Article - July 3, 2008 - Atlantic Information Services Inc.

Many Hospital Claims Denials by Recovery Audit Contractors Are Overturned, as Process Itself Is Questioned

By Nina Youngstrom

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 say. 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. Products like InterQual are just guidelines, experts say, and their use is not required by Medicare. 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.

Meanwhile, there's evidence that RACs may rush to judgment about some inpatient admissions, says physician Robert Corrato, M.D., CEO of Executive Health Resources, a Philadelphia consulting firm. 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.

"We did more than 7,000 appeals. Of the 1,000 cases fully adjudicated so far, we were able to get all of them overturned," he says. He attributes many of the reversed denials to RACs' over-reliance on InterQual. "We often see the use of InterQual in a way that goes beyond the limitations of the tool," he contends.

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."

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