Hospitals continue to appeal RAC clawbacks at high rate

Hospitals remain highly engaged in the often contentious Medicare claims denial process, appealing nearly half of all claims denied by the regional recovery audit contractors (RACs), according to the American Hospital Association's latest RACTrac survey.

Altogether, 47 percent of all denied claims were appealed, according to the survey, which covered data for the third quarter of 2015. That is mostly unchanged from the third quarter of 2014 data, when 48 percent of all denied claims were appealed. Of the 366,479 denied claims, 172,498 were appealed, according to the most recent report.

The appeals of RAC denials have been a fiercely contested issue among hospitals, leading to litigation and the suspension of the two-midnight rule by the Centers for Medicare & Medicaid Services (CMS). Federal administrative law courts were also bogged down by the volume of claims litigated by hospitals. That prompted in part CMS' decision to settle with hospitals a large number of backlogged claims earlier this year for $1.3 billion.

Outpatient billing errors were the biggest reason for an automated claims denial, comprising about 40 percent of all rejected claims and 50 percent of the dollar value of such rejected claims.

The value of an automated denial increased significantly year-over-year. It averaged $1,056 during the third quarter of this year, compared to just $688 during the third quarter of 2014. The dollar value of a complex denial averaged $5,458, compared to $5,615 during the third quarter of 2014.

Inpatient coding errors were the most common reason for denials of complex claims, followed by errors regarding the discharge status of the patient. Only 4 percent said that short inpatient stays of less than two midnights led to some form of complex denial.

Forty-five percent of hospitals said they had a denial reversed during the initial discussion process, compared to 52 percent during the third quarter of 2014.

To learn more:
- read the most recent RACTrac survey (.pdf)
- check out the third quarter 2014 survey (.pdf)