RAC Update: Hospitals that Appeal Denials for Inpatient Admissions Can Be Reimbursed for Ancillary Part B Services

In the event a Recovery Audit Contractor (RAC) denies coverage for an inpatient admission, can the hospital still be paid under Medicare Part B, assuming the service was medically necessary and otherwise meets Part B requirements? Hospitals have long struggled with this issue, especially in the context of reimbursement for emergency room care and outpatient services where the patient was admitted for an in-patient stay that was later denied. Because the denials come long after the timely billing requirements have passed, hospitals have faced an “all or none” situation in those cases: either challenge the denial of the inpatient admission and prevail or receive no reimbursement whatsoever for their services. During the RAC Demonstration Project, hospitals were permitted to go back and re-bill those claims, but the Center for Medicare and Medicaid Services (CMS) has taken the position that this practice was only permitted under the special demonstration program.

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