Featured Story, July 28, 2010

CMS RAC Chief: Medical-Necessity Audits Are Coming, Will Be ‘Big Mountain to Climb’ for Hospitals

Reprinted from REPORT ON MEDICARE COMPLIANCE, the nation's leading source of news and strategic information on false claims, overpayments, compliance programs, billing errors and other Medicare compliance issues.

By Nina Youngstrom, Managing Editor
(nyoungstrom@aishealth.com)

Medical-necessity reviews by recovery audit contractors (RACs) are expected to pick up steam this summer, CMS’s top RAC official tells RMC.

So far, RACs have sent 15 to 20 hospitals about 140 additional documentation requests (ADRs) involving medical-necessity issues, says Connie Leonard, director of the Division of Recovery Audit Operations. The documentation was requested for the RACs’ probe audits, which are mini-reviews conducted to flush out high-risk areas that merit a full-scale audit. After finishing the probe audits, the RACs submitted only four or five issues to the CMS new issues review board, which must sanction audits before RACs begin work. But Leonard says “we expect that will change as we get further into the summer.”

As RACs move into “more subjective areas” — meaning audits of site of service and medical necessity of services provided — Leonard encourages providers to “stay on top of what the RACs are doing.” That means monitoring RAC web portals, which contain detailed claims information, ADRs, audit results and demand letters. “I always encourage providers to do their own quality reviews,” she says. “If they pay attention to their own compliance shops, I don’t think the RAC program will be a big deal for them. Yes, it’s an inconvenience for them, but if RACs request medical records and don’t find problems, they will eventually stop requesting medical records [from that provider]. It’s not cost-effective for RACs to review hospitals where they don’t find improper payments.”

Medical necessity will be “the big mountain to climb,” Leonard says. “You start with other types of reviews and slowly get to medical necessity.” During medical-necessity audits, RAC medical directors will be available to discuss particular cases with physicians and hospital medical officers. CMS also is preparing a new MedLearn Matters article to help providers improve documentation of medical necessity and compliance with admission orders and other requirements. Leonard hopes it will be out by late September.

One of the most threatening aspects of medical-
necessity audits for hospitals involves RAC determinations that admissions were unwarranted. When that happens, CMS has said hospitals can rebill only for Part B ancillary services provided to these patients rather than an APC under the outpatient prospective payment system. Leonard says she agrees the policy is unfair to hospitals but that CMS’s hands are tied by statute. “CMS has been working on that issue with the American Hospital Assn.,” Leonard says. “We support AHA and providers.” She says CMS policy officials and legal counsel have told her that Congress will have to make changes to the law before outpatient rebilling is permitted. “We have been told this cannot be just a manual or regulatory change.”

Meanwhile, RACs are focusing intensely on MS-DRG validations and durable medical equipment (DME) billing. Many MS-DRGs have made the RAC target lists. But Marie Casey, deputy director of CMS’s Division of Recovery Audit Operations, tells RMC that “one area we always have a problem with is the respiratory failure diagnosis.” She says hospitals often miscode respiratory failure or have sequencing problems in this area (e.g., involving pneumonia and chronic obstructive pulmonary disease). “But we haven’t seen huge dollars yet in that area,” Casey says.

In fact, the top overpayment finding from the RACs so far involves DME, Casey says. RACs are finding various errors, such as DME billed for beneficiaries after their date of death and DME billed for beneficiaries while they are inpatients.

RACs Challenge ‘Debatable Diagnoses’

Leonard and Casey won’t be involved with the Medicaid RACs ordered by the health reform law, other than sharing lessons learned. Each state Medicaid agency is required to contract with a RAC to hunt for Medicaid overpayments. “CMS is providing general oversight,” Leonard says. Plans for the Medicare Parts C and D RACs also mandated by the reform law are still being discussed internally, she says.

