How to respond to a RAC audit letter without losing your mind or your cool


By Michael D. Rader, MD, PhD

As a seasoned veteran of multiple Recovery Audit Contractor (RAC) audits, I’d like to share the most important lesson I learned from the experience: It is not about us! RAC audits are all about economic stimulus. Until we physicians accept that, we are going to be very frustrated with the process.

I mean that tongue in cheek … well, sort of. When you read what I’ve been through over the past two years, I think you’ll agree that as physicians, we are doing our part to support the economy through RAC audits.

If I had been asked to write an article immediately after my first RAC audit in 2011, the tone would have been very different. The article would have been filled with inflammatory remarks about the incompetency and inefficiencies of governmental agencies, and I would have taken great umbrage at their crust in accusing an honest and conscientious physician of wrongdoing.

You, too, can fight back and win against a RAC audit without losing your sanity — or even one night’s sleep.

Now that I’ve been dragged through the dispassionate inner workings of the RAC process on two separate occasions, I realize it’s not worth the energy of working yourself up into a lather. If you follow a few steps, you, too, can fight back and win against a RAC audit without losing your sanity — or even one night’s sleep.

Bounty hunters

As most of you know, RACs seek out Medicare overpayments and are paid a percentage of everything they collect. This gives them a powerful incentive to find as many overpayments as possible, and many have dubbed RACs the bounty hunters of the Medicare program.

In my experience, though, they’re not so much bounty hunters as data miners. They are constantly prospecting for coding and billing issues that affect huge numbers of physicians. They churn out impersonal letters accusing those physicians of bilking the system and they demand repayment. Because the RAC program is a central component of the government’s drive to reduce Medicare expenditures, there’s a good chance they will strike at your practice at some point. So, it’s important for dermatologists to educate themselves about how to respond appropriately.

The first letter

When I received my first audit letter in 2011, I was outraged. It was very shocking because I am very conscientious about coding. In fact, I do all coding in my office myself. So when I received a letter accusing me of misusing certain codes, it was very disconcerting.

In this first audit, I was accused of 16 errors and the letter demanded that I repay my CMS intermediary approximately $500. However, when I called my intermediary to question the charge, he was as stunned as I was. I thought I had billed the procedures correctly. My CMS intermediary agreed and paid me the requested amount. But, now, a RAC was telling us that we were both wrong.

After reviewing the regulations outlined on the CMS website as they pertained to these cases, I confirmed that I had coded and billed correctly, and the RAC accusation was blatantly wrong. So, following the instructions in the audit letter, I submitted a “statement of opportunity to rebuttal.” That’s when I slipped down the rabbit hole. I learned very quickly that the RAC process is a study in bureaucratic madness.


When you’re in the midst of a RAC audit, you find yourself dealing with what seems like at least 20 different people, many not even in the same location. None of these people are talking to each other and there isn’t a single point person assigned to help you navigate your case. However, they aren’t coldblooded villains looking to settle a vendetta against you, either. They are simply a bunch of people working for their bosses who are just trying to do their jobs, so they can feed their families, and maybe take them out for pizza and a movie on Saturday night.

Once I understood this, much of my frustration disappeared. In the nine months it took to resolve that first batch of 16 cases, I kept dozens of people busy shuffling papers, researching regulations, performing redeterminations, answering phone calls, delivering correspondence, issuing checks, posting checks, and all the while collecting paychecks they used to support their families and help drive this economy! It was my small contribution to the economic stimulus package.

Ultimately, the cases were resolved in my favor and I was much better prepared the next time RAC came calling two years later. This time, it took only a month to settle the cases, which is a whole other story about the senselessness of this program.

Long story short, if you receive an audit letter, I recommend you follow these steps:

  1. Take a deep breath and remember: It’s not you.
  2. Send a statement of opportunity to rebuttal immediately. You have only 15 days from the date on the audit letter to request this opportunity, so don’t delay.  I usually receive my letters on day six or seven of the 15 allotted days, which is barely enough time to get the letter back before the deadline.
  3. If the amount requested is small enough, go ahead and pay it. The people doing the redetermination are different from those in accounting, who are also different from those in the RAC. Once your case is reversed, someone will have to refund you that money (more jobs!). You also avoid those enormous interest penalties that accumulate should you lose, or — due to a clerical error — a refund is posted wrong (another story).
  4. Pull your charts and notes on the billings in question and build a defense. Use citations from the Medicare Claims Processing Manual (this is the rule book).
  5. Fill out a CMS redetermination form and submit it to your CMS intermediary with the supporting documentation as soon as possible. If you act immediately and prepare a solid defense for your billing, there is a good chance the case will be ruled in your favor if you have been coding correctly.
  6. Finally, let it go. This is all you can do. Get some sleep. Realize that no one is out to get you. The RAC audit is all about economic stimulus, and as any good patriotic American you must pitch in and do your part by allowing all these people to just do their jobs.

These recommendations are based on my personal experience and should not be a substitute for legal advice. I have chosen to handle these audits personally, but I cannot guarantee that a particular case will be successful. 

My somewhat lighthearted treatment of this whole issue should not be misconstrued as condoning fraudulent billing practices. As professionals, we have a duty to uphold honesty and integrity as core values. The recommendations I outlined above assume underlying coding integrity.

Dr. Rader is a board-certified dermatologist in solo practice in rural Oklahoma, where he has practiced for the past 19 years.

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