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It’s Worse Than You Think

In previous posts, we’ve reported that two RACs have now posted approval to begin reviews of both medical necessity and DRG Validation, for the exact same 29 DRGs.  We have also previously shown that the RAC lists (as posted earlier this year) are skewed toward high-dollar and high-volume claims, to no one’s surprise.

Nevertheless, we have a “new” list, so let’s take a look at this “List of 29,” let’s call it — the first list of MS-DRGs approved for RAC review of medical necessity. Can we learn anything about what the RACs and CMS are thinking?

The answer is YES, we can.  Click here if you just want to jump down to the conclusion…

How Skewed Is This “List of 29″?

Well… not very, but that’s actually worse for providers! Why is it worse? Read on, and it should be come clear…

The first table below begins with some unfortunate insight, when counting the number of CC or MCCs in the List of 29. If you are not too familiar with the MS-DRG system, we recommend reading a PDF made available by CMS on the system.

Briefly, the Medicare Severity-Diagnosis Related Groups (MS-DRGs) are a system of codes that provide up to three levels of severity for a particular condition or diagnosis. A “Base DRG Group” combines all levels of severity into a single category, allowing us to combine the the individual MS-DRGs for reporting. Individual MS-DRGs within a Base DRG Group are differentiated according to the presence of either a complication (CC) or a major complication (MCC), or neither. Some Base DRG Groups, however, happen to have only two codes assigned to them. At the end of the day, all the MS-DRGs are assigned payment rates, based on their relative use of resources and supplies. Simply put, a condition that is accompanied by a major complication (MCC) is more costly to treat, therefore the provider is paid more for that claim. A condition with a complication (CC) is not paid quite as much, and a condition with neither CC nor MCC is paid the least of the three.

Now consider this table and consider what the numbers reveal:

• 8 or 28%   – the number of MS-DRGs without a CC or MCC
• 13 or 45%   – the number of MS-DRGs with an MCC
• 18 or 62%   – the number of MS-DRGs with either a CC or MCC.

For the sake of this article, let’s just assume that all Base DRG Groups include exactly 3 MS-DRGs: one with an MCC, one with a CC, and one without CC or MCC. If that were true, then any randomly selected list would likely have 33% of each kind of MS-DRG. However, if the list of MS-DRGs was selected with a weighting toward the MS-DRGs with an MCC, then there would be a higher percentage of those in the list, and a lesser percentage of the two others. Basically, any list with one type of MS-DRG appearing more than 33% of the time is evidence that selection of the list favored that type of MS-DRG over the others.

In the above table, MS-DRGs with an MCC appear 45% of the time, and therefore is evidence that the list is skewed toward those MS-DRGs with an MCC. So, as mentioned above, we can once again demonstrate that even this new list is skewed toward the higher paying MS-DRGs, particularly the ones with MCCs. Of course, this still comes as no surprise, since the RACs are paid via contingency fees — the more they find, the more they get paid by CMS.

But I’m not done yet.

The size of the “skew” was disappointing, and something else about those numbers just didn’t sit right with me. The “skew” just wasn’t very big. I was expecting more. And why were there so many lower-paying DRGs in the list? “Whassup with that?” as my teenage daughter would say.

Could it be that the list is not really intended to be very skewed? That’s when the pattern became clear to me, and a reason for that pattern also came to mind…

RAC to CMS: “Hey, it’s all good!”

The RACs have obviously been busy, these past months. They were not sitting idly by, waiting for medical necessity to be released. It appears to me quite obvious that they have been running their little data-mining machines in high gear because it seems that they have dredged up plenty of evidence of improper payments due to what will be defined in denials as “a lack of medical necessity.”

Remember, the only thing that matters to a RAC is the documentation, or the lack there of, to clearly demonstrate medical necessity, not the reality of the patient encounter. And to get approval from CMS to pursue an issue across their region, a RAC must gather enough evidence to make a case that there is a problem with said claims.

I kept staring at the list. A pattern became obvious to me. Perhaps the pattern is obvious to you, too, but I’ve neither seen nor heard anyone else mention what this pattern MEANS for providers, and I do think it is important to recognize, to enable more clear thinking about what the RACs and CMS intend to do.

A Pattern Emerges

The table below shows the pattern: six complete DRG Groups, included in the List of 29. That’s 16 DRGs, more than half of the list. And remember, these are high-volume DRGs…

What this means is that for these specific diagnoses, CMS and the RACs have evidently found enough evidence to warrant RAC reviews for the medical necessity of these treatments for ALL such claims, not simply the higher paying ones.

Does this mean that CMS actually believes that the patients really did not NEED these treatments? Doubtful.

Or, does this mean that CMS is willing to argue with physicians about the medical necessity of treating these conditions or that they have been misdiagnosed?  Perhaps this is true, for a few cases; but I even find this doubtful, although to read some articles out there, one would think that physicians are preparing to wage war on who-knows-best-how-to-care-for-patients with the RACs’ medical directors. While such battles will inevitably occur, it would seem to me that this is not the kind of evidence that the RACs have already found and used to convince the New Issue Review Board at CMS to approve reviews for all the MS-DRGs in these six Base DRG Groups.

Here is what I think it more likely means: the RACs have found enough evidence to support the assertion that providers are recording neither appropriate documentation nor enough documentation in the medical record to warrant reimbursement for services provided to Medicare beneficiaries in their facilities, and that the problem is so ubiquitous that it bears scrutiny across almost the full spectrum of DRGs. Remember, HDI already has approval for DRG Validation for about 80% of all MS-DRGs.

I’m neither an expert on medical necessity nor on auditing medical records, but I do know how to analyze data and find patterns and meaning in those patterns. To me, this latest list simply nails the issue. This is not about medicine. It’s about money.