In letters to Congress and the head of CMS, The American Hospital Association says stalled Medicare claims totaling more than $1 billion and a growing volume of Recovery Audit Contractor denials are putting its members in "an untenable position."
Overly aggressive and inappropriate audits and denials of hospital claims are holding up more than $1 billion in Medicare payments and the appeals process hospitals have pursued to overturn denials is mired in backlogs contends The American Hospital Association.
In a Jan. 14 letter to Marilyn Tavenner, administrator for the Centers for Medicare & Medicaid Services, the AHA pleads for fundamental changes to Medicare's claims auditing system. The group blasts the system, which it says has a two-year backlog in violation of statutory deadlines and pays auditors commissions for rejected claims without levying penalties for inaccurate denials.
"Hospitals have been put in an untenable position in which the nearly unfettered ability of RACs (Medicare Recovery Audit Contractors) to churn out erroneous denials forces them to pursue appeals in order to receive payment for medically necessary care, while the inability of OMHA (the Office of Medicare Hearings and Appeals) to manage the appeals process within the timeframes required by the Social Security Act holds that payment hostage, " Pollack wrote.
"Hospitals are bearing the financial burden with over a billion dollars caught in a broken appeals process that takes several years to issue a final determination," he wrote. His letters added that since 2010, RAC denials "have increased nearly 30-fold," with the average number of appeals per hospital growing from 17 in 2010 to 300 in 2013, with $1.5 billion now at stake
In a similar letter addressed to members of Congress, Pollock wrote: "During this 30-month period in the appeals process, hospitals are not paid for the care they provided to Medicare beneficiaries."
He added that "hospitals win more than 70 percent of appealed inpatient denials, meaning that the majority of appealed inpatient claims that were denied by RACs are accurate, necessary, and supported by clinical guidelines."
One physician willing to speak out is Steven Hanks, MD, vice president of medical affairs of the 414-bed The Hospital of Central Connecticut within Hartford HealthCare. Hanks says that RAC auditors have unfairly denied 1,408 claims since 2010, holding up more than $9 million in Medicare claims going back about three years.
"What these auditors seem to be doing is focusing on cases with claims for care provided during short lengths of stay, with the presumption being that if the length of stay was short, these patients probably didn't need to be inpatients in the first place. So therefore, they gamble that's the case and recommend denial."
He adds, "It's almost un-American the way this is being rolled out."
"Essentially, the RACs are saying, 'you know, for all these short stay ones, we're going to assume that Medicare overpaid, and recommend denial, which moves a complex medical decision into a time-based criteria.'"
But in most of these cases, Hanks says, "when the patient presents, it's not clear what the clinical course is going to be, and where there's a substantial risk to the patient if (he or she is not admitted)."
Many of the denials his hospital is appealing have to do with patients whose care was billed as an inpatient but who in retrospect the auditors believe should have been on observation, a shorter, and less expensive category of outpatient as opposed to inpatient hospital care.
That means that patients and their families now have co-pays and deductibles, and don't qualify for Medicare coverage of many important types of post acute care services, such as a stay in a skilled nursing home. And that hurts beneficiaries, Hanks says.
Of the 1,408 denied claims, the Hospital of Central Connecticut agreed with the auditors on 5%, but appealed 1,344. Of those, 198 have completed the appeals process and "we won 95%." The rest are still waiting for a hearing.
Another reason why these denials seem so unfair, Hanks points out, is that they reclassify inpatient stays, which are paid a flat rate, or DRG, based on a diagnostic category, into outpatient care which pay less.
The DRG rate was derived by calculating the average length of stay for a patient with that condition. Some patients might stay three days, some five, some 20, but all are reimbursed at the same rate.
Hanks says that he believes the system is set up to "take the chance that the hospital won't have the resources" to go through the appeal process while waiting to get paid. Additionally, RAC auditors incur no penalty for getting it wrong, so they "continue to come after a hospital like mine which keeps winning these cases," he points out. "Let's face it, we all know what this is about," Hanks says.
"The system costs too much. We in the healthcare industry are doing the work to address that. But this to me is a blunt-force instrument to accelerate the process in a way that hurts legitimate beneficiaries.
The AHA also wants CMS to:
- Prevent CMS from recouping disputed funds until after the hospital has received an administrative law judge determination on its appeal.
- Enforce statutory timeframes during which determinations of appeals must be made, including a required default judgment for the hospital if the appeal isn't heard by statutory deadline.
- Address systemic issues that lead to avoidable claim denials and provide a mechanism for erroneous denials to be reversed before they get to the appeals process.
In his letters to CMS and Congress, Pollock says CMS should suspend RAC audits "until all levels of the determination and appeals process catch up with their current workloads," allowing time for claims that have already been audited to work their way through the process.