In business, it is generally accepted that one of three things happens to a company when demand outstrips supply on hand; either the company finds the financing to expand to meet demand, they sell the company to an entity that has the ability to meet capacity and demand, or the company folds, possibly taking with it a great idea that never had a chance.
I’d like to leave that idea in the consciousness of the reader for a moment and discuss the latest results of the AHA RACTrac Survey, which were released on August 22nd. One thing that this ongoing survey teaches us is that based on percentages, few things are changing about the RAC process.
First, despite the fact that CMS raised the maximum number of additional documentation requests per provider back in March of this year, the RACTrac Survey finds that 61% of all medical records reviewed do not result in the finding of an improper payment. This is down only slightly from the last report. In Region B, CGI is only able to detect an improper payment 29% of the time after documentation review.
One of the more important numbers brought forth by the RACTrac Survey is statistics on appeals. CMS has released appeal numbers in the past, but they have been limited to claims appeals originating prior to September 30th 2011. Since the AHA survey is ongoing, I tend to trust their numbers slightly more than those from CMS.
The latest survey shows that 40.8% of all RAC denials are appealed nationwide. This number wouldn’t normally grab my attention, but when coupled with the fact that 75% of all finalized appeals have been found in favor of the provider, and I come to the conclusion that something is terribly wrong with this picture.
Further, the survey shows that over 71% of all appealed claims are currently pending a final decision. From the conversations I have had with RAC coordinators nationwide, it appears that many of their appeals are going to the third level of appeal to eventually be heard by an administrative law judge. One would think that if the providers filing appeals feel this strongly about the claims in question that their chances of an eventual appeal victory are rather large.
This thought leads me back to the 59.2% of RAC claims determinations that are not appealed. On the surface, with the finalized appeal numbers so heavily tilted in the provider’s favor, why isn’t the percentage of appealed claims higher?
I believe that all reasonable answers to this question eventually lead to a discussion of facility administrative costs for RAC-related activity. Many bigger facilities and hospital groups have had RAC teams in place from the very beginning of the permanent process, and these hospitals are finding success. Yet the stories of rural hospitals being crippled by the process are beginning to grab national attention. In an environment where 61% of all additional document requests (ADR) lead to a $0 change in net revenue, how would a mom-and-pop hospital with limited resources ever get to the point where they could respond to RAC issues, given the narrow cost margins that exist just to keep the ER doors open and all of the room lights on?
Simply stated, the administrative resources are not there for these providers. The problem is one of program design. The RAC process has been formulated in such a way that every facility begins to incur a loss of revenue from the very beginning of the process, as it is attempting to protect revenue that has long since been reinvested back into the facility. These losses continue as the appeals continue, and are aggravated with every appeal that is eventually lost.
Banks are not opening up their purse strings to help hospitals (or anyone else, for that matter) in this economy. There has been increased activity on the hospital system merger front of late, but the RAC process isn’t even a discussion point during these mergers. This leads to the third option of demand outstripping supply, which is for hospitals to go out of business from the weight of RAC activity. This is not the stated goal of the RAC program, but it is looking more and more like an unintended consequence of a Medicare Integrity process that has run off the rails.