As RACs Increase Denials and Record Requests, Hospitals Step Up Appeals

[Editor's note: This month insidePatientFinance will present a series of articles, white papers, best practices, and news surrounding the always-controversial Recovery Audit Contractors.]

The latest figures released by RACtrac, the American Hospital Association’s quarterly analysis of how the Medicare Recovery Audit Contractors affect hospitals, show that healthcare providers continue to have success appealing denials and thwarting record requests.

At the same time, RACs are stepping up efforts. There’s a term used in newspaper circles, “standing hed,” which refers to a headline that is reused, such as “Police News” or “Society Column.” In the RACtrac report, the standing hed could be, “Participants continue to report dramatic increases in RAC activity.”

The RACtrac report summary contains a significant amount of spin, but if you dig into the detailed results contained in the report there is a clear indicator of the impact of the RAC process, both in terms of record requests and denials. The most significant trends reported are that RACs are increasing their record requests and are denying more claims; at the same time providers are appealing more denials, but overturning them at lower rates.

Record requests by RACs have increased dramatically over the past year as those providers who filled out the survey report receiving almost 500,000 over the past 12 months; more importantly, the average value of medical services in those claims where RACs seek records has stayed flat or decreased, an indication that RACs are widening their nets.

According to healthcare providers participating in the survey, in Q3 2013 they appealed 47 percent of all appeals and had 67 percent of those overturned. Compare that to Q3 2012, where healthcare providers appealed 40 percent of all RAC denials, with a 74 percent success rate.

What follows is the summary of the Q3 2013 RACtrac report, prepared by AHA:

According to the survey, 2,452 hospitals have participated in RACTRAC since data collection began in January of 2010. Of those 1,269 hospitals participated this quarter.

Participants continue to report dramatic increases in RAC activity:

Cumulative medical record requests have increased by 13 percent since Q1 2013.
The number of cumulative complex audit denials reported by respondents has increased by 28 percent since Q1 2013.
58 percent of medical records reviewed by RACs did not contain an overpayment, according to the RAC.
67 percent of hospitals indicated medical necessity denials were the most costly complex denials.
64 percent of short-stay denials for medical necessity were because the care was provided in the wrong setting, not because the care was medically unnecessary
Hospitals reported appealing 47 percent of all RAC denials, with a 67 percent success rate in the appeals process.
The appeals overturn rate may be impacted by appeals withdrawn by hospitals for rebilling.
43 percent of participating hospitals reported having a RAC denial reversed through utilization of the discussion period.
70 percent of all hospitals filing a RAC appeal during the 3rd quarter of 2013 reported appealing short stay medically unnecessary denials.
71 percent of all appealed claims are still sitting in the appeals process.
68 percent of all hospitals reported spending more than $10,000 managing the RAC process during the third quarter of 2013, 49 percent spent more than $25,000 and 12 percent spent over $100,000.