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The results of the latest American Hospital Association (AHA) RACTrac Survey were released Aug. 22. One thing that this ongoing survey has revealed is that, based on percentages, few things about the RAC process are changing.

First, despite the fact that the Centers for Medicare & Medicaid Services (CMS) raised the maximum number of additional documentation requests per provider back in March, the RACTrac Survey found that 61 percent of all medical records recently reviewed did not yield a finding of an improper payment. This figure is down only slightly from the last report. Of the four RAC contractors, CGI is setting a low standard in this particular category, as it only was able to detect an improper payment 29 percent of the time, after documentation review.

One of the more important revelations brought forth by the RACTrac Survey involved appeal statistics. CMS has released appeal numbers in the past, but they have been limited to claim appeals originating prior to Sept. 30, 2011. Since the AHA survey is ongoing, I tend to trust its numbers slightly more than those from CMS.

There is one new informational graphic showing that the value of appealed claims nationwide now exceeds $500 million. On average, hospitals reported appealing 118 claim denials apiece, up from the average of 83 reported in the last quarterly report.

The latest survey also shows that 40.8 percent of all RAC denials nationwide are appealed. This is up from just more than 36 percent from the last report. This figure wouldn’t normally grab my attention, but coupled with the fact that 75 percent of all appeals have resulted in judgments rendered in favor of the provider, I come to the conclusion that something is terribly wrong with this picture.

Furthermore, the survey shows that more than 71 percent of all appealed claims currently are awaiting a final decision. From the conversations I have had with RAC coordinators nationwide, it appears that many of these cases are going to the third level of appeal, eventually to be heard by an administrative law judge. One would think that if the providers filing appeals feel this strongly about the claims in question, their chances of an eventual appeal victory are rather good.

This leads me back to the 59.2 percent of RAC claim determinations that are not appealed. On the surface, with the appeal outcomes so heavily tilted in the providers’ favor, why isn’t the percentage of appealed claims higher?

I believe that all reasonable answers to this question eventually lead to a discussion of facility administrative costs for RAC-related activity. In the latest report, 26 percent of hospitals indicated that they have had to take on additional staff based on the impact of the RAC program on their facilities. Seventeen percent of hospitals in Region A reported an average cost of at least $100,000 to manage their RAC programs. This “burden spike” is occurring as 69 percent percent of providers either have not received outreach education or are unaware of it being offered, either by their RAC or by any other entity.

Many bigger facilities and hospital groups have had RAC teams in place from the very beginning of the permanent process, and these hospitals are achieving success. Yet the stories of rural hospitals being crippled are beginning to grab national headlines. In an environment where 61 percent of all additional document requests (ADR) lead to no change in net revenue, how would a mom-and-pop hospital with limited resources ever get to the point where they could respond to RAC issues, given the narrow cost margins that exist in terms of just keeping the ER doors open and all of the lights on?

Simply stated, the administrative resources are not there for these providers. The problem is one of program design. The RAC process has been formulated in such a way that every facility begins to incur a revenue loss from the very beginning of the process, even as they attempt to protect revenue that long since has been reinvested back into the facility. These losses continue as the appeals continue, and they are aggravated with every appeal that is eventually lost.

If CMS contemplates another increase in the records that can be requested in a 45-day period, it is not difficult to envision the Medicare appeals process being brought to its knees, followed closely by empty buildings that used to be hospitals appearing across the country.

About the Author

J. Paul Spencer is the Compliance Officer for Fi-Med Management, Inc., a national physician practice financial management company based in Wauwatosa, WI. Paul has over 20 years of experience across all facets of healthcare billing, including six years spent with insurance carriers. In his current role with Fi-Med, he acts as a physician educator on issues related to E/M level of service and documentation audits by CMS and other outside entities. Paul has carried the CPC and CPC-H credentials from the American Academy of Professional Coders since 1998.

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Just What We Need; More Junk Science!


J. Paul Spencer, CPC, COC

J. Paul Spencer is a senior healthcare consultant for DoctorsManagement. Is the national correspondent for Monitor Mondays, the live Internet radio broadcast produced by RACmonitor.

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