, and appeals. RACs are paid a contingency fee for finding fraud by doing post-payment reviews, so Azia says they act as aggressive bounty hunters who can allege fraud long after you have received payment and thought there was no dispute. Zone Program Integrity Contractors have wide latitude to investigate fraud and abuse, which includes requiring pre-payment or post-payment reviews for physician practices under scrutiny, and Medicare Administrative Contractors have similar authority.


See Also: 6 Ways to Avoid Unintentional Medicare Fraud


An increasing threat to physician practices is a tool, used by the various auditors, called extrapolated overpayments, Azia notes. For example, the auditor may look at a sample of 30 of the physician's claims and find an error rate of 60%. They then extrapolate that error rate to a much larger universe of claims by that practice.

"You may have an initial overpayment of $10,000 that becomes a $1 million extrapolated overpayment," he explains. "It is a very dangerous situation facing providers."

Providers may not recognize the original request for repayment as a RAC audit, cautions Sharon Hollander, CEO of STAT Medical Consulting in Los Angeles. Accepting one allegation of fraudulent billing could open the door to many others.

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2 comments on "RACs Incentivized to Find Even Smallest Billing Errors"


Arlen Huller (2/11/2014 at 8:55 AM)
Unfortunately the RACs can go back THREE years!

Arthur T Walker (2/5/2014 at 9:50 PM)
Now retired, but am recalling a Rac billed me for $600+ for treatment delivered more than 2 years prior. I hand wrote on their letter "I reject this notice as too late to consider". Never heard from them again.