By: Carla Engle, MBA

We still all are waiting anxiously for RAC activity to commence any day now. CMS recently updated its phase-in calendar  to convey the earliest possible launch dates for both automated and complex reviews.

Even though the earliest complex review launches won't begin for a while - August/September 2009 for yellow/green states and October/November 2009 for blue states, as indicated below - it is not too early to start planning your strategy on how to handle appeal processes once denials come rolling in your door.

To hone your facility's ability to win appeals, you need to develop a structured and well-formulated strategy before you start to challenge denials. All of your appeals will need to be fact-based and dependent on the accuracy and quality of your medical documentation - you should bear this in mind as you develop your strategy.

Every potential appeal should be evaluated through this strategy and the merits of each case should be considered carefully; then the ultimate decision of whether to proceed with an appeal always should be decided by a review team. The authors of the 2009 Recovery Audit Contractor Workbook urge facilities to think about the following elements that could affect such decisions:

Cost Benefit Analysis

You should consider the financial implications of appealing. According to the AHA, the average cost of defending an appeal during the demonstration project was between $2,000 and $3,000, so especially if you are considering appeals on a case-by-case basis, this may have some bearing on your desire to set a cost threshold for your facility.

Resources Required for Claim Appeal

It is vital to weigh whether your organization has the necessary resources to manage an appeal effectively, using either internal or external resources.

During an appeal process, you may require more resources during initial stages to set the foundation  for subsequent stages. It is important to note that you should involve legal counsel in each step of an appeals process.

It may be difficult to know at this point how to budget your resources until the time for an actual appeal arrives, but you should be prepared to adjust your processes as you get financial data reported to you.

Quality of Your Documentation

Do you have sufficient documentation to back up your claims?  Remember, the documentation you submit for the first two levels of the appeals process also will be used during the subsequent three levels. It is vital to review medical records prior to appealing to identify other issues that might be hidden in them. Because it is so important to have quality documentation to defend your position in an appeal, it may not warrant pursuing an appeal if you do not have it.

Specific Types of Denials to Appeal

You need to consider whether you want to appeal ALL wrongfully denied claims or just those related to certain types of issues, like incorrect coding or medical necessity. Also, you need to consider the overall compliance implications of moving forward with any appeal. If you decide not to appeal  out of an unwillingness to pay the cost to review and prepare the case, in the eyes of ANY governmental auditing body you may be viewed as admitting that you routinely handle this particular type of case incorrectly, therefore opening yourself up to a larger governmental audit. As you know, the RACs aren't the only auditors that you need to be concerned about!

Appeals Best Practice:  Example

John Orsini, CPA, the vice president of financial operations for Catholic Healthcare West, described how his organization approached the appeal of  more than $11 million in initial findings uncovered by the RAC demonstration project in 2008.

CHW established policies and procedures to ensure that its facilities appealed RAC denials quickly and correctly. Facilities were provided with template letters to use in appealing denials based on medical necessity with the corresponding legal arguments (summarized in the table below).

CHW Legal Arguments in Fiscal Intermediary Appeals