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RACs step up reviews, denials of Medicare claims

June 14, 2013

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The AHA recently reported that recovery audit contractors (RACs) denied $1.9 billion in hospitals’ Medicare claims during the first quarter of 2013, up from $1.3 billion during the fourth quarter of 2012.

RACs requested more than 1 million medical records from hospitals for the first three months of this year, compared with 720,590 records for the last quarter of 2012, according to the AHA’s RACTrac survey.

The survey, released June 4, is based on information submitted by 1,324 hospitals.

Of the $1.9 billion in denied claims, 96%, or $1.8 billion, resulted from complex reviews where RACs comb through Medicare claims databases for evidence of incorrect payment amounts, incorrectly coded or duplicate services and uncovered services, including claims that are deemed not reasonable and necessary.

A small portion of the overall claims rejected by RACs – about 4%, or $63.7 million, for the first three months of 2013 – are done through what are called automated denials. That is when
a RAC regards a service to be so improper that a demand for repayment is sent to a provider through an automated procedure without an auditor ever actually reviewing the medical record.

While a lack of medical necessity was the top reason Medicare RACs denied claims, nearly twothirds of those denials were for care found to be provided in the wrong setting rather than medically unnecessary. Survey respondents appealed 44% of denials with a success rate of 72%. The survey found that 75% of all appealed claims – nearly $1.1 billion – are still in the appeals process.

Hospitals spend a considerable amount of resources dealing with the audit process, according to the survey. Sixty-three percent of the survey’s respondents spent more than $10,000 managing the RAC process during the first quarter of 2013, 46% spent more than $25,000 and 10% spent more than $100,000.

RACs operate in four distinct geographic areas of the country, and are intended to identify Medicare overpayments and underpayments. RACs receive a percentage of the overpayments they collect from providers.

The AHA’s free web-based RACTrac survey helps the association and hospitals monitor RACs’ impact, provide up-todate information on the status of hospital appeals both nationally and for specific regions of the country, and identify ways of improving the program in advocacy before Congress and the Centers for Medicare & Medicaid Services (CMS).

Hospital representatives are invited to attend a free June 19 AHA-hosted webinar to review recent RAC policy developments and results from this month’s survey. To register, click on: http://tinyurl.com/m2mcdn2

The AHA’s survey findings follow recent data from CMS, which show RACs collected $1.37 billion in overpayments and returned $65.4 million in underpayments in the first half of fiscal year 2013.

The AHA is pressing for changes in the RAC program before the courts, Congress and CMS. In recent comments before CMS, the AHA criticized the limited scope of its proposed rule on Medicare Part B rebilling, and the association has sued the agency over its policy of denying Medicare claims for necessary services because hospitals provided the treatment in an inpatient rather than outpatient setting.

The AHA also is urging Congress to pass the “Medicare Audit Improvement Act,” S. 1012/ H.R. 1250, introduced by Sens. Mark Pryor, D-AR, and Roy Blunt, R-MO, and Reps. Sam Graves, R-MO, and Adam Schiff, D-CA. The legislation is designed to improve auditor performance, increase transparency and permit hospitals to rebill denied claims without unreasonable restrictions.

For more information on RACs, visit www.aha.org/rac.