Recovery audit contractor (RAC) activity is on the rise. RAC requests for medical records, denials and the dollar value for those denials all increased by 21 to 26 percent during the third quarter of 2012, according to the American Hospital Association’s (AHA) RACTrac survey.1 The survey also notes that nearly 90 percent of hospitals report experiencing RAC activity, hospital staffs are spending more time responding to RAC requests and 56 percent of hospitals report increased administrative costs. The survey calculates that more than 600,000 individual medical records were requested through third quarter of 2012.

Furthermore, recovery audits are extending way beyond Medicare’s original RAC program. A plethora of payer revenue recovery programs have been established on the heels of RAC, all trying to take back fraudulent or inappropriate provider reimbursements. One way for healthcare providers to cope is by successfully implementing RAC audit management software.

A strong, feature-rich application helps hospitals manage heightened audit requirements while also protecting organizational revenue. But with over 20 companies offering packages, where do you begin?

This article takes a look at RAC audit management software, its key criteria, implementation considerations and added-value opportunities for healthcare provider organizations.

Four key criteria for evaluating RAC audit management software

RAC audit management software is a core technology requirement for handling an ever-increasing quantity of revenue recovery audits. Industry experts estimate that between 30 and 50 percent of hospitals have already implemented some type of RAC package. In fact, the AHA RACTrac survey mentioned above reports that 44 percent of survey participants use some type of RAC software tool. For those hospitals that have not yet installed RAC software, there are four key criteria to consider.

Flexibility to accommodate all audits

First, the application should accommodate more than just RAC audits, as non-RAC audits are growing exponentially. As an example, in 2012, HealthPort customers logged an average of 39,000 non-RAC audits, compared to just 13,000 on average in 2011. Flexibility to accommodate any type of audit, including internal ones, is a key capability. Furthermore, having the primary federal audits pre-defined within the system saves time during implementation and setup. Most audit software providers should offer prebuilt audits and system rules.

Within the chosen software system, organizations should be sure to delineate the different types of reviews and services being reviewed. Types of reviews include automated review, complex review, prepayment review and more. Likewise, the patient service type should be recorded within the system (e.g., inpatient, outpatient, home health, etc.). System flexibility to accommodate multiple types of audits and services is particularly important as organizations centralize audit management and processing across their organizations.

Robustness to support centralization and growth

With so many types of audits and recovery contractors, provider organizations should also consider centralizing the audit management and appeals function. Centralization makes the most of audit staff, reduces costs and minimizes revenue take-backs.

By automating the management and appeals process across all departments, organizations establish departmental accountability while enabling easier identification of duplicate audit requests. If a particular record was previously audited by another government entity, then it is no longer eligible for a RAC audit. Audit software packages should easily identify these duplicate or conflicting audit requests.

Furthermore, as organizations grow through mergers, acquisitions and consolidation, the audit management software should scale to accommodate multiple locations, additional users and new patient service types.

There are five steps for effective centralized audit management. It is important that audit management software applications support each of these steps:

  1. Establish a centralized audit management department to receive, process and manage all audits across the organization.
  2. Educate all departments on what audit request letters look like, what they contain and how to forward them along to the centralized audit department.
  3. Log all audit request letters, responses, appeal findings and outcome letters into a centralized audit tracking system.
  4. Store all audit information, correspondence and medical record documents electronically; scan or upload into a common area for reference.
  5. Develop standardized reports to communicate with the “C” level and other stakeholders.

Detail for reporting

Management reports are required for each type of audit or across audits. This is particularly important for organizations using a centralized audit management approach. The team overseeing the process must be continuously updated with key information, such as number of active audits, potential lost revenue and appeal status. Custom reporting should also be available by audit or across all audits without vendor support or extensive programming requirements.

Compatibility for AHA RACTrac

According to the AHA, being RACTrac-compatible simply means that a vendor has “created a mechanism in their claim-level RAC audit tool that will aggregate RAC experience data at the hospital level that is consistent with AHA RACTrac survey questions.” Compatibility hastens the quarterly RAC reporting process to the AHA and ensures that nationwide data, like that referenced above, is complete and accurate.

Most vendors have achieved this designation; a complete list of RACTrac-compatible vendors is available online at the AHA RACTrac website.2 In addition, the AHA hosts quarterly webinars to review survey data. From these webinars, providers are able to keep abreast of RAC trends, target issues and program concerns.

Beyond these key criteria, organizations can make the most of their audit software investment by using the following best practice implementation considerations.

Implementation considerations

When audit software implementations go awry, there are two key points of failure to evaluate and correct: system workflow and user education.

Understanding the root causes and workflow choke points is important to solving the most visible problems associated with audit management. Most systems allow for assignment of specific tasks and responsibilities within the audit process, with email notification to users (individuals or groups) within the system. When the application is not functioning properly, system workflows should be checked and faulty assignments corrected within the application.

User education is another area of concern for most audit management software vendors. Organizations should develop standard terminology to use when entering data in the system. All users should document review and denial reasons in the same way, using the same vernacular. By keeping documentation consistent across the organization, reports remain correct, data accuracy is maintained and cases can be easily identified.

Finally, the entire audit management department should keep up to date on new review issues published by the RAC and, in some cases, the Medicare administrative contractors (MACs). Updates are available on their respective websites. Subscriptions to applicable CMS newsletters and industry list servs are another way for staff responsible for audit oversight to remain up to date with impending threats and audit risk.

Maximizing audit software capabilities

There are two features available within audit management software applications that dramatically improve appeal success rates and reduce the administrative burden associated with audit processing. These include the ability to view and approve submissions before they are sent to the audit entity and electronic delivery of documents directly from the audit management application.

A review-and-approve queue allows organizations to view, approve or disapprove every record before it goes to the appropriate audit contractor. By ensuring that all documents within the audit package are correct, complete and support the care delivered, organizations increase the rate of positive response by the RAC. This feature is especially important for medical necessity denials, which are the most costly audit cases for providers to process.

Electronic delivery of documents directly to auditors is another feature worth implementing. Technology is currently available in two flavors: CMS’ esMD project or a direct portal connection to the payer. A direct portal is a single organizational conduit to all audit entities. It can be shared by an organization’s HIM business office and any other department submitting records to auditors. Up to 50 percent reductions in associated costs can be seen by using electronic delivery tools, as they remove significant amounts of paper from the audit process. More information about both of these options can be obtained from the CMS website or individual websites of approved health information handlers (HIHs).


Audits tax an organization’s human resources and increase operational expense. When poorly managed, audits result in revenue loss. The use of technology streamlines audit processing while also reducing labor cost. Solutions are proven. Second-generation technology is available. If your organization has not yet implemented an audit management solution, now is the time. HMT

About the Author

Lori Brocato is audit product manager, HealthPort. For more on HealthPort:

  1. American Hospital Association, RACTrac Survey, third quarter 2012. Available online at:
  2. American Hospital Association, RAC Audit/Tracking Tool Vendors, updated January 23, 2013. Available online at:
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