A number of hospitals have recently been hit with a slew of Diagnosis-Related Group (DRG) downgrades from internal hospital Recovery Auditor (RA) teams camping out in their offices, continually combing through their claims data.

In response to this issue, RACmonitor will be conducting a national survey on DRG downgrades being performed in many of America’s hospitals on Tuesday, Oct. 11. 

Here is why RACmonitor believes this survey is important.

Situational Analysis

When DRG downgrading occurs, hospitals are faced with large cuts in their revenue, specifically from Medicare and Medicaid payments. RACmonitor has learned that the appeals procedures may be faulty, leaving the hospitals at a strong disadvantage. One hospital reported that it is spending more than $1 million per year on handling its countless appeals of DRG downgrades. 

This problem is potentially very large. There are 4,789 hospitals in the United States. Texas and California have the most (375 and 340, respectively). The states with the next five most hospitals are Florida (186), Illinois (182), New York (180), Pennsylvania (173), and Ohio (165). 

So these seven states account for 43 percent of the hospitals in the United States, e.g., 1,436 of 3,352. Most hospitals are acute-care(3,364), with an additional 129 being acute-care veterans’ hospitals. There are only 122 children’s hospitals nationally, while there are a surprisingly large number of critical access hospitals (CAHs, with 1,272. 

Purpose of the Survey

The RACmonitor survey will seek to determine the prevalence of alleged abuses in how auditors are performing DRG downgrades. If a large number of alleged abuses are present, RACmonitor will seek to learn how widespread the problem is. In particular, the RACmonitor survey will determine:

  1. When DRG downgrades started to happen on a wide scale;
  2. Whether or not hospitals have been required to hire extra staff (or consultants) to handle DRG downgrades, and if so, how many;
  3. Whether or not faulty administrative practices on the part of the auditors (timeouts, missing notifications, refusal to receive electronic records, etc.) are present and how severe their effect is; and
  4. Whether or not DRG downgrading has happened even though all criteria from the American Medical Association (AMA) were met in the diagnosis. 

“Our hypothesis is that DRG downgrading is a major problem for hospitals, and that there is widespread dissatisfaction with how it works,” said Edward Roche, a RACmonitor investigative reporter and New York attorney. Roche, founder of Barraclough, LLC, a litigation support firm, has been reporting on this story.

Next Steps 

Depending on the results obtained, RACmonitor may petition the Centers for Medicare & Medicaid Services (CMS) for support in conducting a more detailed survey to be given to all hospitals in the United States. The results of this larger survey will be given to CMS and lawmakers who may be interested in considering reform of the system, including tighter regulation of the auditors. 

About the Author 

Chuck Buck is publisher of RACmonitor and is the executive producer and program host of Monitor Mondays.

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