Where Does Retrieval-Based Open-Ended Evaluation Fail? Automatic Taxonomy Induction from Long-Form Medical Answer Factuality Verification

Biomedical fact-checking systems must do more than predict whether a claim is supported, contradicted, or unaddressed: they should also produce evidence that is faithful, complete, and useful for verification. We study this evidence-generation setting on CARE-XAI, a unified benchmark spanning five biomedical and health fact-checking sources. We compare base instruction LLMs, PubMed retrieval-augmented LLMs, fine-tuned LLMs, label-only LLMs, and biomedical encoder classifiers under a shared evaluation protocol. Biomedical classifiers remain strongest for verdict-only prediction, while fine-tuned LLMs are the strongest evidence-generating systems. PubMed retrieval is mixed: it helps PubMed-aligned sources such as PubMedQA and SciFact, but can distract models on broader public-health claims. We introduce Bio-GRACE, a gold-reference-normalized diagnostic for measuring whether retrieved evidence recovers the decision benefit of reference evidence. Bio-GRACE shows that retrieval utility is source-dependent, motivates selective retrieval, and exposes why retrieval recall and lexical evidence overlap are insufficient for biomedical fact-checking.

Retrieval-Augmented Generation (RAG) significantly improves the factuality of Large Language Models (LLMs), yet standard pipelines often lack mechanisms to verify inter- mediate reasoning, leaving them vulnerable to hallucinations in high-stakes domains. To address this, we propose a domain-specific RAG framework that integrates explicit rea- soning and faithfulness verification. Our architecture augments standard retrieval with neural query rewriting, BGE-based cross-encoder reranking, and a rationale generation module that grounds sub-claims in specific evidence spans. We further introduce an eight-category verification taxonomy that enables fine-grained assessment of rationale faithfulness, distinguishing between explicit and implicit support patterns to facilitate structured error diagnosis. We evaluate this framework on the BioASQ and PubMedQA benchmarks, specifically analyzing the impact of dynamic in-context learning and rerank- ing under constrained token budgets. Experiments demonstrate that explicit rationale generation improves accuracy over vanilla RAG baselines, while dynamic demonstration selection combined with robust reranking yields further gains in few-shot settings. Using Llama-3-8B-Instruct, our approach achieves 89.1% on BioASQ-Y/N and 73.0% on Pub- MedQA, competitive with systems using significantly larger models. Additionally, we perform a pilot study combining human expert assessment with LLM-based verification to explore how explicit rationale generation improves system transparency and enables more detailed diagnosis of retrieval failures in biomedical question answering.

Hallucinations can undermine clinician trust in LLMs, making it important that evaluation methods capture clinically relevant errors. Rubric-based evaluation has become the leading approach for assessing LLMs in medicine, but it is unclear whether rubric scores reflect such errors. We first study this in a controlled setting using MedHallu, finding that more specific rubrics better distinguish correct from hallucinated responses. To test this systematically, we develop a taxonomy of medical hallucination types and a clinician-validated error-injection pipeline that creates matched correct and error-injected responses. Across HealthBench, HealthBench Professional, and LiveMedBench, our clinically relevant hallucinations are missed by rubrics, often leaving scores unchanged. We find that rubrics are most effective when explicitly checking facts, and are less effective for additional or unexpected errors they do not anticipate. A preliminary retrieval-based factuality check recovers some of the rubric-blind errors, suggesting a complementary approach. These findings reveal systematic blind spots in current medical evaluation of LLMs and suggest that rubric scores alone are insufficient to establish clinical reliability, potentially undermining clinician trust and confidence in clinical deployment.