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Hospitals Rack Up Victories Against RACs, But Denials Continue

October 12th, 2016

MADISON, WI – Medicare's recovery audit contractors (RACs) have continued to increase their scrutiny and denials of hospital payment claims in recent years, even though more and more of their actions have been overturned in favor of the hospitals.

According to the American Hospital Association's RACTrac website, hospitals appeal nearly one in four RAC denials with an 85% success in the appeals process.

The overall solution, according to a recent study in the Journal of Hospital Medicine, is RAC reform, including improved transparency in data reporting.

Study authors led by researchers from the University of Wisconsin School of Medicine and Public Health, note that hospitals and patients have grown increasingly concerned about determinations related to observation and inpatient status for Medicare beneficiaries. “Recovery Audit Contractor (RAC) activity alleging improper status, however, has received little attention, and there are conflicting federal and hospital reports of RAC activity and hospital appeals success,” they add.

To shine some light on the situation, the researchers looked at complex Medicare Part A audits at three academic hospitals – the University of Utah Hospital in Salt Lake City, Johns Hopkins Hospital in Baltimore, and University of Wisconsin Hospital in Madison – from 2010 to 2013.

Results indicate that, of 101,862 inpatient Medicare encounters, RACs audited 8%. Overpayment was alleged in 31.3% of those audited cases, and hospitals disputed 91.0% of the overpayments.

“There was a nearly three-fold increase in RAC overpayment determinations in two years, although the hospitals contested and won a larger percent of cases each year,” the authors point out.

The overpayment determinations didn’t contest the need for care delivered, the study explains, but that the care should have been delivered under outpatient, not inpatient, status.

The study finds that about a third of settled claims were decided in the discussion period; those favorable decisions for the hospitals are not reported in federal appeals data.

In addition, nearly half (951/1935) of settled contested cases were withdrawn by the hospitals and rebilled under Medicare Part B to avoid the lengthy – a mean of 555 days – appeals process. The healthcare facilities employed an average of 5.1 full-time staff in the audits process, according to the study.

The original inpatient claims were then counted as improper payments recovered by the RAC.

While hospitals also lost appeals 0.9% of the time by missing a filing deadline, there was no reciprocal case concession when the appeals process missed a deadline, study authors emphasize.