The vast majority of requests for documentation covered “complex” reviews of
4,350 claims, most of which were submitted years before. These reviews, Conley
says, almost always center on the medical
necessity of the inpatient stay of patients
who were admitted to the hospital with the
RAC contending they should have been
treated in an observation or an outpatient
New York-based HMS Holdings, the
parent company of HealthDataInsights
Inc., did not respond to a request for comments for this story.
“The denied Medicare Part A inpatient
claim results in a significantly lower payment under Medicare Part B, providing
reimbursement for diagnostic services
only,” Conley explains. So, the reviews focus on the inpatient versus outpatient status of the patient, and that determination
is made by the treating physician. RACs are
reviewing these types of claims long after
patients have received treatment and the
outcome is known.
But at the time of service, a physician is
often seeing a very sick patient and making
a judgment call on whether observation or
inpatient level of care is appropriate, Conley notes.
So, the RAC is taking the position that
a patient wasn’t sick enough to be admitted and the provider should have filed an
outpatient claim, and is demanding documentation from the provider proving that
the proper judgment call at the time was to
admit the patient, she says.
The only recourse for hospitals in this
situation is to appeal, Conley says. There
are five appeal levels for complex reviews,
although only the first three are generally
used as most providers don’t have the resources or see the wisdom in further appeals.
The first two levels are perfunctory functions where providers can appeal disputed
RACs decisions to their Medicare contractor and then to a “qualified independent
contractor” retained by CMS—and rarely
succeed, Conley and other providers say.
CMS declined an interview request for
this story and also declined to respond to
concerns providers raised about the fairness of the program.
The agency in a statement said it offers
providers assistance through a quarterly
compliance newsletter and articles on its
Medicare Learning Network, and noted it
has implemented several edits to its payment system to correct problems that RACs
Further, RACs make themselves acces-
sible to providers by phone and e-mail, and
meet regularly with national and state hos-
pital and medical associations, according
to the statement. “CMS is always looking for
new opportunities to improve the program
and welcomes suggestions by providers
These appeals have to done before a pro-
vider can advance to the third level and go
before an administrative law judge, who is
independent of Medicare contractors and
RACs, and where a provider and the RAC
present their arguments. This is where pro-
viders really fight the complex claims and
where they often win.
RACs cost providers a lot of money that
they already had in the door and now
must repay. And it costs in time and resources spent.
At CoxHealth, the salaries alone of five
employees dedicated to handling RAC requests—three nurses one certified coder
and one billing specialist—total roughly
$200,000 a year. And while RACs are supposed to also check for underpayments,
providers say that is not a priority. Of the
5,236 claims CoxHealth’s RAC reviewed in
about two years, 19 resulted in underpayments that were corrected.
Providers have strong views on the fair-
ness of RACs, but some also acknowledge
Medicare’s right to make sure it’s paying
appropriately. What they want, they say,
is a more level playing field. So does the
American Hospital Association, which re-
cently filed a lawsuit against the RAC pro-
gram (see story, page 62).
CMO Hegland “fell into” overseeing 15-
hospital Ministry Health’s RAC work and
acknowledges “there are very few places
that have a physician in this role.”
Others with more “appropriate” titles
weren’t available, so Hegland attended a
presentation on the RAC program.