Postpayment review, extrapolation challenges, 5-level Medicare appeals.
RACs (Recovery Audit Contractors) are CMS contractors that conduct postpayment review of Medicare and Medicaid claims for overpayment recovery on a contingency-fee basis. Cotiviti audits Regions 1, 2, and 3 (Northeast, Midwest, Southeast). Performant Recovery audits Region 5 (Home Health, Hospice, and DME nationwide).
HMS Federal Solutions has held regional contracts in prior cycles. A RAC audit notice arrives as an Additional Documentation Request (ADR) on a defined sample of paid claims, frequently followed by an extrapolated overpayment demand across the full claim population. Health Law Alliance defends RAC audits across hospitals, physicians, DME suppliers, and home health agencies.
Our defense framework focuses on the ADR response, the statistical extrapolation challenge, the contingency-fee incentive misalignment, and the 5-level Medicare appeals track through redetermination, reconsideration, ALJ hearing, the Medicare Appeals Council, and federal court.
.png)
A RAC postpayment review with statistical extrapolation turns a 30-claim sample into a multi-million dollar recoupment demand across the full claim population. The RAC contractor is paid a contingency fee on every recovery it produces, which structurally aligns the contractor with finding error rather than the substantive merits of the claims. The 5-level Medicare appeals track is procedurally unforgiving and typically takes 18 to 36 months from the initial demand. The defense posture has to address all three from the ADR response forward.
RAC review uses statistical extrapolation. The contractor reviews a sample (often 30 to 50 claims), calculates an error rate, and extrapolates the error rate across the full claim population for the audit window. A $50,000 sample finding can produce a $5M to $20M recoupment demand after extrapolation. CMS withholds payment on incoming claims to recoup the demand, which compounds the cash flow exposure. The largest dollar defense in most postpayment matters is the statistical methodology challenge: sample frame defects, sample size deficiencies, RAT-STATS application errors, and Cochran formula objections.
RAC contractors are paid a percentage of every overpayment they identify and recover, with statutory limits and clawback obligations if the determination is overturned on appeal. The contingency-fee structure aligns the contractor with finding error rather than reaching the substantively correct billing determination. Defense framing should reflect this incentive misalignment in the appeal record, particularly at ALJ hearing, where the procedural and substantive defects in the contractor's findings are most likely to be addressed on the merits.
RAC overpayment determinations move through the 5-level Medicare appeals track: redetermination by the MAC, reconsideration by the QIC, ALJ hearing, the Medicare Appeals Council, and federal court. The full track typically takes 18 to 36 months, with CMS recoupment continuing through the appeal unless a recoupment-protection request is granted. The defense framework has to manage the cash flow consequences of the protracted appeal alongside the substantive merits.
RACs operate under the CMS Program Integrity Manual, with their own statistical methodology, their own document request conventions, and their own referral authority to HHS-OIG and DOJ. Defense counsel that treats a RAC audit as a routine billing dispute misses the procedural posture and the realistic exposure.
Our bench includes a former Assistant U.S. Attorney with DOJ Director's Award recognition and senior healthcare-company counsel. We have defended RAC audits across Cotiviti, Performant, and HMS jurisdictions, produced statistical extrapolation reductions in postpayment matters, and coordinated RAC defense with parallel False Claims Act and criminal exposure. This is the protocol.
From the day the RAC notice arrives: evaluate the audit type (prepayment review, postpayment review, focused medical review), the contractor (Cotiviti, Performant, HMS), the dispensing or service window covered, and the document request as written. Most document requests can be narrowed through written response on scope and timing. We conduct a privileged pre-production review of every document before it leaves the practice, which preserves defenses for the appeal track and avoids producing material that becomes evidence in any subsequent FCA or criminal matter.
When the RAC issues findings: respond on the substantive defense for each flagged claim and challenge the statistical methodology where postpayment extrapolation is used. The methodology challenge focuses on sample frame defects, sample size deficiencies, RAT-STATS application errors, and Cochran formula objections. A successful methodology challenge at this stage often reduces the recoupment demand by a meaningful percentage before the matter reaches the formal appeal track.
The Medicare appeal track requires the right record at every level. We draft and file the redetermination request to the MAC within the 120-day window, prepare the QIC reconsideration with the substantive and statistical record, and present to the Administrative Law Judge with witness preparation, expert testimony where applicable, and a procedural record built to support the ALJ's decision. The record built at the redetermination and QIC stages is the record the ALJ reviews; defense counsel that skips ahead loses the procedural foundation.
When RAC findings produce a referral to HHS-OIG, the DOJ Civil Division, or the local U.S. Attorney's office: civil FCA defense (CID response, intervention or declination engagement, Rule 9(b) motion practice) and criminal defense (target letter response, attorney proffer, grand jury subpoena management) run in parallel with the RAC appeal. Our former-federal-prosecutor bench coordinates the RAC appeal, the civil FCA matter, and the criminal track as one matter to avoid locking in admissions in one forum that hurt the defense in another.
RACs use CMS-supplied data analytics to identify providers whose billing patterns deviate from peer comparables. The following triggers are the most common predicates for a RAC document request, prepayment review notice, or focused medical review.
Outcomes are summarized for confidentiality. Client names, precise geography, and identifying facts are redacted.
Recoupment Reversed
Provider received a RAC postpayment review finding with statistical extrapolation across a multi-year claim window. Health Law Alliance challenged the contractor's sample frame, sample size methodology, and RAT-STATS application errors at the redetermination and QIC reconsideration stages. The extrapolated recoupment demand was reduced to the actual sample-claim amount, a small fraction of the original number. The procedural record built at the redetermination level supported the QIC's reduction without requiring an ALJ hearing.
DOJ Declination
Healthcare company received a RAC referral that produced a Civil Investigative Demand from the DOJ Civil Division covering alleged $6M in false claims. Health Law Alliance produced documents under a negotiated rolling schedule, presented the factual rebuttal of the government's theory in a meeting with the line attorneys, and prepared a written submission addressing the materiality and falsity defects. DOJ declined both civil intervention and criminal referral. Pre-unsealing engagement, when the matter surfaces through other channels, is the highest-leverage window in any FCA matter.
Indictment Dismissed
Solo physician faced a multi-count federal indictment that included healthcare fraud counts following an upstream RAC referral to the local U.S. Attorney. Health Law Alliance filed responsive motions, built the procedural record, and challenged the government's theory through pre-trial motion practice; the indictment collapsed before trial. The RAC-to-criminal escalation risk is real in matters where the contractor's findings include intent evidence; a unified defense across the RAC appeal track and the parallel criminal track is the most efficient way to avoid the criminal exposure.
Attorney advertising. Prior results do not guarantee a similar outcome. Case summaries are generalized for confidentiality and are not a substitute for legal advice on your specific matter.
Anthony's background as a former federal prosecutor and executive for major healthcare companies provided a level of expertise and insight that made all the difference. His deep understanding of healthcare law, particularly in litigation and compliance matters, helped navigate complex legal issues with ease.
Seven questions that come up on almost every first call. The answers below are general; specific situations require privileged consultation.
Before you produce documents to the RAC, before the contractor draws the sample for extrapolation, before the matter escalates to a DOJ Civil Division referral, have a privileged conversation with attorneys who defend RAC audits across Cotiviti, Performant, and HMS jurisdictions. Free, confidential, no retainer.
