Revenue Cycle

Sneak preview: Comparing appeal rates for RACs vs. claims processing contractors

Recovery Auditor Report, October 29, 2009

Editor’s note: This excerpt is adapted from the soon-to-be-released book, “The RAC Survival Guide: Successful management of Recovery Audit Contractors,” by Kimberly Anderwood Hoy, JD, CPC. Pre-order your copy on 
The high number of claims determinations appealed was a measure of dissatisfaction with the RAC demonstration project. In January 2009, CMS updated the Evaluation Report with appeal statistics through August 31, 2008. By the beginning of 2009, all timely appeals should have been filed, although some claims still in the appeals process remain undecided at various levels of appeal. The January 2009 update indicated that providers appealed 22.5% of all RAC claim determinations. In contrast, CMS reported in the Evaluation Report that providers appealed only 4% of improper payment determinations by claims processing contractors during the same period. With nearly one-quarter of RAC claim determinations appealed—a rate that is five times higher than for typical claims processing contractors—the data seem to indicate provider dissatisfaction with the accuracy of RAC payment determinations.
Type of Reviewer
Percent of Improper Payment Determinations/Denials Appealed by Provider
Percent of Appealed Claims Overturned in Favor of Provider
Percent of All Improper Payment Determinations/ Denials Overturned in Favor of Provider
Claims Processing Contractors1
Recovery Audit Contractors2
1 The Medicare Recovery Audit Contractor (RAC) Program: An Evaluation of the 3-Year Demonstration, June 2008
2 The Medicare Recovery Audit Contractor (RAC) Program: Update to the Evaluation of the 3-Year Demonstration, January 2009
The rate of determinations overturned on appeal in favor of the provider was also high, indicating that providers’ concerns were not totally without merit. The January 2009 update reported that 34% of appealed claims were decided in providers’ favor. Note that this is lower than the rate of appealed claims overturned in the provider’s favor for claims processing contractors, which CMS has said is 59%. However, combining the much higher rate of appeals for RACs with the high rate of claims overturned in providers’ favor reveals that the percentage of all RAC claim determinations overturned was three times higher than it was for claims contractors. Only 2.3% of all improper payment determinations made by claims processing contractors were overturned on appeal, but 7.6% of all RAC claim determinations were overturned in the provider’s favor on appeal. This 7.6% rate of reversal lends credence to providers’ concerns regarding improper determinations and improper application of Medicare guidelines.

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