Many Hospital Claims Denials by Recovery Audit Contractors Are Overturned, as Process Itself Is Questioned
Atlantic Information Services, Inc. (AIS) - July 17, 2008 - Washington, DC

Hospitals may be able to fend off recovery audit contractor (RAC) claims denials for medically unnecessary admissions or services because some of them have been overturned, experts tell AIS's Report on Medicare Compliance (RMC).

If RACs are too quick to reject admissions because they don't meet screening criteria (e.g., InterQual) without looking at the entire medical record, hospitals may be able to reverse them. The best approach, however, is to have an effective up-front process that provides ample documentation of the decision making behind an inpatient admission as described in the Medicare Benefit Policy Manual. Read the full story at

Meanwhile, there's evidence that RACs may rush to judgment about some inpatient admissions, physician, Robert Corrato, M.D., CEO of Executive Health Resources tells RMC. For example, CMS appeals contractors and administrative law judges overturned more than 1,000 RAC claims denials appealed by hospitals in four states toward the end of the RAC pilot, which wrapped up in March, says Corrato, whose organization helped the hospitals mount appeals. The hospitals were able to prove that the admissions and/or services were medically necessary, he says.

However, CMS says that only 5% of RAC determinations were overturned on appeal from the beginning of the pilot through Oct. 31, 2007. "CMS does not expect this number to change significantly once the evaluation report of the three-year demonstration is released," a CMS official tells RMC. About 40% of the overpayments identified by RACs were based on their assertions that the services lacked medical necessity. But Corrato notes that "when the 5% figure was computed, very few cases had advanced to the third level of appeal (the ALJ)" and "CMS's own statistics...indicate that 44.2% of appealed cases were decided in favor of the provider."

This article has been excerpted from AIS’s Report on Medicare Compliance. To access the story in its entirety, visit

About Report on Medicare Compliance Published by Atlantic Information Services, Report on Medicare Compliance is written by veteran compliance editor and reporter, Nina Youngstrom. Since 1992, this award-winning weekly newsletter has been the industry's #1 source of compliance news and strategies ... on medical necessity, physician payments, DRG coding, quality of care, observation billing, Stark and more.

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