Hospitals Appealing RAC Denials in Record Numbers

Centers for Medicare & Medicaid Services (CMS) Recovery audit contractors (RACs) are denying more claims than ever, but hospitals are throwing those denials back at them in the form of an ever-growing number of appeals.

The American Hospital Association released its latest “RACTRAC,” the organization’s quarterly survey of hospitals and their interaction with RAC auditors. While most of the numbers held steady over last quarter, one statistic continues a growing trend: hospitals are appealing a greater percentage and greater number of denials, now up to 44 percent in the survey’s coverage period, the first quarter of 2013.

Hospitals report they are winning 72 percent of appeals, a figure consistent with the previous quarter. The cost of filing appeals has similarly increased. A year ago 34 percent of hospitals reported spending more than $25,000 annually on appeals; now 46 percent spend that much and more, and of those, 10 percent are spending more than $100,000 per annum.

During the first quarter of 2013, RACTRAC found the following:

• The number of medical record requests for survey respondents has increased by 53 percent in comparison to the cumulative total reported in Q3 2012.
• The total number of complex audit denials issued to respondents has increased by 42 percent in comparison to the cumulative total reported in Q3 2012.
• Of the medical records reviewed by RACs, 60 percent did not contain an overpayment.
• The most costly complex denials to defend, according to 96 percent of hospitals, are medical necessity denials.
• Eight percent of medical necessity denials reported were for one-day stays where the care was found to have been provided in the wrong setting, not because the care was medically unnecessary.
• Nearly 30 percent of participating hospitals reported having a RAC denial reversed through utilization of the discussion period.
• Of all hospitals filing a RAC appeal during the 1st quarter of 2013, 71 percent reported appealing short-stay, medically unnecessary denials.
• Three-fourths of all appealed claims are still sitting in the appeals process.
• Nearly two-thirds of all hospitals reported spending more than $10,000 managing the RAC process during the first quarter of 2013, 46  percent spent more than $25,000 and 10 percent spent over $100,000.