Hospitals appeal half of RAC claim denials

Despite the increasing backlog and cost of Recovery Audit Contractor (RAC) appeals, hospitals continue to petition the Centers for Medicare & Medicaid to overturn claim denials, according to the latest results from the American Hospital Association's (AHA) quarterly RACTrac survey.

The survey collects hospitals' cumulative RAC experience data from the beginning of activity through the first quarter of 2014. The AHA reports 2,489 hospitals participated in the survey since it began collecting data in January 2010, but 1,165 hospitals submitted data for the first quarter of 2014.

In the survey's latest findings, hospitals reported that they appeal 50 percent of all RAC denials with a 66 percent success rate. In addition, half had the appeal overturned during a discussion period before a formal appeal.

Although CMS temporarily suspended scrutiny of short-stay reviews, 55 percent of the hospitals that filed formal appeals disputed short-stay, medically unnecessary denials. Most of those denials (66 percent) were because care was provided in the wrong setting, not because it was medically unnecessary, according to the report.

A majority of hospitals (59 percent) also said they received RAC denials for inpatient coding, up eight percent from last quarter.

However, the survey noted that hospitals reported withdrawing an additional 13,000 claims from the appeals process since the third quarter of 2013 in order to rebill the charges.

The price tag for managing the RAC process is hefty. Sixty-six percent of hospitals reported they spent more than $10,000 in the first three months of 2014 to manage RAC claims; 48 percent said they spent more than $25,000; and 11 percent reported they spend more than $100,000.

Sixty-three percent of all appeals claims are still in the appeals process.

Hospitals and health system leaders continue to complain to lawmakers about inappropriate payment denials by RACs. Last week, Steven Hanks, M.D., executive vice president and chief medical officer at The Hospital of Central Connecticut, told congressional staff that despite medical need, in many cases, RACs deny payment for inpatients on the grounds that the services should have been provided in the outpatient settings, FierceHealthcare previously reported. Hospitals have appealed 96 percent of the denials and successfully overturned 94 percent of them, Hanks said.

To learn more:
- here's the survey (.pdf)

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