RAC audits up in Q2; complex denials bring in $15.5M

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Seventy percent of hospitals reported experiencing Medicare Recovery Audit Contractor (RAC) activity during the second quarter of 2010 and 85 percent of all denied dollars were complex medical record denials that totaled more than $15.5 million, according to a RACTrac survey published by the American Hospital Association (AHA) Sept. 9.

Of the 1,389 hospitals responding, 51 percent said that the RAC activity increased administrative costs, while 19 percent said the activity initiated the hiring of new staff—only 1 percent reported having to make cutbacks.

The survey reported that automated activity—a claim determination without human reviews of the medical record including duplicate payments or coding and billing errors—nearly tripled, increasing from 20 percent in the first quarter of 2010 to 62 percent in the second quarter.

However, complex reviews including a human review of whether improper payments have been identified dropped from 88 percent in the first quarter to 77 percent in the second quarter.

Of the responding hospitals, almost 90 percent reported experiencing automated denials for outpatient coding and billing errors, while 10 percent reported having duplicate claims. Ninety-one percent of all of the hospitals reported complex case denials that dealt with inpatient coding errors in quarter two—12 percent reported complex denials due to lacking documentation.

Additionally, 86 percent of hospitals said that incorrectly coding MS-DRGs or other coding-specific errors were the top reasons for complex hospital denials.

Since the first quarter of 2010, $19.2 million denied claims have been reported and almost $11 million of these were from Region C alone—the Southern region that includes Texas, New Mexico, Louisiana and Florida.

AHA reported that the average automated denial was $311, while the average dollar amount for complex claims was $5,598. Outpatient services reported the highest number of automated denials at 86 percent, while inpatient services saw rates of complex denials that reached 97 percent.

Sixteen percent of the responding hospitals said that they appealed at least one RAC denial and of those that have undergone the appeals process, 13 percent of the claims were overturned in favor of the provider.

Hospitals reported that overturned denials equated to $420,870 with $273,113 of them appearing in Region C alone.

RACTrac became active in January and works to assess the impact of the program on hospitals.