In recent weeks, two new reports gave us some insight into how providers have been responding successfully to audits through their appeals of demonstration project findings, as well as how the RACs have been impacting providers in 2010 via the permanent project.

Updated CMS RAC Report

A June 14 report from CMS titled The Medicare RAC Program: Update to the Evaluation of the Three-year Demonstration indicates that providers have been winning more appeals since the last updated report was released.  The new report compiles statistics through March 9 and indicates that the number of appeals claims dropped significantly from the 118,051 reported in January, down to 76,073 (or 12.7 percent of the RAC determinations made in the demonstration program).  This is in part due to the fact that claims no longer are being counted individually at each level of appeal, but rather counted only once if appealed at any level. Even with the omission of this first-level appeals data, the numbers still reflect that when providers chose to appeal claims, they often were successful: of the 76,073 claims appealed, according to CMS's calculations, 48,993 were overturned, representing an overall success rate of 64.4 percent. This represents a clear success for providers, indicating that pursuing appeals is worthwhile.

According to the report, the changes occurred because of several shifts in data calculation:

• The prior method of compiling claims counted claims appealed to multiple levels at each stage of appeal. The revised method now counts each appealed claim once regardless of whether it was appealed through multiple stages.
• Duplicate claims now are identified and removed.
• Appeals withdrawn by the provider also are removed from the total.
• Claims reversed by the claims-processing contractor when additional documentation was submitted also were removed from the total.

The updated report shows that providers are winning a significantly higher percentage of appeals than had been indicated by previous reports; providers had a 64.4 percent success rate in the new report, compared to 34 percent in the previous report. It would appear that providers also are experiencing a higher success rate as they advance through the higher levels of appeal, particularly at the Administrative Law Judge (ALJ) level. There even still may be claims decided favorably that have not been included in these statistics. The Administrative Law Judges were overwhelmed by the volume of appeals they received during the demonstration project.

Providers still are receiving favorable decisions on appeals of findings identified during the demonstration program that would not have been included in the most recent CMS data, so the information is likely to change again in future updates. This all should be encouraging news for providers as they make decisions on whether or not to pursue appeals of findings identified in the permanent program.

RACTrac First Quarter 2010 Results

On June 22, the American Hospital Association (AHA) released its first-quarter 2010 report on the impact of the Recovery Audit Contractor (RAC) program on member hospitals. Titled Exploring the Impact of the RAC Program on Hospitals Nationwide: Results of AHA RACTrac Survey, January -March 2010, the report collected data from more than 650 hospitals, revealing many valuable results for participating facilities, the AHA and state hospital associations, which will use this information to educate the field and inform CMS and Congress of changes needed to the program.

Here are some of RACTrac's findings; a more detailed report is available on the AHA Web site.

Data collected from 653 hospitals in April 2010 shows that:

• More than two-thirds of hospitals participating in RACTrac are experiencing RAC activity.

• Since 2009, all types and sizes of hospitals have been subject to RAC review.

• More than three-fourths of participating hospitals in Regions B and C reported RAC activity; Region C had the highest number of hospitals reporting RAC activity.

• $2.47 million in denied claims was reported among the 437 hospital respondents experiencing RAC activity during the first quarter of 2010; Region C had 47 percent of the reported denials.

• RACs primarily are engaging in complex reviews.

• Outpatient coding and billing were often a target for automated reviews, while inpatient coding was a common target for complex reviews.