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Revised RAC Statement of Work Published

This month, the Centers for Medicare and Medicaid Services (“CMS”) published a revised recovery audit contractor (“RAC” or “Auditors”) statement of work (“SOW”) which is, as CMS described, a “contract” between CMS and the Auditors to support CMS in its mission to “reduce Medicare improper payments through the efficient detection and collection of overpayments, the identification of underpayments and the implementation of actions that will prevent future improper payments.”

While much of the SOW is a reiteration of familiar concepts, CMS has also added some new aspects. One key change incorporated into the revised Statement of Work relates to the claim review process.

Types of Review

CMS has identified three (3) types of reviews: automated reviews, complex reviews and now semi-automated reviews. While the automated and complex reviews are familiar to most providers and suppliers, it is the semi-automated review that is the newest type of review authorized by CMS.

  1. Automated Reviews – CMS describes automated reviews as “occur[ring] when a Recovery Auditor makes a claim determination at the system level without a human review of the medical record. An automated review is permissible if two (2) conditions are met: (i) there is a certainty that the service is not covered or is incorrectly coded, and (ii) there is a written Medicare policy, Medicare article or Medicare-sanction coding guideline exists.
  2. Complex Reviews – CMS describes complex reviews as “occur[ring] when a Recovery Auditor makes a claim determination utilizing human review of the medical record.” Typically, complex reviews are used when there is a high probability (versus a certainty, which is required for the automated reviews) that the service is not covered or where no Medicare policy, Medicare article or Medicare-sanctioned coding guideline exists.
  3. Semi-Automated Reviews – Semi-automated reviews are two-part reviews in which there is (i) an identification of flawed billing through an automated review using claims data, and (ii) a notification letter is sent to the provider explaining the potential error identified. Once a provider receives the notification letter, the provider has forty-five (45) days to submit documentation that supports its original billing. Failure to submit the documentation, or if the documentation submitted fails to support the original billing, will result in the claim being sent to the Medicare claims processing contractor for an adjustment and a demand letter will be issued. If, on the other hand, the documentation supports the claims billed, then the claim will not be sent for adjustment and the provider will be notified that the review has been closed. While CMS has been using Semi-Automated Reviews for some time, and has published a Frequently Asked Question related to these types of reviews, the revised Statement of Work expressly authorizes the RACs to conduct Semi-Automated Reviews.


For more information on audits, including RACs, please contact Abby Pendleton, Esq. or Jessica L. Gustafson, Esq. at (248) 996-8510 or at (212) 734-0128 or visit the HLP website.

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