Reimbursement News

Hospitals Facing More Payment Claims Audits, Costly Denials

The American Hospital Association says it continues to help prevent abuses that keep hospitals from being paid.

By Jacqueline DiChiara

- Hospitals are allegedly trying to do the best they can, even when money is slow to come in.

Recovery Audit Contractor claim denials

Nearly half of all Recovery Audit Contractor claim denials are denied by hospitals, according to a new report from the American Hospital Association (AHA).

Although hospitals remain focused on patient care, they are becoming increasingly burdened by payment claims audits, says the AHA.

Of primary concern are recovery audit contractors (RACs), which may jeopardize hospitals’ revenue cycle. RACs place an increased amount of administrative burden on hospitals, the AHA says.

“The AHA continues to work with government stakeholders to improve the RAC program and prevent abuses that preclude hospitals from receiving payment for necessary medical care,” writes the AHA’s website.

“The AHA also provides education to association members to help prevent payment denials and navigate the Medicare appeals process in the event of an adverse RAC payment determination.”

AHA’s general report findings

Hospitals reportedly repealed 47 percent of all RAC claim denials, according to a third-quarter survey report.

Hospitals confirm the most likely reason for complex claim denials is associated with RACs citing inpatient coding errors. No overpayments were found in almost 60 percent of claims reviewed during the third quarter.

For at least 84 percent of claims appealed to an administrative judge law, more time than the 90-day statutory limit for a judge to provide determination to a hospital was needed, said AHA.

Hospital representatives are invited to attend AHA’s free webinar on December 16, 2PM EST. The primary objectives of the webinar are to review AHA’s aforementioned survey results and new RAC policy developments.

Why RAC efforts need close monitoring

The Centers for Medicare & Medicaid Services (CMS) started the RAC program in January of 2011 to help identify improper – and expensive – Medicare Part D payments.

Created via the Medicare Modernization Act of 2003, its primary goal is to help recognize and retrieve these types of payments administered under fee-for-service Medicare plans.

CMS’s RAC approach was problematic, according to research from the Government Accountability Office (GAO).

“CMS’s challenges in setting expectations about the work the Part D RAC would conduct and establishing the length of time required for CMS and the RAC to reach project milestones hampered Part D RAC program implementation,” wrote the GAO in a Medicare Part D study.

“An annual performance evaluation would provide CMS with a clear basis for assessing RAC performance in identifying improper payments and provide the RAC with targets against which the RAC could compare its performance.”

“[F]ederal internal control standards call for agencies to have effective and efficient processes to meet agency goals. However, as a result of CMS’s and the RAC’s challenges in determining audit work to conduct and the RAC’s challenges in developing audit methodologies, CMS has approved 1 of the 15 audit proposals from the RAC since the beginning of the contract in 2011.”

Why the act of filing an appeal costs more than an overturned denial

The American Medical Association additionally expressed concerns last December that RAC auditors were utilizing ‘bounty-hunter like tactics” causing physician practices hardship.

“Filing an appeal takes time away from patient care and often costs physicians more money than they recoup when a denial is overturned. It also causes uncertainty that can affect a physician’s ability to improve the quality of care and implement innovative new delivery models,” said Robert M. Wah, MD, former President of the American Medical Association.

“As CMS awards new contracts in the RAC program, it must consider putting an end to policies that cause burdens for physicians and encourage RAC auditors to incorrectly deny claims.”

Why hospitals are overspending

The number of RAC requests spiked “dramatically” from 2012 to 2013, according to earlier 2013 AHA RACTrac research. Over 1,200 hospitals reported 47% more requests than the year prior. Fifty-eight percent reported more complex audit denials than the year prior.

Said EHRIntelligence.com, these numbers were perhaps due to various cost-cutting Medicare initiatives and a greater push to increase physicians’ accountability regarding expensive treatment choices.

Earlier RACTrac survey data from the AHA confirmed RAC confirmed auditing activities in the final quarter of 2013 cost a great deal of money to execute. At least 2 in 3 hospitals confirmed they were spending over than $10,000 to manage the RAC process. Half said they were spending over $25,000.

Congress says RACs deny correct claims

Last year, Congress additionally confirmed the Department of Health & Human Services (HHS) was failing to adequately and effectively handle the RAC program.

“Although the intent of the program is laudable, operational problems within the program have persisted without correction action by [CMS],” said 111 members of the House of Representatives in a letter to HHS.

“They are paid a commission on the dollar amount of the claims they deny, which ranges between 9 and 12.5 percent. Due to this payment structure, RACs are incentivized to deny claims, even when the claims are correct,” the Representatives wrote.

“Without more oversight measures in place, RACs have imposed a huge administrative burden on hospitals, which must spend valuable time and resources to appeal denied claims in order to be reimbursed for Medicare services provided.”