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.

HDI Edits Ten Issues to include Reviews of Medical Necessity for 29 DRGs

The Region D RAC, HDI, only took about a week to also garner approval to begin review of medical necessity for 29 DRGs previously approved for DRG Validation, after the Region B RAC, CGI, was approved by CMS to begin medical necessity reviews for the same DRGs, as of August 6, 2010. However, while CGI had to post six (6) new issues to their site, because those DRGs had never appeared on their site before, HDI did not have to post any new issues. Of the existing 746 MSDRGs, HDI had already posted approvals for DRG Validation of over 75% of them, and these 29 did happen to already be among their approved list.

The I’s Have It: CGI and HDI

Now two of the four RACs have approval to review medical necessity, putting 24 states under such review. We do expect that to grow in the next few days, since it took HDI only about a week to catch up to CGI, so we assume Connolly and DCS are not far behind.

Although our previous post provided lists and links to the 29 DRGs, those links and titles were created using the CGI website data. Also, that list was broken into two lists — one for “new” issues, and one for “previous” issues.

Below is a list of the ten “previous” issues that now include some approvals for medical necessity. It was created using the HDI website data, which is slightly different. To see the full detail, as posted by HDI, follow the links:

(Note: to see the details, you will need to login to the eduTrax main site — Registration is still Free.)

Most Difficult to Track

It is perhaps insignificant but notable that the first two RACs to be approved for medical necessity review also happen to have the two websites that are the most difficult to monitor for changes. Both sites are constructed in a way that requires interaction, and does not provide a simple method of capturing the data on the page, to compare to a future capture of the same page.

New Service Coming

We have resorted to creating our own software application to specifically follow and compare all the pages on these two sites. Shortly, we will announce and offer a for-fee service to notify our clients and subscribers of any changes posted to any of the RAC New Issues pages, including the details screen, in addition to our eduTrax RAC New Issues Tool Suite®.

CGI Federal, the CMS RAC for Region B posted approvals for review of both Medical Necessity and DRG Validation for some 29 DRGs since last Thursday, August 12, 2010.

Half of the top 20 DRGs nationwide were included. Click here to jump down to the list.

Our subtitle above calls these “Newly Approved,” instead of “New.”  Why did I use that phrase?  Why not just say “new”? Well, because that’s not quite accurate, and it seems that CMS and CGI don’t consider all of them to be “new” issues. Are you surprised that a word like “new” is not well defined?

This little video snippet should help you recall recent public debate about what the word “is” means.

I’ve had “debates” like that, on occasion, and I’ve always wanted to ask the person debating with me, “How many moons are in your night sky?” Of course, some words change definitions over time, or just mean different things to different people. Small words should be easy to define, though, don’t you think?

Anyway, keep this in mind as you read on, because there does not seem to be a consensus in our industry on what the word “new” means.

More about this later…

A Valid “New” Concern for Providers

The morning after the “newly approved” medical necessity issues were first posted by CGI, I spoke with the a RAC Team Leader for a hospital system with hospitals in several states. Even though this system has no hospitals in Region B, I know this person as a keen observer of all the RAC activities, and we often talk about the impact of the RACs. “We heard from our state hospital association that Region B would be the first to post some issues for medical necessity, and that it would happen this week,” they told me. “So, this wasn’t really a surprise. But this marks a new phase for the RACs, and we are concerned about what’s on the list.”

50% of Top 20 DRGs Now Approved

A quick analysis of the list proves that provider concerns are quite valid – of the top 20 DRGs for FY2009, 10 made this new list. Therefore, perhaps half of the top 20 DRGs in any facility either are now or soon will be targets of RAC reviews for medical necessity; and remember, they were already likely targets for reviews of physician admission orders, DRG validation, and the coding for principal and secondary diagnoses.

The First “New” DRGs Approved for Medical Necessity

Now, let me explain a small caveat, about the word “new”:  some of the DRGs approved for Medical Necessity are truly “new” issues, as those DRGs have never appeared on the (CGI) list before; while other DRGs were already approved for DRG Validation, but have now been “newly approved” for Medical Necessity review, as well.

So now, here is a list of six (6) issues with nine (9) DRGs never before posted on the CGI website, but now are posted as approved for review of both Medical Necessity and DRG Validation. To see the full detail, as posted by CGI, follow the links:

(Note: to see the details, you will need to login to the eduTrax main site — Registration is still Free.)

• MSDRG 253, 254: Other Vascular Procedures w CC, w/o CC/MCC
• MSDRG 302: Atherosclerosis w MCC
• MSDRG 312: Syncope & Collapse
• MSDRG 313: Chest Pain
• MSDRG 314, 315, 316: Other Circulatory System Diagnoses
• MSDRG 811: Red Blood Cell Disorders w MCC

There was also one DRG added for the first time, but only approved for DRG Validation:

• MSDRG 813: Coagulation Disorders (Medical Necessity excluded)

Ok, but that’s still only nine of the DRGs. Where are the others posted on the site?

