Of the total, 79 percent reported RAC activity. Most of the activity is occurring in Region C hospitals (513) followed by those in Region D (392) and Region B (351). Region A is the lowest with only 198 hospitals reporting activity.


Most audits continue to be conducted in general medical and surgical acute care hospitals (1,219) with critical access hospitals coming in next (189). Audits of the following types of hospitals are minimal at the moment: long-term acute care, inpatient rehabilitation, psychiatric, children’s, and “other” types (such as cancer and other specialty hospitals, etc.).


“RAC activity of all types has nearly doubled since last quarter,” reports the AHA. A bar graph in the organization’s report compares activity from the third and fourth quarters, and the numbers look like this.


  • Medical record requests (125,538 from 69,374);
  • Complex denials (15,714 from 10,880).
  • Automated denials (21,406 from 7,001);


More than $86 million in both automated and complex denials were reported, which is more than double the last quarter, which came in at $42 million. Of that amount, 90 percent (and over $78 million) were complex denials.


Automated Reviews


As a reminder, an automated review is basically a claim determination without a human review of the medical record. Software is used to detect errors like duplicate payments and coding and billing errors.


The number of automated reviews increased in the fourth quarter, with the following being cited as the reasons for denials.


  • Outpatient billing (70 percent);
  • Other (25 percent);
  • Outpatient coding (25 percent);
  • Duplicate claim (10 percent);
  • Inpatient coding error (MS-DRG) (remains 5 percent); and
  • Discharge disposition (5 percent).


Naturally, the biggest financial impact resulted from the outpatient billing errors. And for 15 percent of reporting hospitals the “all other” category had a large financial impact as did outpatient coding. The percentages fall significantly for the financial impact for the other denial reasons: duplicate payment (6 percent), inpatient coding error (MS-DRG) (3 percent) and incorrect discharge status (3 percent).


Complex RAC Denials


Humans perform complex reviews and determine improper payments after receiving the medical record. On this side of the survey fence, the numbers look like this for denial reasons:


  • Inpatient coding (81 percent);
  • Medically unnecessary (57 percent);
  • All other (6 percent);
  • No or insufficient medical record documentation (2 percent); and
  • Incorrect APC or other outpatient coding error (2 percent).


The AHA asked survey participants to rank denials by reason, according to dollars impacted. As the organization reported, “Incorrect MS-DRG continues to represent the top reason by dollars for complex denials, but 23 percent of hospitals are now ranking medically unnecessary as the top reason for denial.”  In fact, this is the biggest change from the third quarter. In the fourth quarter, 57 percent of the hospitals reported denials while “no activity” was the response in the third quarter. The AHA report break downs the medically unnecessary denials as follows: short stay (33 percent); other (19 percent) and > 3 days (5 percent).



Number of Appeals Increasing


In all regions, the number of hospitals appealing their denials increased. Although the AHA lists the national average of hospitals reporting appeals as 23 percent, 57 percent of all hospitals have repealed at least one RAC denial. Of the claims that have completed the appeals process, 85 percent were overturned in favor of the provider. (This is a major jump from last quarter, when the percentage was just 13 percent.) At the time of the AHA’s report, 42 percent were still in the appeals process.


Types of Impact


Obviously, RACs are affecting hospitals undergoing reviews. According to the AHA survey, “increased administrative costs” led the way with 50 percent of hospitals reporting it. Although 24 percent of hospitals reported “no impact,” other effects of RAC reviews on hospitals include the following:


  • Training and education (41 percent);
  • Tracking software (31 percent); and
  • Initiated a new internal task force (21 percent).


Interestingly, only 14 percent of the hospitals reporting modified their admission criteria.


The AHA RACTrac Survey, 4th Quarter 2010 can be found at http://www.aha.org/aha/issues/RAC/ractrac.html.


To comment on this article please go to editor@racmonitor.com


About the Author


Carol Spencer, RHIA, CCS, CHDA is a senior healthcare consultant with Medical Learning, Inc. (MedLearn®) in St. Paul, Minn. MedLearn is a nationally recognized expert in healthcare compliance and reimbursement. Founded in 1991, MedLearn delivers actionable answers that equip healthcare organizations with coding, chargemaster, reimbursement management and RAC solutions.

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