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Top Reason for RAC Denials: Lack of Medical Necessity in Wrong Setting

spencerCThe American Hospital Association (AHA) continues to collect and report valuable data from its web-based RACTrac survey.


As summarized below, its May 20, 2011, report includes new findings from the first quarter of 2011, including the fact that lack of medical necessity is the top reason for claim denials by Recovery Audit Contractors (RACs).

The number of hospitals participating in the survey continues to increase, and 1,960 have submitted data since the start of the project in January 2010. Of that total, 84 percent reported RAC activity in the first quarter of 2011.


Most RAC activities continue to occur in general medical and surgical acute care hospitals (1,317) with critical access hospitals coming in next (212). Audits of the following types of hospitals are minimal at the moment: long-term acute care, inpatient rehabilitation, psychiatric, children's, and "other" types (such as cancer and other specialty hospitals, etc.).


As always, the AHA collects data on denials from automated reviews, which use computer software to detect improper payments, and denials from complex reviews, which use human evaluation of medical records and other documentation. The survey also asks for data on the number of medical records RACs are requesting, underpayments, appeals, and the administrative burden on providers of the reviews.


Complex Reviews: Top Denials


Medical necessity denials came in at 57 percent in the last quarter of 2010, and now they're 84 percent. In the last quarter of 2010, inpatient coding led the way in reason for denials with 81 percent of total reported. That percentage dropped 10 points to 71 percent for the first quarter of 2011.


As the AHA stated in its Executive Summary, "The majority of medical necessity denials reported were for 1-day stays where the care was found to have been provided in the wrong setting, not because the care [was] medically unnecessary." Statistics also showed these denials were due to the following:


  • Short stay (53 percent-change from 33 percent);
  • Other (25 percent-change from 19 percent); and
  • Longer than three days (7 percent-change from 5 percent).

Denials due to inpatient coding errors declined in the first quarter of 2011 (to 71 percent from 81 percent in the fourth quarter of 2010) as did outpatient coding errors (to 4 percent from 5 percent). The following were the other reasons given for complex denials:


Discharge status (a new reason reported)-15 percent;


Other-only 2 percent in the first quarter of 2011, down from 15 percent in 2010; and


No documentation-down to 9 percent from the 12 percent in the fourth quarter of 2010.


MS-DRGs Cited


All hospital survey responders indicated that the top MS-DRG denied by RACs for lack of medical necessity was MS-DRG 312-syncope and collapse-with 16 percent of total denials. The second-highest denial (8 percent) in this category came from MS-DRG 313-chest pain. The following came next:


MS-DRG 69-transient ischemia (6 percent);


MS-DRG 249-percutaneous cardiovascular procedure with non-drug-eluting stent without MCC (5 percent); and


MS-DRG 192-chronic obstructive pulmonary disease w/o CC/MCC (5 percent).


MS-DRG 312 also had the largest number of denials (6 percent) under the entry "all other complex denials," and the ones listed below were only slightly behind:


MS-DRG 166-other respiratory system OR procedures with MCC (5 percent);


MS-DRG 981- extensive OR procedure unrelated to principal diagnosis with MCC (4 percent);


MS-DRG 189-pulmonary edema and respiratory failure (4 percent); and


MS-DRG 813-coagulation disorders (3 percent).