Twenty More DRGs with Medical Necessity “Newly Approved”

The other 20 DRGs now approved for Medical Necessity review were all listed previously for DRG Validation in a total of 12 issues, dating back to December, 2009, among the first complex reviews posted by CGI. These 20 DRGs were not listed as “new” issues, but were simply “called out” as approved for Medical Necessity by renaming those previously approved issues.

The 12 issues with some DRGs newly approved for medical necessity review are as follows:

• MSDRG 056, 057, 069: Nervous System Disorders
• MSDRG 190, 191: Chronic Obstructive Pulmonary Disease
• MSDRG 192: Respiratory
• MSDRG 249: Percutaneous Cardiovascular Procedures
• MSDRG 291, 292, 293: Heart Failure & Shock
• MSDRG 308: Cardiac arrhythmia & conduction disorders
• MSDRG 391: Esophagitis gastroenteritis and misc digest disorder
• MSDRG 393: GI Disorders
• MSDRG 551, 552: DRG Validation for Musculoskeletal Disorders
• MSDRG 640: Nutritional & Metabolic Disorders
• MSDRG 682, 683, 684: Renal Failure
• MSDRG 689: Kidney & Urinary Tract Infections

Confused yet?

Why Not List All Those As “New Issues”?

Why indeed!  NOW, with the lists out of the way, let’s finally discuss why I even bring this up, and why it really will matter to providers — at least the ones who are trying to keep up with what the RACs are doing.

“New” Issues Must Be Posted by the RAC

According to the RAC Statement of Work, before a RAC can begin sending out requests for documentation to conduct complex reviews, or even demand letters for automated reviews already completed, the RAC must first win the approval of any audit issues from CMS, and then they must post all those approved issues on a public web site.

Last August, we all began watching those websites ominously take form and grow by leaps and bounds, in some cases, with the addition of more and more “new,” approved issues. We were curious to see the formats that the RACs were using, as each seemed to have their own private format for posting the issues.

Why Not All Use the Same Format?

Because they don’t have to. The RAC Statement of Work actually says NADA about what the format of these websites should be, and how “approved issues” should be “posted” on the sites. Whence, each RAC has their own interpretation of how to “post” their “new,” dare we say “newly minted,” approved issues.

To be sure, Medical Necessity review was never approved by CMS for a RAC before August 6, (now there’s an ominous date for you) and no issue approved for medical necessity review has being posted on any RAC website before August 11. However… now that such approvals have been garnered, and such posts have been made, at least some of said posts have been done in a manner that could be described as… well… obscure.

I call them obscure because some of these posts wind up as simple “edits” instead of “new” line items.

The method that CGI has chosen for posting approvals of Medical Necessity reviews is either of two methods: 

1. post it as a new issue if the DRG is not already on the list; or
2. merely change the name or title of the previously approved issue that lists the DRG, to include Medical Necessity review for one or more of the already approved DRGs in that issue.

So, some 20 of the 29 DRGs wound up “sprinkled” within 12 older issues, and simply had their titles “edited” instead of appearing as “new” line items in the list.

Why does this matter? Because the RACs can now post changes to their list of approved issues, without notice. Of course, they didn’t have to notify any of the providers before, but the lists seemed to do that, after a fashion – a form of notifying providers of what’s being reviewed, what to expect from the RACs.

Since the lists first appeared, many of us were thinking that we could watch the RAC websites and see the “new issues” get posted, from week to week; hoping we could simply sort the list (somehow) by date posted, and we’d know if there was anything “new” on the list or not.

“We all” were wrong. It would seem that “new” doesn’t have the same meaning, as we now see with the way a “new” review approach (medical necessity) is embedded in the original posted issue. Keep in mind that there is no reason to think that the other RACs will not adopt this same approach, also. Instead of posting “new” issues for Medical Necessity, they may simply rewrite the descriptions of their “old” issues, just as CGI has done.

Anyway, more “new”…oops… “edited” issues can be expected, any day. They’ll just be harder to track now, because we’ll have to read every issue, every day, to see what changed.

Oh, and by the way, I only see one moon in my night sky — how about you?

The List

Below are the nine new issues, posted earlier this week. Follow the links to each one, in the eduTrax RAC New Issue Database®, which can be seen with simple free registration at myedutrax.com.

Who’s Getting Stuck?

You’ve billed for it, even been paid for it. But will you get to keep the money? And you can’t take the injection back…

This is like getting an injection with a barbed needle: feels ok going in, but coming back out it hurts like <insert your favorite expletive>.

For both providers and payers, there’s no confusion about one thing: injections and infusions can be tricky to properly bill.

Instruction Available

The eduTrax® site has two excellent courses available for their paid subscribers, and these can also be purchased as downloads or CDs. Short previews are available to give you an idea of their quality and content:

Coding Injections and Infusions — reviews the recent changes to injections and infusions codes and offers guidance on correct capture of these services. (3 minute preview)

RAC Focus: Injections & Infusions — discusses why, how & where physicians must be involved, and addresses code selection based upon time and service provided. (8 minute preview)

Click here to send us an Email for more information or to place an order.

