New Denial Code for RACs

Effective May 24, 2010, the CMS will institute a new denial code (N432) that is specifically a message to you (the physician’s office) that reimbursement has been held back due to a RAC audit.

Specifically, “When possible, the Remittance Advice shall contain an N432 code to let the provider know that the adjustment is the result of a RAC audit.”

This, when accomplished will be a “heads up” to you that a Demand Letter is on its way.

The extra emphasis on “when possible” is in the CMS Manual Transmittal, which tells me this code won’t always be there which will add to confusion.

Speaking of confusion, if it wasn’t clear already that you better be looking out for #1 (YOU), take a look at this direct quote from the transmittal:

The RAC shall notify the AC and MAC that an overpayment has been identified by forwarding an Excel or flat file to the AC and MAC containing the claims with improper payments. The RAC shall upload a separate file into the RAC Data Warehouse that contains information associated with the improper payment finding for each affected claim/line item…the AC and MAC will forward an Excel or flat file to the RACs with information associated with the claim adjustment. This includes the dollar amount of any additional adjustments to the claim that were identified by the system during the adjustment process. These are normally called associated findings. Working in concert with the AC and MAC, the RAC will issue a demand letter to the provider explaining the reason for the overpayment and the amount of the overpayment to be recouped. The AC and MAC shall establish an Accounts Receivable and an electronic or paper Remittance Advice for notification to the provider in the claims processing system.

If you were able to read that paragraph and fully understand it in one reading, you are brilliant.

My point here is, if you are not organized…fully and completely organized when it comes to any demand letters you receive, any files you send to a RAC and any appeals you file, then you are leaving money on the table.

The CMS is setting up a system so complex, not many people will understand it.

The RAC’s will have to contend with tens of thousands of files and letters…they are going to screw things up.

You need to worry about yourself and make sure it is not your business that is on the wrong side of their screw ups.

How do you do this?

Fanatic organization and tracking when it comes to RAC’s.

You need to track every bit of minutia when it comes to your audited files, and more importantly when it comes to your appealed files.

It should be your goal to make the recovery of money from you by the CMS and RAC as difficult as possible…while following their procedures exactly.

If you are an easy target, chances are you’ll get hit again and again.

This whole process can be made easy for you with

Always know the location of a  file.

Always know where a file is in the process.

If you are on top of these things, you’ll come out ahead of the RACs.

3 Year RAC Audit Lookback

As noted in the RAC SOW:

The RAC shall not attempt to identify any overpayment or underpayment more than 3 years past the date of the initial determination made on the claim.  The initial determination date is defines ad the claim paid date.

October 1, 2007 is the magic date, meaning, right now, RACs can only go back this far.  As of the writing of this post, that is about 2.5 years of lookback.

Once we reach October 1, 2010, lookback will be a moving 3 year window.


This is simply the time window in which a RAC can look, it is the furthest date in the past the RAC can review files.

So, if you have “bad files” beyond the lookback date, you are safe.

Until we reach October 1, 2010, you actually have a “bargain” review window, as the window is less than 3 years.