According to the latest RACTrac survey by the American Hospital Association (AHA), Medicare recovery auditors (RAC)-related denials in the second quarter of 2012 soared upwards by 24 percent from the first quarter of 2012.
The AHA's RACTrac survey collects data from nationwide hospitals on a quarterly basis in order to assess the impact of the Medicare RAC program on hospitals. The AHA developed RACTrac in 2010 in response to the lack of data and information provided by the Centers for Medicare & Medicaid Services (CMS) on the impact of the RAC program on providers.
RACs conduct automated reviews of Medicare payments to healthcare providers using computer software to detect improper payments. RACs also conduct complex reviews of provider payments using human review of medical records and documentation to identify improper payments. According to the 2012 second quarter RACTrac survey, improper payments include incorrect payment amounts, incorrectly coded services, non-covered services (including services that are not reasonable and necessary) and duplicate services.
According to the survey, which includes input from 2,266 nationwide hospitals, the number of medical record requests was up 22 percent compared to the first quarter. Of all the participating hospitals, 88 percent reported experiencing RAC activity overall and 12 percent did not. The dollar value of RAC automated and complex denials was up 21 percent compared to first quarter, and that number has more than doubled in less than a year. The number of RAC denials averaged $224.8 million in the second quarter for each of the four geographical regions tracked, compared to $185.2 million in the first quarter of 2012 and $110.9 million during the fourth quarter of 2011.
Of the total amount of RAC denials in the second quarter, 97 percent was for complex denials due to the fact that these denials involve more money - $5,564 during the quarter compared to $548 for automated denials. A majority of hospitals (84 percent) indicated that medical necessity denials were the most costly of the complex denials.
The survey also reported that nearly two-thirds of the medical records reviewed by RACs did not contain an improper payment, and more than two-thirds of medical necessity denials reported were for one-day stays.
"I think it's important to realize that the medical necessity denials are the ones that seem to be hitting the hospitals the hardest, and it's an issue where the denials are for one-day stays provided in the wrong setting, whether it be inpatient or outpatient," said Caroline Steinberg, vice president of trends and analysis at the American Hospital Association. "So it's not that the care was not medically necessary. I think we have a real problem in terms of criteria that are used to determine whether a patient should have inpatient or outpatient care, and there's a real lack of clarity for the field and how to make these decisions. Most of these denials when appealed are getting overturned."
Many hospitals were successful in appealing denials during the second quarter. According to the survey, hospitals reported appealing more than 40 percent of all RAC denials with a 75 percent success rate in the appeals process. Nearly two-thirds of those hospitals reported appealing short stay medically unnecessary denials, but nearly three-fourths of all appealed claims are still sitting in the appeals process.
Steinberg noted that while many of these cases have been appealed, they are not allowed to be rebilled from one setting to another – from inpatient to outpatient.
"This is a high administrative burden and I think Congress is starting to become sensitive to this, especially with such a high overturn rate," she said.