A Recovery Audit Contractor (RAC) finding arrives as paperwork, but it behaves like a clock. From the date on the letter, your hospital has a fixed window to review the claim, decide whether to fight, and file. Miss a date and a defensible claim becomes a lost one. This guide walks through the response in order, from the first letter to the last appeal level, and explains where RAC audit support services fit when your team's capacity runs short.

Step 1: Identify which RAC audit letter you are holding

RAC correspondence comes in stages, each with a different obligation.

  • Additional Documentation Request (ADR). The RAC wants the medical record for a complex review. You generally have 45 calendar days to send it. No response is treated as no support, and the claim is denied.
  • Review Results Letter. The RAC has finished its review and is telling you what it found. For complex reviews, this opens a discussion period in which you can send the RAC additional information and ask it to reconsider before the finding becomes a demand.
  • Demand Letter. Issued by your Medicare Administrative Contractor (MAC), this is the initial determination that identifies the overpayment and starts the formal appeal clock.

Log the letter type, letter date, claim numbers, and dollar amount on arrival. Every deadline below counts from that date.

Step 2: Calendar every deadline before you analyze anything

Deadlines decide RAC outcomes more often than the merits do. Before anyone opens a chart, put these dates on a shared tracker:

  • Discussion period: 30 days from the date of the Review Results Letter.
  • Redetermination (Level 1): 120 days from receipt of the demand letter to file with the MAC.
  • Recoupment protection: if the MAC receives your redetermination request within 30 days of the demand letter date, it cannot begin recouping the overpayment while that appeal is pending. Otherwise recoupment may begin on day 41.
  • Reconsideration (Level 2): 180 days from the redetermination decision to file with the Qualified Independent Contractor (QIC). Filing within 60 days again pauses recoupment.
  • Administrative Law Judge hearing (Level 3): 60 days from the reconsideration decision, subject to a minimum amount-in-controversy threshold that CMS adjusts annually.
  • Medicare Appeals Council (Level 4) and federal district court (Level 5): 60 days each from the prior decision, with a higher amount-in-controversy threshold for court.

Interest accrues on an unpaid overpayment from day 31 after the demand letter, whether or not you appeal. That is why the 30-day redetermination filing matters: it protects cash flow while the claim is contested.

Step 3: Test the RAC audit finding against the record

A RAC finding asserts that the documentation does not support what was billed. Your job is to test that assertion against the evidence.

Assemble the complete medical record, the final billed claim, the itemized statement, and the orders, progress notes, and discharge summary for the dates of service. Then answer the question the RAC asked:

  • DRG validation: Was the principal diagnosis correctly sequenced, and do the secondary diagnoses and procedures meet coding guidelines for the DRG assigned?
  • Medical necessity: Does the physician documentation support the level of care and length of stay that were billed?
  • Coding accuracy: Do the codes on the claim match what the record describes, using the guidelines in effect on the date of service?

Note where the record supports the claim and where it does not. That worksheet becomes the backbone of the appeal, or the honest basis for not filing one.

Step 4: Decide whether to appeal, repay, or rebill

Not every finding deserves an appeal. Sort each claim into three groups:

  1. Appeal. The documentation supports the claim as billed, or the RAC applied the wrong guidance. These are worth the effort at every level.
  2. Repay. The record plainly does not support the claim. Repay promptly to stop interest and move on.
  3. Rebill. Some inpatient denials may be payable at a different level. Confirm the rebilling rules and timely-filing limits first.

Triage by dollar value and defensibility. A high-dollar claim with strong documentation goes first; a low-dollar claim with thin documentation may not justify the staff hours.

Step 5: Build a RAC appeal that walks the reviewer through the record

A strong appeal does not simply disagree. It shows the reviewer where the record supports the claim and cites the applicable guidance.

  • Open with a one-paragraph summary of the claim, the finding, and why the finding is wrong.
  • Quote the documentation directly, with page references, rather than paraphrasing it.
  • Cite the specific coding guideline, coverage determination, or CMS manual section that supports your position.
  • Address the RAC's stated rationale point by point. Silence on a point reads as concession.
  • Include a complete, organized record. Reviewers see what you send, not what you have.

Keep a copy of the full submission and proof of filing. The record you build at redetermination is the one you will argue from at every later level.

When RAC audit support services make sense for your hospital

Most hospitals can handle a few findings with existing staff. The strain shows when volume climbs, when findings cluster in a specialty your coders see rarely, or when the appeals calendar competes with getting clean claims out the door. That is where outside RAC audit support services change the outcome.

The right partner does the work described above, at scale and with reviewer-level experience: a comprehensive review of each RAC finding against the medical record and final billed claim, a clear determination of whether documentation and billing were appropriate, and appeal support on the claims that warrant it. Ask any provider three questions before you engage:

  • Who performs the review, and what credentials do they hold?
  • Will they tell you when a claim is not worth appealing?
  • Do they also address the documentation gaps that generated the findings, so the next cycle produces fewer of them?

How HMI approaches RAC audit support

HMI LLC has provided Health Information Management services to hospitals and health systems since 1989. Its U.S.-based, credentialed specialists hold designations such as RHIT, CCS, CPC, and CHC. Within its coding and billing compliance services, HMI's RAC Pre-Audit & Appeals work reviews the findings cited in the demand letter against the medical record and the final billed claim, determines whether the documentation and billing were appropriate, and assists in appealing denied claims or services where the record supports it.

The same team performs pre-audit reviews that surface exposure before a contractor does, and delivers coding and documentation education to the staff and providers whose work generates the claims. For background on how RAC reviews are structured, see HMI's RAC audit guide for hospital leaders.

Common mistakes in RAC audit responses

  • Treating the ADR as optional. A missed record request is an automatic denial with no review of the merits.
  • Filing on day 119. A late filing preserves the appeal but forfeits recoupment protection. Aim for day 30.
  • Sending a partial record. Incomplete submissions lose winnable cases.
  • Appealing everything. Weak appeals consume hours while stronger claims wait.
  • Fixing the claim but not the process. The same documentation gap will produce the same findings next cycle.

Key takeaways

A disciplined response makes a RAC audit finding manageable: identify the letter, calendar the deadlines, test the claim against the record, decide deliberately, and build an appeal that walks the reviewer through the evidence. When volume outgrows your team, RAC audit support services from a credentialed partner protect the revenue under review and the staff hours spent defending it.

If your hospital is holding a demand letter now, or wants a pre-audit review before the next one arrives, contact HMI or call (844) 446-9176.