RAC auditors recovered more than $700 million in improper payments in the last reporting year. That money came from somewhere — and if your documentation practices are shaky, it may have come from practices like yours. Here's how to stay off the list and win the appeals you do face.
Recovery Audit Contractors identify improper payments through automated and complex reviews. Automated reviews catch billing errors that don't require medical record review — wrong units, bundling violations, invalid code combinations. Complex reviews require human review of your records and are where real money gets recovered.
Current RAC focus areas in 2026 include:
Short inpatient stays and observation status issues
Medical necessity for joint replacements and cardiac procedures
DME billing — particularly power wheelchairs and CPAP
Evaluation and management upcoding in high-volume practices
Home health billing errors under PDGM
Outpatient therapy services medical necessity
The RAC approved issue list is publicly available on CMS's website. Check it quarterly — RACs post the specific claim types they're approved to audit. If your high-volume services are on the list, prioritize your documentation review there first.
The Additional Documentation Request Process
RAC audits typically begin with an Additional Documentation Request (ADR). You have 45 days to respond with the requested records. Miss that window and the claim is automatically denied.
Assign someone in your organization as the RAC ADR coordinator. Every ADR needs to be logged, records need to be pulled and reviewed before submission, and the response needs to go out on time. A disorganized ADR response is almost as bad as no response.
Don't send records cold: Before submitting records in response to an ADR, have a clinical reviewer look at them. If the documentation has gaps that explain why the claim might be improper, you may want to consider the risk of the appeal versus the risk of repayment. Submitting records that clearly don't support the claim just accelerates the denial.
The Five-Level Appeal Process
If a RAC denies your claim, you have five levels of appeal:
Redetermination — by the Medicare Administrative Contractor. File within 120 days of the denial notice. About 30–40% of appeals succeed here.
Reconsideration — by a Qualified Independent Contractor. File within 180 days. Success rates improve with strong clinical arguments.
ALJ Hearing — Administrative Law Judge. This is where complex medical necessity cases often turn. ALJ decisions take longer but carry higher overturn rates for well-prepared appeals. Currently facing significant backlogs.
Medicare Appeals Council — within the Departmental Appeals Board.
Federal District Court — for claims over $1,760 (2026 threshold). A last resort, but used successfully for high-value denials.
Building a Winning Appeal
The best RAC appeals include three things: a clear statement of the clinical facts, a connection between those facts and the applicable coverage policy, and supporting evidence from peer-reviewed literature when medical necessity is disputed.
If you're appealing an inpatient status denial, lead with the physician's clinical reasoning at admission — not just what happened during the stay. RACs are looking at the admission decision, and your appeal should directly address that decision point.
Tip: Track your RAC denial and appeal outcomes by claim type. After 12 months, you'll know which services are audit targets, what your win rate is at each appeal level, and where to focus your pre-billing documentation improvements.
Proactive RAC Defense
The best RAC strategy is to avoid the audit in the first place. That means:
Running internal audits on your top-billed services annually
Using the RAC approved issue list to prioritize documentation improvement
Ensuring physician documentation explicitly addresses medical necessity, not just clinical findings
Having a second pair of eyes on complex cases before billing
RACs work on contingency — they keep a percentage of what they recover. They're incentivized to find overpayments. Make it hard for them to find anything.
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