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It implemented this survey in January of this year “in response to a lack of data and information provided by the Centers for Medicare & Medicaid Services (CMS) on the impact of the Recovery Audit Contractor (RAC) program on America’s hospitals.” The survey was released on Sept. 9, 2010.


Hospital participation in the survey has more than doubled since the AHA issued the first quarter report, and 1,389 hospitals are now participating. Of that number, 70 percent (972 hospitals) are experiencing RAC activity while 30 percent (417 hospitals) are not.


Most of the audits reported are being conducted in general medical and surgical acute care hospitals (831) with critical access hospitals coming in next (174). Audits of the following types of hospitals are minimal at the moment: long-term acute care, inpatient rehabilitation, inpatient psychiatric, and “other” types (such as cancer hospitals, etc.).


Although hospitals are experiencing more automated reviews (15 percent of the responding hospitals) than last quarter, RACs continue to focus their efforts on complex reviews (85 percent of the responding hospitals).


As a reminder, an automated review is basically a claim determination without a human review of the medical record. Instead, software is used to detect errors like duplicate payments and coding and billing errors. In this quarter, the following are the reasons for automated denials. (Note that the percentages below refer to the percentage of the total number of hospitals responding to the AHA survey.)


  • Outpatient coding/billing errors (87 percent);
  • Duplicate payment (9 percent);
  • Inpatient coding error (MS-DRG) (5 percent);
  • Incorrect discharge status or disposition (6 percent); and
  • Other (22 percent).


In complex reviews, humans do the review and determine improper payments after receiving the medical record. On this side of the survey fence, the numbers look like this:


  • Incorrect MS-DRG or other coding error (86 percent);
  • All other (6 percent);
  • No or insufficient documentation in the medical record (4 percent);
  • Incorrect APC or other outpatient coding error (3 percent);
  • Medical necessity (no activity).


The last section of the AHA’s second-quarter report focuses on appeals. In all regions, the survey revealed that many hospitals are not appealing the denials. On a nationwide basis (all four RACs), 16 percent of hospitals reporting appealing at least one claim denial. Of the claims that have completed the appeals process, 13 percent were overturned in favor of the provider.


One final bit that may be of interest to hospitals relates to the “administrative burden” that RACs are posing to the organizations.


Through the second quarter of 2010, 76 percent of responding hospitals reported that RAC activity has made an impact on organizational administrative duties and 51 percent reported increased costs because of RACs. Specifics look like this:


  • Increased administrative costs (51 percent);
  • Initiated a new internal task force (38 percent);
  • No impact (24 percent);
  • Employed additional staff/hiring (19 percent);
  • Modified admission criteria (13 percent);
  • Additional administrative role of clinical staff (12 percent);
  • Other (9 percent); and
  • Had to make cutbacks (1 percent).


About the Author

Carol Spencer, RHIA, CCS, CHDA is a senior healthcare consultant with Medical Learning, Inc. (MedLearn®) in St. Paul, Minn. MedLearn is a nationally recognized expert in healthcare compliance and reimbursement. Founded in 1991, MedLearn delivers actionable answers that equip healthcare organizations with coding, chargemaster, reimbursement management and RAC solutions.

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