Electronic Health Records

Adoption & Implementation News

Complex denials, appeals in RAC process costing hospitals

By Kyle Murphy, PhD

The purpose of the Recovery Audit Program and its Recovery Audit Contractors (RACs) is to identify Medicare overpayments and underpayments across the country, but according to a survey of hospitals by the American Hospital Association (AHA), these auditing activities are proving costly.

The RACTrac survey comprises data collected via an online survey from 2,478 hospitals through December 2013 with the vast majority (2,195 hospitals) reporting RAC activity and nearly half that number (1,241 hospitals) in this quarter.

In terms of costs, more than two-thirds of hospitals (68%) are spending more than $10,000 managing the RAC process during Q4 2013. Half reported spending more than $25,000 while a quarter of that number ended up spending in excess of $100,000.

Although RAC auditing activities are divided among four regions — Region A (Northeast), Region B (Midwest), Region C (South), and Region D (Plains and West) — their work with denials centered almost always on complex denials. Automated denials were miniscule in comparison to complex medical record denials through Q4 2013: 3 percent/$80.6 million and 97 percent/$2.5 billion, respectively.

Region C, which had the highest total number of hospitals reporting RAC activity, experienced the greatest percentage of these denials (38%), followed by Regions A (22%), D (22%), and B (18%). For this region, the dollar value of automated and complex denials escalated over the course 2013, from $650.6 million (Q2) to $820.9 million (Q3) and ultimately $886.6 million (Q4).

The dollar values of automated and complex denials are night and day: The average value of the former reached $882 while the latter’s number $5,659. On the automated side, the majority (71%) were related an outpatient setting. On the complex one, inpatient service areas (89%) represented the greatest percentage of denials.

While the cause of automated denials varied by region, outpatient billing errors were commonplace. But for complex denials, the most common reason was the determination of “short-stay medical unnecessary.” Digging deeper, the survey reveals that most respondents (64%) believed the care was indeed necessary but happened to be provided in the wrong setting.

The appeals process appears to be 50-50 endeavor. Slightly less than half of participating hospitals (49%) indicated that they had had a denial reversed during the discussion period. That rate was much higher in Region A where hospitals were successful 65 percent of the time. The short stay denials were the most likely cause for hospitals to pursue a RAC appeal, with 55 percent having reported doing so.

The response they are getting, however, isn’t necessarily positive. The timing for reviewing appeals is exceeding the 60-day window required by the program and 95 percent of participating hospitals indicated that at least one delay went beyond the statutory limit of 90 days.

What’s more, around two-thirds of all cumulative claims appealed (67%) are tied up in the appeals process. Considering that 64 percent of claims having gone through the appeals process come out in favor of the provider, that’s a troubling situation.

With the RAC program already coming under fire by not only provider associations such as the AHA but also Congress, these findings would appear to provide further support for reform.

Read the full survey here.




Sign up to continue reading and gain Free Access to all our resources.

Sign up for our free newsletter and join 60,000 of your peers to stay up to date with tips and advice on:

EHR Optimization
EHR Interoperability

White Papers, Webcasts, Featured Articles and Exclusive Interviews

Our privacy policy

no, thanks

Continue to site...