RAC lessons: Appeals can work; denials and hospital prep are costly

Separate reports from the Centers for Medicare and Medicaid Services (CMS) and the American Hospital Association (AHA) helped hospitals cobble together a clearer picture of what the recovery auditor contractors (RACs) are up to, while presenters at this year's Healthcare Financial Management Association (HFMA) ANI conference in Las Vegas offered strategies for managing the RAC process.

CMS last week issued an update to the appeals statistics in its evaluation of the three-year RAC demonstration project. (The data were applicable for appeals through March 9, 2010.) From the launch of the demonstration through March 9, providers appealed 12.7 percent of RAC overpayment determinations. While only 8.2 percent of all RAC determinations were overturned on appeal, providers that appealed won a favorable decision 64.4 percent of the time. By comparison, the previous evaluation update, issued in January 2009, found that only 7.6 percent of all RAC determinations were overturned on appeal and that providers had won 34 percent of the time.

Moving on to the national RAC program in place today, during the first quarter of 2010 RACs denied $2.47 million in Medicare claims submitted by 437 of the 653 hospitals participating in the AHA's voluntary RACTrac survey. "The average dollar value of an automated denial was $709, and the average dollar value of a complex denial was $6,542," said the report. Those denials weren't the only costs hospitals experienced. Forty-nine percent of the RACTrac respondents experienced increased administrative costs from managing the RAC process, and 17 percent of the hospitals pulled in an external consultant to help--at an average cost of $91,636.

At an ANI session, Marina McDonough, revenue cycle consultant for CareMedic Systems, and Gerilynn Sevnikar, vice president of patient financial services for Sharp HealthCare, offered some basic advice for hospitals to prepare for a RAC incursion:

  • Assess the hospital's exposure for RAC denials to determine how much money should be reserved from an accounting perspective.
  • Create a multidisciplinary team that includes financial, clinical, IT, and operational staff. The facility's RAC coordinator should lead--and work directly with--the RAC committee to ensure information flows through the entire organization.
  • Capture data in multiple formats in order to get the clearest picture of the hospital's exposure risk, and set up a dashboard to monitor the areas at higher risk.
  • Educate clinical and nonclinical staff to institute changes that prevent RAC take-backs on a go-forward basis.

To learn more:
- read the updated RAC demonstration report from CMS
- take a look at the AHA survey results
- read this HFMA conference summary on RAC appeals strategies
- download RAC Audit Survival Guide: Strategies to Prevent Audits and Minimize Their Impact

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