Hospices Likely to See ‘Uptick’ in RAC Audits

As federal regulators intensify their focus on hospices, operators may begin seeing an influx of Recovery Audit Contractor (RAC) activity.

The U.S. Centers for Medicare & Medicaid Services (CMS) contracts with RACs to conduct post-payment reviews designed to recover any funds that may have been overspent.

RAC audits can re-examine hospice claims going back as long as three years — and more of them may be coming, according to Kelly Grahovac, general manager of The van Halem Group, who spoke at the National Association for Home Care & Hospice (NAHC) Financial Management Conference.


“The president’s budget was approved for $2.5 billion directly related to health care fraud abuse. So the federal government knows that abuse happens,” Grahovac said. “They know that fraud is rampant, and they want to make sure that they protect that trust fund. They’re putting money in to fund these audit contractors and to review your claims, which also means we’re going to see an uptick in audits and likely an uptick in RAC audit volume.”

We’re going to see an uptick in audits and likely an uptick in RAC audit volume.

-Kelly Grahovac, general manager,The van Halem Group

As utilization climbs, so does the amount of dollars CMS spends on hospice care, spurring agencies to step up enforcement in an effort to control costs. Medicare hospice expenditures rise by about $1 billion annually, according to CMS.


Many hospice providers express uncertainty about their ability to weather an audit. Even prior to the pandemic, fewer than 50% of hospices indicated that they were ready for a federal audit or additional document request, according to a 2019 survey of 170 organizations by Optima Health.

Millions in overpayments recovered

RAC audits come in two varieties. One is a relatively simple, automated process, and the second is a more intense, potentially lengthy complex audit.

“The Recovery Audit Contractor carries a little bit of a different weight than some of the other contractors,” Katie Wehri, NAHC’s director of home care and hospice regulatory affairs, told Hospice News. “Each of the contractors that CMS utilizes has their own scope of work. And for the RAC, they are recovering payments, basically, that have been made.”

In 2019, the most recent year for which data are available, RACs recovered more than $162 million in overpayments from providers across the continuum, gleaned from close to 182,000 claims, according to CMS.

Worth noting is that RACs can also identify instances in which Medicare underpaid providers as well. In 2019, RAC audits led to total corrected underpayments in excess of $18.3 million.

As with most regulatory interventions, complete and accurate documentation and error-free claims are a hospice’s best defense, Grahovac said.

A robust compliance program is also critical.

“Always, a provider without a compliance program is considered negligent, and any uncovered compliance issues could result in more severe penalties,” Grahovic explained. “So you need to have an effective compliance program in place. Your compliance officer, your compliance department, is essential in helping you get through these audits, but also in educating your staff to know what they should be documenting.”

RACs eyeing GIP, CHC

Annually, RACs will propose potential audit topics to CMS, which the agency must then approve or deny.

Currently, RACs are focusing on two areas related to hospice — utilization of General Inpatient Care (GIP) and Continuous Home Care (CHC).

For 2023, CMS authorized RACs to conduct audits designed to verify the medical necessity of GIP, as well as the accuracy of associated documentation. The contractors will be reviewing claims to determine whether GIP was “reasonable and necessary” to achieve pain control or chronic symptom management that could not be addressed in any other setting.

Always, a provider without a compliance program is considered negligent, and any uncovered compliance issues could result in more severe penalties.

-Kelly Grahovac, general manager ,The van Halem Group

CMS will re-code any claims that do not meet the indications of coverage or medical necessity, classify them as an overpayment and recoup the funds from the provider.

“Really make sure that your documentation shows that this patient has pain or a symptom that cannot be managed in another setting, which would include a brief description of what you did to try to manage it in that other setting and why that attempt didn’t work,” Wehri said. “For each and every day that the patient is there, describe why what is being addressed under the GIP level of care cannot be addressed in a different setting.”

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