The RACs are frequently wrong in their assertions about what a physician, confronted with a patient in need of medical treatment, should have done months or years earlier. Indeed, hospitals report that when they pursue appeals through the administrative appeals process—an expensive and burdensome exercise—they are successful in overturning RAC denials 75 percent of the time. Despite this alarming error rate, when a RAC determines that a provider was paid for inpatient hospital services but that the patient in question should have been treated as an outpatient, CMS [Centers for Medicare & Medicaid Services] takes back the entire Part A payment. Moreover, CMS takes the position that once an inpatient claim that was paid under Medicare Part A is later—usually years later—denied, the hospital cannot receive Medicare Part B payment except for a few ancillary services. As a result, when a RAC concludes that a hospital should have provided items and services on an outpatient, rather than an inpatient, basis, the hospital ends up receiving little if any reimbursement for reasonable and medically necessary items and services provided. The RACs fare significantly better. They keep a contingency percentage—9 percent to 12.5 percent—of the entire Part A payment.



Source: aha.org (PDF)