Tuesday, November 26, 2013

AHA: Hospital RAC Audits Rising

Cheryl Clark, for HealthLeaders Media , November 26, 2013

Audits of hospital claims data by Medicare Recovery Audit Contractors are growing dramatically and impose an "immense administrative burden" on hospitals, says an AHA official.

Hospitals are being hit hard with a "dramatic increase" in records requests and audits from Medicare Recovery Audit Contractors, with a 28% increase in complex denials in the third quarter of this year compared with the first.
Auditors sought to review medical records documenting more than $10 billion in Medicare payments from 2010 to Sept. 30, 2013, of which $2.5 billion was denied. And of those RAC investigations that resulted in a denial of payment, hospitals appealed 47%, with a 67% success rate in getting the decision overturned.

Those are among several findings from the latest quarterly installment of RACTrac, the American Hospital Association's member survey of RAC experiences since 2010. This installment covers the third quarter of 2013 ending Sept. 30. Reports from more than 2,000 hospitals are included, 1,269 of which reported during the third quarter.
"The data show that RACs continue to demonstrate a high level of inaccuracy when reviewing claims, which means that hospitals must spend funds that could be used for patient care in order to appeal inappropriate denials," says Melissa Jackson, senior associate director of policy for the AHA.

An "Immense Administrative Burden" on HospitalsJackson says the RAC program "requires fundamental reform so that hospitals can avoid this immense administrative burden and focus on their mission to provide patient care."
RAC audits are the U.S. Department of Health and Human Services effort to scrutinize hospitals' billed claims to correct
  • Over payments
  • Under payments
  • Inappropriately coded claims
The audits also seek to find cause to cancel payments for services deemed unreasonable, unnecessary or duplicative. The auditor program was created by the Medicare Modernization Act of 2003 and was officially launched in 2005.

Slow Response to AppealsAmong the survey's findings was that 94% of hospitals that appealed claims reported delays beyond the statutory 90-day-limit for a determination by an administrative law judge on whether the payment was appropriate.
Among the AHA's other survey findings:
  • Cumulative medical record requests have increased by 13% since the first quarter of 2013.
  • 58% of medical records reviewed by RACs "did not contain an overpayment."
  • 67% of hospitals indicated medical necessity denials were the most costly complex denials.
  • 71% of all appealed claims are still sitting in the appeals process.
  • 64% of short-stay denials for medical necessity were because the care was provided in the wrong setting, not because the care was medically unnecessary.
  • 43% of participating hospitals reported having a RAC denial reversed through utilization of the discussion period.
  • 70% of all hospitals filing a RAC appeal during the third quarter of 2013 reported appealing short-stay medically unnecessary denials.
Audits Costly for HospitalsDealing with a RAC audit involves hospital expense, the survey showed. About 12% of hospitals responding said they spent more than $100,000 managing the RAC process, and 49% spent more than $25,000.
The survey noted that hospitals were incurring significant administrative costs to deal with RAC audits, including expenses for training, software, additional hours from clinical staff, modify admissions criteria and create internal task forces to prevent negative audit findings.

More than three-fourths of all hospitals, including teaching and non-teaching, rural, urban, and critical access hospitals were audited during the survey period, beginning in 2010. Through the third quarter of 2013, smaller and rural hospitals were slightly less likely than others to receive audits.

The survey revealed wide variation in RAC activity by region, with the greatest number of hospitals reporting audits located in the southern and southeastern part of the country, from West Virginia and Virginia, Louisiana, Oklahoma and Colorado to the Mexican border.

The most commonly cited reason for complex denials was a medically unnecessary short stay in a hospital. Of short-stay denials for medical necessity, 64% were because care was provided in the wrong setting, "not because the care was medically unnecessary," the AHA reported.

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