It makes sense for respiratory failure to be a high-
error MS-DRG, says Drew Rothschild, M.D., with Navigant Consulting. “There are many differences of opinion about what the diagnosis means and how it needs to be documented,” he says. For example, sometimes patients can’t breathe, but physicians don’t write respiratory failure; they call it “only” an asthma attack or respiratory insufficiency, even in severe cases where patients haven’t resumed breathing on their own, sometimes after intubation, he says. “Many physicians base the diagnosis only on ABG [arterial blood gas] results. But ABGs aren’t performed nearly as often as they were in the past, so they frequently aren’t available,” Rothschild says. “Other physicians require acidosis, ignoring the many other causes of respiratory failure, such as hypoxic acute respiratory failure.” Some physicians focus primarily on specific lab values or pulmonary lung testing, particularly in chronic failure. The bottom line: “There is no consistency in what people think is necessary,” he says. And Rothschild has seen some doctors overdiagnose respiratory failure, so he recommends that coders query physicians if anything seems iffy.

Hospitals will run into a problem with respiratory failure because RACs seize on debatable documentation of diagnoses, Rothschild says. “RACs don’t want [providers] to just state the diagnosis. If it seems debatable, you have to explain why you believe it’s true. You have to make it so it’s not debatable in any way,” Rothschild says.

Though the RACs list many MS-DRGs on their websites, which means they have been approved for audit by CMS, hospitals say the audits tend to focus on a handful at a time — although the requests for medical records can be extensive. For example, in January, Franciscan Health System in Washington state received 14 documentation requests targeting nine MS-DRGs from its RAC, Health Data Insights, says Jonathan Eastabrooks, the audit contractor program liaison for Franciscan. The MS-DRGs are simple pneumonia and pleurisy; respiratory system diagnosis with ventilator support 96+ hours; other circulatory system diagnoses; extensive operating room (OR) procedure unrelated to principal diagnosis; respiratory infections and inflammations; other OR procedures for injuries; and septicemia without mechanical ventilation 96+ hours.

In March, the RAC requested medical records for 205 MS-DRGs, with 40% of them focused on three DRGs: other circulatory system diagnoses, septicemia and extensive OR procedures unrelated to principal diagnosis.

Eastabrooks notes that 73% of the MS-DRGs audited had only one CC or MCC. For example, RAC auditors said they couldn’t find a secondary diagnosis of acute hemorrhagic anemia to justify the CC, so they downcoded the MS-DRG from other OR procedures for injuries with CC to other OR procedures with no CC/MCC (from 908 to 909). That reflects a trend of RACs and other auditors zeroing in on MS-DRGs with a single complication they can potentially dismiss, which would downcode the MS-DRG to the lower-paying version with no CC or MCC.

RAC Teams Should Be Diverse

Franciscan has a large RAC team responding to audits and preparing appeals. Members of the RAC team come from many departments, including the business office, care management, health information management and compliance. The involvement of a lot of people helps Franciscan’s five hospitals fend off unfair RAC denials, which it did by successfully using the RAC discussion period. Recently, the RAC denied a claim for physical therapy services (CPT 97001), saying the hospital exceeded the number of units allowed per patient per day. The patient was referred twice for PT, but the referrals were from two different doctors for two separate disorders. “They don’t like to schedule them on the same day, but they did,” Eastabrooks says. “We had to show the RAC we didn’t screw up. We engaged them in discussion and it was successful.” 

CMS created the discussion period for providers to present evidence to RACs before filing formal appeals, to persuade them that claims denials were unwarranted. Eastabrooks says Franciscan prepares appeals letters for denials but tries to resolve disputed claims denials through the discussion period.

Hot Products

New • The AIS Guide to Blue Cross and Blue Shield Plans* • Managed Medicare and Medicaid Factbook: 2010 • Special Needs Plans: Regulatory Challenges and Market Strategies • Health Reform’s Impact on Commercial and Medicare Health Plans *Not affiliated with the Blue Cross Blue Shield Association or its member companies. Best Sellers • AIS's Directory of Health Plans: 2010 • Report on Patient Privacy and AIS's HIPAA Compliance Center • 2000-2009 Survey Results: Pharmacy Benefit Trends & Data • Guide to Managing Never Events and HACs See full listing of products at AIS Marketplace

Advertise With AIS

Privacy

Site Map