Case Management

RAC denials excessive, says American Hospital Association

Case Management Insider, January 13, 2015

The American Hospital Association (AHA) says that Recovery Audit Contractor (RAC) reform is needed to stop the “excessive” and “inappropriate” number of denials by RACs.

“Fundamental reform of the RAC process is at the heart of an effective and permanent solution to the appeals backlog problem and will enable hospitals to get timely administrative review that clearly is required by the Medicare statute,” said Linda Fishman, AHA senior vice president of public policy analysis and development in a written statement.
The U.S. Department of Health and Human Services Office of Medicare Hearings and Appeals has been working to get ideas on how to clear the growing backlog of appeals at the Administrative Law Judge Level. But the AHA said that they are looking to fix the wrong problem. The problem isn’t that system—it’s a deeper problem of too many denials.
To combat this problem, the AHA wants to see a number of reforms put in place to modify RAC behavior. “OMHA’s current pilot programs aimed at reducing the existing huge appeals backlog offer at best only a temporary fix for backlogged cases while raising a number of questions and concerns for any hospital potentially interested in participating,” according to Fishman.
RACs persistently and excessively deny claims, leading hospitals to appeal them in great numbers, Fishman said. 
“The biggest driver of this willful conduct by RACs is the contingency fee structure because it incentivizes them to issue inappropriate denials with impunity,” she said. “If RACs were assessed a financial penalty for making inappropriate denials, it would lessen these strong financial incentives and promote more appropriate and accurate assessments by the RACs.”
Some of the additional changes the AHA recommends include the following:
  • Limit RACs to reviewing medical documentation available at the time the physician made the admission decision when deciding whether an inpatient stay was medically necessary.
  • Getting rid of the one-year filing limit to rebilled Part B claims. “When a Part A claim for a hospital inpatient admission is denied by a Medicare review contractor because the inpatient admission was determined not reasonable and necessary, the hospital should be able to submit a subsequent Part B claim for the services provided as long as the Part B claim is submitted within 180 days of a final determination,” Fishman said. “This would allow hospitals to pursue their appeals rights and receive a final determination on the Part A claim before rebilling under Part B.”
  • Giving RACs a specified time period to audit approved issues, such as short inpatient stays. “After the issue’s audit time period has run, RACs must stop auditing that issue. CMS then would analyze the audit results and provide education to providers in that jurisdiction, if warranted,” Fishman said.
Ultimately, ensuring that RACs are issuing appropriate denials is the only way to truly eliminate the current backlog, according to the AHA.
The District of Columbia federal district court dismissed a lawsuit December 18, 2014, filed by the AHA against HHS for excessive and inappropriate RAC denials, according to AHA News. The AHA announced that it may appeal the court’s decision.
Stay tuned for more information on this issue going forward.


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