Hospitals successfully appealing RAC denials despite many process issues

According to the American Hospital Association’s (AHA) report on CMS Recovery Audit Contractors (RAC), hospitals are appealing 46 percent of RAC denials. The success rate of appeals for hospitals was 69 percent, although more than half of appealed claims are stalled in the process. The AHA created the RACTrac survey to collect data on the impact of RACs on hospitals due to the lack of information provided by CMS on the topic. The AHA provides guidelines for preparing for RAC reviews and conducting self-audits.


According to the 879 participating hospitals for the 4th quarter of 2014, the average number of denials and requests for medical records remained steady all year. The northeast region experiences the highest number of medical record requests for complex denials. Overall, 55 percent of medical record reviews resulted in a determination of no overpayment.


The average dollar value of automated denials nationwide was $851, although the amount varied widely among the regions. The range was smaller for complex denials with an average of $5,613. Inpatient coding is cited as the most commonly cited reason for complex denials, occurring at 70 percent of hospitals. Denials for short stays have dropped significantly from 59 percent in the first quarter to 11 percent in the fourth quarter. According to ranking by dollar impact, incorrect outpatient coding/billing error was the highest at 52 percent.


The discussion period allows hospitals to avoid the formal appeals process and attempt to reverse denials through sharing of information with the RAC. A little over a third of hospitals reported obtaining reversals during this period. Despite statutory requirements that appeals to an administrative law judge (ALJ) be resolved within 90 days, over 72 percent of claims have taken longer. Almost half of hospitals with an overturned denial received a reversal because care was deemed medically necessary. Hospitals are experiencing denials on half of all prepayment reviews, which tend to have higher dollar amounts than retrospective denials. Although 74 percent of these denials are appealed, only 36 percent are overturned.

Many process issues were reported in the survey. Almost half of hospitals did not receive demand letters informing them of denials. Many believed that the letters lacked an explanation of the rational for denial. RACs also delayed in sending demand letters and did not meet the 60-day deadline for determinations in many cases.