Hospitals still confronting RAC backlogs


Hospitals continue to contest a large proportion of claims denied by recovery audit contractors (RACs) through the multi-level appeals process, and a backlog of claims continue to clog federal administrative law courts.

According to the most recent data from the American Hospital Association's RACTrac Survey of 676 hospitals nationwide, 45 percent of denials were appealed through the second quarter of 2016, with 56 percent of those appeals related to inpatient coding denials. That's down slightly from the first quarter, where 47 percent of denied claims were appealed.

The average dollar value of an automated denial--which are caught through computer algorithms--is $741. Complex denials involve far more money, with an average dollar value of $5,418.

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Meanwhile, the appeals process remains sluggish. Nationwide, three-quarters of survey respondents said that administrative law courts have taken longer than the mandated 90 days under federal statutes. In the Upper Midwest, 93 percent of hospitals say the process has taken longer than 90 days. Altogether, 27 percent of all appeals ever filed by hospitals since the RAC program began in 2010 continue to be sitting in the appeals process. In 2014, the feds briefly suspended the program after the number of claims being appealed topped 350,000.

Last year, the Centers for Medicare & Medicaid Services (CMS) offered to settle the backlog of appeals involving disputed short-stay hospital stay for 68 cents on the dollar, for a total settlement of about $1.6 billion.

Nevertheless, hospitals have enjoyed considerable success in the appeals process, with 60 percent of appeals leading to a denial being overturned.

Still, the financial burden of appealing a RAC denial is fairly costly. Twenty-percent of hospital said during the second quarter they spent at least $10,000 on administrative costs related to addressing RAC issues; 12 percent spent more than $25,000, 7 percent spent more than $50,000, and 5 percent spent more than $100,000.

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