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Hospitals reported that $9.4 billion in Medicare payments were targeted for medical record requests through the second quarter of 2013, of which $2.2 billion were denials, according to the American Hospital Association’s report recently posted RACTrac.

RAC Region A was reported to have the highest number of medical record requests as well as the highest average number of records per hospital. The survey also reported that 58 percent of the medical records reviewed by the RACs did not contain an improper payment.

The twin horns of the Medicare dilemma were evident in the survey—medical necessity and short stays. Sixty-seven percent of hospitals indicated medical necessity denials were the most costly complex denials, while 62 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.

The average dollar value of an automated denial was $576 and the average dollar value of a complex denial was $5,704. Ninety-eight percent of denied dollars were for complex denials. The most commonly cited reason for a complex denial was “short-stay medically unnecessary.”

Stents and syncope and collapse were the top MS-DRGs denied by the RACs in terms of dollar impact.

On the appeal side of the equation, the RACTrac survey found that “the value of appealed claims is approaching $1.1 billion,” with hospitals reporting appealing an average of 247 claims to date.

With hospitals appealing 40 percent of all RAC denials, they also reported a 70 percent success rate, according to the survey. Additionally:

  • 45 percent of participating hospitals reported having a RAC denial reversed through utilization of the discussion period.
  • 63 percent of all hospitals filing a RAC appeal during the second quarter of 2013 reported appealing short-stay medically unnecessary denials.
  • Three-fourths of all appealed claims are still sitting in the appeals process.

Success has come with an administrative burden, noted survey respondents. Sixty-three percent of all hospitals reported spending more than $10,000 managing the RAC process during the first quarter of 2013, 45 percent spent more than $25,000, and 11 percent spent over $100,000.

The AHA reported that 1,273 hospitals participated this quarter’s survey and noted that “participants continue to report dramatic increases in RAC activity,” with 47 percent reporting that medical record requests had increased by 47 percent since the fourth quarter of 2012.

Coincidentally, the RACTrac report comes on the heels of an OIG study published this week on its website. In its report to Congress, the OIG chided the Centers for Medicare & Medicaid Services (CMS) for lacking metrics on its performance evaluations to evaluate RACs’ performances on contract requirements. Moreover, the report stated that in fiscal years 2010 and 2011, the RACs could identify only half of all the claims as having improper payments—a sum of $1.3 billion.  

About the Author

Chuck Buck is publisher of RACmonitor.

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OIG Report


Chuck Buck

Chuck Buck is the publisher of RACmonitor and is the program host and executive producer of Monitor Monday.

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