The American Hospital Association recently released the results of a survey conducted to explore the efficacy of the RAC program in hospitals nationwide. The survey utilized the results responses submitted by 676 participating hospitals in order to explore the program’s impact in the second quarter of the year 2016. The results suggest that while Medicare over-payments are not running rampant, 72% of hospitals received complex denials based on inpatient coding alone. Furthermore, despite the lack over over-payments, a large majority of claims submitted were still identified as an improper payment. These numbers are alarming, as there’s been an observed 58% increase in improper payments from last year.

The Recovery Audit Program, a CMS initiative to identify improper Medicare payments employs a handful of contractors to review Medicare reimbursements through the use of computer software. This automated process is said to be as equally as effective as auditor-driven CDI and medical record reviews. Unfortunately, automation may not be the answer, at least according to the AHA, who claims that the contractors have been increasing the volume of record reviews and are consistently misidentifying over-payments. In the first quarter of the year, medical record requests per hospital were in the 1,500 range. As the second quarter requests were dispatched, request numbers were nearing 1,700.

Hospitals reported that, on average, there were 131 automated claims denials in the second quarter of 2016, with 627 complex denials. This is also an increase from the previous year, where the numbers sat at 124 and 609, respectively. Average automated claims denials were valued at about $714, while complex denials were worth a steep $5,418.

Below, you’ll find the top denial justifications and red flags found within hospital claims.


  • Outpatient billing errors (24%)
  • Incorrect discharge status (22%)
  • Outpatient coding error (11%)


  • Inpatient coding errors (81%)
  • Incorrect discharge status (30%)
  • Outpatient coding errors (13%)

In a not-entirely-surprising turn of events, around 45% of hospitals appealed their denied claims in the first quarter of the year alone. By Q2, 27% of those claims were still in the process of investigation and appeal. Fortunately, despite the holdups, many hospitals (60% of those who appealed) were eventually considered justifiable and overturned in the provider’s favor.

For healthcare providers, the outcomes of such audits are favorable – but they illuminate widespread and easily preventable issues in the billing process. Considering the fact that many denied claims were accepted after the hospitals provided additional documentation to support and justify claims – why are care providers not delivering all necessary information up front? It would appear as though many claims packages are prepared haphazardly, and the appeals process – long and arduous – is where providers buckle down. Doesn’t this raise the cost of healthcare and extend certain processes far longer than truly required, and who is more to blame – RACs for lacking initial specificity, or providers for their dismissal of the process requirements?