Ask the payment expert ... about RAC nursing home audits

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Ask the payment expert ... about the observation stay loophole
Ask the payment expert ... about the observation stay loophole

We keep hearing about RACs in skilled nursing homes but we haven't seen any in our state, so why should we worry about them? 

Although you might not have seen Recovery Audit Contractors in your particular state yet, you need to know that the RACs are definitely focused on skilled nursing facilities. All four RAC areas have parts that they have identified as key areas of review in SNFs. Presently, all four are reviewing the following areas: 

• Number of days billed in excess of the MDS allowable days (for instance, a 14-day assessment billed in excess of 16 days)

• Part B therapy billed in excess of the $3,700 cap

• Part A SNF services following an inpatient stay in a psychiatric hospital

Additional areas are focused on by some RACs, including Medical Necessity of Services provided and SNF services provided for hospice residents.  

The best way to find out the particular areas your RAC is reviewing is to go to its website and look at its present issues of review. You can find your RAC information and the website address by going to the CMS website at

My message is to not feel comfortable because you have not yet been the focus of a RAC review.  RACs are incentivized to find errors, and can extrapolate their results. That means that they can take your error rate and apply it to all your Medicare days. A penalty of $75,000 for one provider became a fine of $750,000 from CMS.

Your best defense is to evaluate your systems and make sure your claims can stand up to scrutiny. Prioritize to review the areas that your particular RAC is reviewing and compare to the areas others are having reviewed.