Hospitals hammered by RAC audits

By Diana Manos
10:44 AM

Hospitals continue to see increases in recovery and contractor, or RAC, audits, according to the latest survey by the American Hospital Association.

The March 8 report, which explores the impact of the RAC program on hospitals nationwide, shows results of a 2012 fourth quarter survey. According to AHA, 1,233 hospitals participated in this latest survey, and participants “continue to report dramatic increases in RAC activity.”

Highlights of the survey include:

  • Nearly 60,000 medical record requests have been made of survey respondents since last quarter.
  • More than 30,000 complex audit denials have been issued to respondents since last quarter.
  • Nearly two-thirds of medical records reviewed by RACs did not contain an overpayment, according to the RAC.
  • 94 percent of hospitals indicated medical necessity denials were the most costly complex denials.
  • 61 percent of medical necessity denials reported were for one-day stays where the care was found to have been provided in the wrong setting, not because the care was medically unnecessary.
  • Hospitals reported appealing more than 40 percent of all RAC denials, with a 72 percent success rate in the appeals process.
  • 61 percent of all hospitals filing a RAC appeal during the fourth quarter of 2012 reported appealing short stay medically unnecessary denials.
  • Nearly three-fourths of all appealed claims are still sitting in the appeals process.
  • 63 percent of all hospitals reported spending more than $10,000 managing the RAC process during the fourth quarter of 2012; 43 percent spent more than $25,000 and 13 percent spent over $100,000.
  • Over one-third of participating hospitals reported having a RAC denial reversed through utilization of the discussion period.

[See also: Meaningful use, ICD-10, RAC & ACOs: A perfect storm in the making?]

Centers for Medicare & Medicaid Services Recovery Audit Contractors conduct automated reviews of Medicare payments to healthcare providers -- using computer software to detect improper payments, AHA says. RACs also conduct complex reviews of provider payments -- using human review of medical records and other medical documentation to identify improper payments to providers.

Improper payments include: incorrect payment amounts; incorrectly coded services (including Medicare Severity diagnosis-related group (MS-DRG) miscoding; non-covered services (including services that are not reasonable and necessary); and duplicate services.

Automated activity includes the traditional automated activity as well as semi-automated review activity. These claims are denied in an automated manner if supporting documentation is not received on a timely basis, according to AHA.