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Reasons for RAC Denials

The Recovery Audit Contractor (RAC) program identifies improper Medicare payments. RACs receive a percentage of overpayments and underpayments that they identify from medical service providers. An RAC denial occurs when a medical service provider's claim for Medicare funds is rejected. When this happens, it is often due to documentation problems or different views regarding medically necessary admissions.

  1. Documentation Submission Timing

    • After the medical service provider submits a claim, the RAC issues an Additional Document Request (ADR) letter and the medical service provider has to respond to it within 45 days of the letter. However, the medical service provider often submits the medical documentation beyond the due date. Medicare would then have insufficient information to justify the level of care billed and the eligibility of the beneficiaries. Medicare would deny the claim in such a case.

    Inconsistent Documentation

    • Some RAC denials stem from the inconsistency between the documentation and the clinical indicators in the medical record. Medicare would then deny the physician's claim of major complications and/or co-morbidities (MCCs) or complications and/or co-morbidities (CCs) because the documentation does not support his claim. For example, the physician claims sepsis, but clinical record shows no indication for it and the length of patient stay is too short for the condition to be sepsis.

    Medical Necessity

    • The success of a claim requires that the hospital admission is medically necessary. Otherwise, Medicare would not cover the expenses. An RAC denial could be due to the hospital stay being too short. Medicare would consider the admission not sufficient to constitute an inpatient procedure. Otherwise, it could consider the admission to not meet the level of service of an inpatient procedure. (ref 4)

    Coding

    • A coding denial constitutes a partial claim denial. The RAC recommends that the principal diagnosis is changed or the MCC or CC is disqualified. The RAC includes the claim in a lower-paying diagnosis-related group (DRG), resulting in a smaller reimbursement amount. The RAC usually groups the condition with a DRG that contains a small number of MCC or CC. (ref 4)

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