Hospitals Appealed Nearly Half of RAC Denials Through 2Q 2015

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By James Swann

Sept. 11 — Hospitals have appealed 49 percent of Recovery Audit Contractor denials through June 2015, and have won 64 percent of the appeals that have completed the process, according to a report from a hospital association released Sept. 10.

However, the American Hospital Association's RACTrac survey said that for 89 percent of RAC denials appealed to the administrative law judge (ALJ) level, the judges have taken more than the 90 day statutory limit to render a decision, and 44 percent of all RAC appeals are still working their way through the five-level appeals process.

The five levels of the appeals process are:

• an initial claims redetermination by a Medicare Administrative Contractor (MAC);

• a claims reconsideration by a qualified independent contractor (QIC);

• a hearing before an ALJ;

• a review by the Medicare Appeals Council; and

• a judicial review in U.S. district court.


The percentage of appealed RAC denials was a jump from the 44 percent appealed through the first quarter of 2015.

As of April, ALJs had a backlog of 500,000 RAC appeals.

The RACTrac survey is designed to measure the impact of the RAC program on hospitals and has been conducted since the first quarter of 2010.

Most of the survey results are cumulative, and 819 hospitals participated in the first quarter of 2014.

RACs are paid on a contingency fee basis by the Centers for Medicare & Medicaid Services to identify and recover Medicare overpayments.

RAC Denials

Through the second quarter of 2015, hospitals continued to face more complex RAC denials than automated RAC denials, with an average of 627 complex denials per hospital compared to an average of 134 automated denials per hospital.

Complex RAC denials involve human review of medical records related to a claim and often involve allegations of medically unnecessary treatment, while automated denials occur without the need for human record review.

The average amount of a complex RAC denial was $5,543, compared to $918 for an automated RAC denial.

Over half (51 percent) of all automated RAC denials were due to either outpatient billing errors or outpatient coding errors, while the bulk of complex RAC denials (79 percent) were due to incorrect discharge status and incorrect coding errors.

Hospital Burdens

Hospitals reported a wide range of burdens associated with RACs, including:

• increased administrative costs (31 percent);

• training and education (30 percent);

• the purchase of tracking software (22 percent);

• adding administrative responsibilities for clinical staff (16 percent); and

• modifying hospital admissions criteria (16 percent).


Fifty percent of hospitals said they spent more than $10,000 in the second quarter of 2015 handling the RAC process, while seven percent reported spending over $100,000.


To contact the reporter on this story: James Swann in Washington at

To contact the editor responsible for this story: Kendra Casey Plank at

The AHA RACTrac report is at


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