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AIS's Health Business Daily
Featured Story, July 21, 2010 Providers Have Won Majority of RAC Claims Denials They Have Appealed Reprinted from REPORT ON MEDICARE COMPLIANCE, the nation's leading source of news and strategic information on false claims, overpayments, compliance programs, billing errors and other Medicare compliance issues. By Nina Youngstrom, Managing Editor (nyoungstrom@aishealth.com) The latest RAC appeals data show the tide turning in favor of providers, who have prevailed in two-thirds of the claims denials they fought to have overturned. The updated data — the first that CMS has released in more than a year — indicate that it’s worth appealing claims denials when hospitals believe they have a strong leg to stand on.
According to CMS’s June 2010 RAC update, 598,238 claims have been subject to RAC overpayment determinations as of March 9. Providers appealed 76,073 of those claims, and were victorious 64.4% of the time, which means 8.2% of the claims were overturned on appeal.
That’s “a dramatic increase in appeals that are favorable to providers,” notes Michael Taylor, M.D., senior medical director for government appeals and regulatory affairs at Executive Health Resources in Philadelphia. CMS did not break down the figures according to the different levels of HHS administrative appeals (e.g., redeterminations by Medicare administrative contractors and fiscal intermediaries, reconsiderations by qualified independent contractors and appeals to administrative law judges). As a result, the number of cases won or lost at each level is unclear. “Based on our experience in helping hospitals manage appeals, we have seen a high success rate in overturns at the ALJ level. We infer that many of the favorable outcomes for providers in this latest data probably reflect the results of the ALJ level,” Taylor notes.
Unfortunately, he says, some providers don’t realize they often have to appeal claims denials all the way to the ALJ to win. They stop after losing at the lower level because of frustration, lack of knowledge and/or lack of resources. This may change as providers get more experience with administrative appeals. “ALJs tell me they are seeing more cases come through the process and seeing more providers who never before took their cases to an ALJ,” Taylor says.
All or most of the appeals data reflect claims denied during the RAC demonstration. A different appeals picture may emerge under the permanent RAC program because CMS changed the correlation between the contingency fee and overturned cases.
During the three-year demonstration, which took place largely in New York, California and Florida, the RACs were paid a percentage of their overpayment findings even if they later were thrown out on appeal. Providers objected fiercely to that incentive, claiming it turned the RACs into bounty hunters. Under CMS’s new rules, RACs don’t get paid a dime for overpayment identifications if they are overturned on appeal.
Because their contingency fees are at risk in the appeals process, “RACs might try more aggressively to defend their decisions,” Taylor says. When they were permitted to keep a percentage of overpayments they identified even when they lost appeals, RACs weren’t incentivized to contest the provider’s appeal at the ALJ level, he says. But it’s a new ballgame now. If RACs provide testimony to counter a provider’s assertions, “it will [be] absolutely essential for the provider to appeal with precision and show evidence of a daily review and certification process that is compliant with regulations in order to prevail in the appeals process,” Taylor notes.
Ideally, if RACs are faring poorly during the appeals process, they will abandon the overpayment determination. RACs don’t want to look bad in CMS’s eyes because they want to keep their contracts, and CMS will be monitoring RAC error rates through appeals and the validation contractor.
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