Drilling Down Into Latest RACTrac Survey Results

There were no big surprises in the latest American Hospital Association's RACTrac survey. Second quarter 2012 findings are consistent with HealthPort's experience processing audit requests for our customers.

The bottom line: RACs are requesting and reviewing as many cases as permitted by CMS. However, hospitals are winning more appeals. It is to some degree, a numbers game.  

More reviews, but  providers continue high appeal overturn rates

Lori BrocatoRACs' are eager to max-out record review limits. This has resulted in significant increases in requested documents. However, growth in the volume of RAC reviews does not correlate with the number of appeals won. Hospitals are faring better in appeals as RAC decisions continue to be overturned.

For healthcare providers, fewer dollars are lost but additional human resources to process a growing number of RAC requests are required. Fifty-five percent of all hospitals reported spending more than $10,000 managing the RAC process during the second quarter of 2012, 33 percent spent more than $25,000 and 9 percent over $100,000. These numbers do not reflect the total costs of labor from clinicians, finance, billing, health information management and administration required to process, respond and appeal the audit requests and findings. Therefore, the actual cost to manage RAC audits is higher.

Making the decision to appeal

According the survey results, hospitals appeal about 40 percent of the denials they receive from the RACs. And when they do appeal, hospitals win over the RAC in approximately 75 percent of the cases.
This leads one to wonder why, with a 75 percent win rate, hospitals do not appeal a higher percentage of denials. In our experience, providers balance two criteria when deciding which cases to appeal.

Lack of resources

Many organizations may simply lack the human resources internally to handle the volume of appeals as the RACs audit more and more records.

Cost to win

Another argument is that the hospitals are appealing only high-dollar cases they can win. Small dollar denials just do not warrant spending resources for the sake of principle. Almost all of the denials were a result of complex denials (97 percent) with the remainder being from automated, computer-driven denials. The average dollar value of the complex denial was $5,564, while the average dollar value of the automated denial was $548. These numbers may support the notion that it is too expensive in many cases to chase low dollar denials.  

Semi-automated reviews

In the world of automated reviews, Region C issues significantly higher numbers of these than other regions. Semi-automated reviews are those requests that come across as "informational" requests. Providers have the option to submit records in these cases, and they must respond to these semi-automated requests in a timely manner or the amount in question will be automatically recouped. There is some concern here that providers are not aware of semi-automated reviews and may not be submitting records in cases where they would benefit.

Other regional findings

The south (Region C) and west (Region D) have the highest percentage of audited hospitals. This is in line with the larger number of hospitals in these regions. However, the smaller RACs, the midwest (Region B) and northeast (Region A), actually audit higher dollar claims than their Region C and Region D counterparts. So, while Regions A and B are smaller, they are auditing more total Medicare payments than the two larger regions.

Target syncope and angioplasty

Looking at the percentage of MS-DRGs for medically unnecessary and all other complex denials with the largest financial impact through Q2, 2012, there is a notable revenue risk with MS-DRG 247 (angioplasty, 25 percent) and MS-DRG 312 (syncope and collapse, 19 percent). It behooves providers to conduct self-audits of these two areas and assure that clinical documentation supports medical necessity. In fact, DRG 312 was so high on reviews, that it is one of eight initial DRGs included in the new RAC pre-payment review project (initiated Aug. 27, 2012).  

We recommend targeting syncope and angioplasty for clinical documentation improvement and coding audits, even if your organization is not in one of the eleven states slated for the initial pre-payment targets.

In Summary

Clearly, audit workloads are increasing along with the associated revenue risk.  If you have not yet put a formal audit process in place, now is the time to do so. Best practices have shown that a centralized audit function with automated audit tracking is the most cost effective workflow. It also is best for educating clinicians and preventing mitigating future risk.

While the RACs in their statement of work were supposed to provide education related to avoiding payment errors from CMS, providers report that very little of this education has occurred. Hence, now is the time to drill down and do it yourself.

Lori Brocato is a seasoned professional with more than 15 years experience in the healthcare technology industry and is accomplished in creating product lifecycle plans and executing product market strategies for healthcare healthcare audit, electronic data interchange and revenue cycle management applications.

More Articles on RACs:

Providers Can't Challenge Year-Old RAC Audits, Court Rules
25 Statistics on Hospitals and RAC Audits
How to Build RAC-Proof Admission Screening Criteria

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