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To hone your facility’s ability to win appeals, you need to develop a structured and well-formulated strategy before you start to challenge denials. All of your appeals will need to be fact-based and dependent on the accuracy and quality of your medical documentation – you should bear this in mind as you develop your strategy.


Every potential appeal should be evaluated through this strategy and the merits of each case should be considered carefully; then the ultimate decision of whether to proceed with an appeal always should be decided by a review team. The authors of the 2009 Recovery Audit Contractor Workbook urge facilities to think about the following elements that could affect such decisions:


Cost Benefit Analysis


You should consider the financial implications of appealing. According to the AHA, the average cost of defending an appeal during the demonstration project was between $2,000 and $3,000, so especially if you are considering appeals on a case-by-case basis, this may have some bearing on your desire to set a cost threshold for your facility.


Resources Required for Claim Appeal


It is vital to weigh whether your organization has the necessary resources to manage an appeal effectively, using either internal or external resources.


During an appeal process, you may require more resources during initial stages to set the foundation  for subsequent stages. It is important to note that you should involve legal counsel in each step of an appeals process.


It may be difficult to know at this point how to budget your resources until the time for an actual appeal arrives, but you should be prepared to adjust your processes as you get financial data reported to you.


Quality of Your Documentation


Do you have sufficient documentation to back up your claims?  Remember, the documentation you submit for the first two levels of the appeals process also will be used during the subsequent three levels. It is vital to review medical records prior to appealing to identify other issues that might be hidden in them. Because it is so important to have quality documentation to defend your position in an appeal, it may not warrant pursuing an appeal if you do not have it.


Specific Types of Denials to Appeal


You need to consider whether you want to appeal ALL wrongfully denied claims or just those related to certain types of issues, like incorrect coding or medical necessity. Also, you need to consider the overall compliance implications of moving forward with any appeal. If you decide not to appeal  out of an unwillingness to pay the cost to review and prepare the case, in the eyes of ANY governmental auditing body you may be viewed as admitting that you routinely handle this particular type of case incorrectly, therefore opening yourself up to a larger governmental audit. As you know, the RACs aren’t the only auditors that you need to be concerned about!


Appeals Best Practice:  Example


John Orsini, CPA, the vice president of financial operations for Catholic Healthcare West, described how his organization approached the appeal of  more than $11 million in initial findings uncovered by the RAC demonstration project in 2008.


CHW established policies and procedures to ensure that its facilities appealed RAC denials quickly and correctly. Facilities were provided with template letters to use in appealing denials based on medical necessity with the corresponding legal arguments (summarized in the table below).


CHW Legal Arguments in Fiscal Intermediary Appeals

CHW Argument

CHW Key Points

No basis for overpayment determination

There were no published Medicare criteria to support the overpayment determination.

“Provider without fault” doctrine

If the FI determines that a provider has been incorrectly paid, the FI may not assume that the claim should be denied.

“Waiver of liability” doctrine



There is no basis for reopening a claim after the one-year time period allowed by Medicare regulations.

Improper review

In determining whether services were medically necessary, the RAC auditor acted beyond the scope of the authority granted under the Medicare Modernization Act of 2003.

Violation of Constitutional due process rights

The RAC auditor violated the hospital’s due process rights because it has a direct financial incentive to deny claims.

With assistance from its legal department, CHW also developed standard policies and procedures around the appeal process across all of its facilities, with the goals of  protecting its rights and winning a higher percentage of appeals.


Develop Your Facility Appeals Policy


The authors of the 2009 Recovery Audit Contractor Workbook recommend the practice of developing an appeals policy to address issues of  how your facility will choose which denied claims to challenge  and how to handle documentation. Such a policy should include these elements:


§        When you receive your demand letter, the RAC liaison and RAC subcommittee, in coordination with legal counsel and clinical experts, should review the findings to ensure accuracy and to determine next steps.

§        The RAC liaison and RAC subcommittee, in coordination with legal counsel, should review:

o       Each appeal outcome for accuracy, reasonableness and appropriate application of program rules, regulations and statutes.

o       All RAC findings to make a determination as to which denials should be appealed.

§        The RAC liaison should coordinate the appeals process to obtain all necessary data and information, ensuring that all appeals are filed within specified time frames and include  required documentation.

§        You should include the following documents when filing appeals at the first and second levels of the appeals process:

o       The organization’s appeal letter

o       The RAC letter requesting medical records

o       The RAC demand letter

o       The remittance advice for the initial payment for the services

o       The remittance advice for the recoupment of the payment, if applicable

o       The entire medical record

o       The organization’s clinical arguments

o       An explanation of how CMS coverage and payment policies apply to the claim.

§        If a denial is upheld on appeal, the RAC liaison and RAC subcommittee should determine whether further action, such as considering other levels of appeal, is applicable or appropriate.

§        The RAC liaison should consult with legal counsel during  all levels of the appeals process.

§        You should track all information pertinent to the appeals process using a tracking tool that covers timelines, status, dates, basis, and outcome.


The RAC Workbook also provides a template policy by which you can model your own internal policy. You can purchase a copy of the RAC Workbook at http://health.cch.com/Products/ProductID-5510.asp.


If you do your due diligence in each case and develop a standard protocol for your RAC process, an appeal could be worth your time and money in the long run. You may learn over time, though, that as you go through the paces it may not be advisable to launch an appeal every time. Weigh your options each time, very systematically, and review each denial as a separate case based on the merits of each.


About the Author


Carla Engle, MBA, is a product manger for MediRegs, a Wolters Kluwer company. Her background includes more than 20  years in hospital and physician practice operations, particularly in reimbursement and billing functions. Prior to joining Wolters Kluwer recently, she was the vice president of compliance for a national revenue cycle solutions company and prior to that was in the Rreimbursement Training Department with HCA. For several years she headed up the Part A Fraud Investigation Unit for a CMS Program Safeguard Contractor (PSC) where she was successful in the prosecution of several national cases. In her revenue cycle compliance capacity, she worked with a number of clients in California and Florida with Recovery Audit Contractors (RACs) in setting up processes and appeals.


Contact the Author




Narain, A., et al. (2009). Recovery Audit Contractor Workbook. Chicago: CCH.

Orsini, J. (2008, May). Surviving the RAC how to take back the take-backs. HFM (Healthcare Financial Management), 62(5), 66-69.




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