Still No Medical Necessity Approvals

To date, there are still no issues posted & approved for review of Medical Necessity for any issue.

As usual, we wait…

The List

Below are the 15 new issues, posted last week. Follow the links to each one, in the eduTrax RAC New Issue Database®, which can be seen with simple free registration at myedutrax.com.

More to Come

We’ll have more to say about the review of Physician orders, soon…

We’ve seen this question from several providers, recently. The short answer is “Yes,” but under certain circumstances, it’s “No”; and so maybe the answer should be “Maybe”?

Timing is everything, in…

Timing, Timing, Timing

In the retail industry (and others), the three most important factors are said to be, “Location, Location, Location.” If that’s true for those industries, then perhaps something similar can be said for our industry, under the new healthcare reform environment.

I submit that at least in dealing with the RACs, the factors might be, “Timing, Timing, Timing.”

Timing is everything, in many things, don’t you agree?

So let me explain what I mean…

How RACs Perform Reviews

RACs have to get issues they want to review approved by CMS before they can do “widespread review” — the term “widespread” evidently refers to multiple records, multiple providers, and/or multiple states. (They can review ANY record on a very limited basis while assembling evidence needed to garner CMS approval for any issue, but that’s another subject…)

Approved Issues Lists

The RACs also have to post a list of approved issues on a public web page, before they can begin conducting records requests, conduct reviews and publish their results — most often in the form of Demand Letters, recouping the payments from the providers.

Once an issue is approved by CMS and posted on the RAC’s website, the RAC uses proprietary software and their own experience to do data mining and analysis of Medicare Part A and Part B claims, which CMS makes available to them. When the RAC identifies claims that they believe show a potential for an improper payment, they can perform one of two types of review: an Automated review, where an error is a certainty just from data analysis; or a Complex review, where an error is considered likely, but cannot be determined without a human review of the medical record for the claim in question.

For an Automated review, the error is certain, by definition, so a Demand Letter is produced and sent to the provider. For a Complex review, an Additional Documentation Request letter (ADR) is send to the provider, and requires the provider to send specific claims records to the RAC for review. The ADR must name the issue being reviewed by the RAC. It must list one issue, and this issue must already be approved by CMS and posted on that RAC’s approved issues web page.

Now, back to the question at hand:  once a RAC recieves a record in house, can they review it for other approved issues at the same time?

The CMS Answer

Here’s how the CMS RAC FAQs answer that exact question: READ CAREFULLY…

Question: Can the Recovery Audit Contractor (RAC ) do a medical necessity review on a claim that they originally reviewed for DRG validation?

Answer: At this time, if the RAC has already requested documentation and issued a review results letter to the provider for a DRG Validation, the RAC will not be allowed to re-review the claim again for medical necessity. However, if both issues are approved (DRG Validation and medical necessity) prior to the request of the additional documentation, the RAC may conduct both reviews simultaneously.

(see Answer ID 10007, posted 4/23/2010)

Let’s analyze this a bit…

So that’s…At Least Two Answers?

First, notice the phrase, “At this time,…” So, CMS might change their policy at a later date. Form your own opinion about the likelihood of that.

Second, while the first sentence mentions the review results letter, which appears to place a stop on multiple issue reviews on a claim (that was the NO answer), the second sentence allows multiple issue reviews on the same claim, as long as both issues were approved for review before the ADR was sent out for that claim (that’s the YES answer).

So, as long as both issues were approved for review before an ADR was sent out, it appears that a single claim can be reviewed for multiple approved issues.

However, if a new issue is approved after a Review Results letter was sent out for a previously approved issue, the RAC is not allowed to re-review that same record for the new issue.

And Maybe a Third Answer?

What the statement does NOT address is this: can the RAC send out a new ADR for the same claims, under the newly approved issue? (That’s what I call the MAYBE answer.)

Well, we would expect that the RAC could submit an ADR for any approved issue, even if the record has already been reviewed for something else… but we’re going to send this question in to CMS and see what their answer is, which we will then post here…

So, stay tuned.

On February 1, 2010, the Council posted their decision: they did not agree and stated that the position of CMS was essentially inconsistent with policies found in its own manuals.

On December 7, 2007, the RAC charged with auditing California providers denied Medicare coverage for a claim of inpatient hospitalization services, as furnished to a beneficiary on November 1, and 2, 2004, at O’Connor Hospital. The RAC found the services provided were not “reasonable and necessary” per the Social Security Act, and therefore the hospital had received an overpayment. Like virtually every other claim filed by a RAC during the demonstration, said overpayment finding was upheld at both of the first two levels of the appeals process.

The first level of appeal in the RAC program, when requested by the provider, is a Redetermination. This is an additional examination of the claim by the RAC, supposedly by personnel who are different from the personnel who made the initial determination. One might consider this as simply a chance to ask the RAC to be sure to check their paperwork. We are not aware of any denials being overturned at this level of appeal during the Demonstration project.

The second level of appeal, again when requested, is a Reconsideration. These are always conducted by a Qualified Independent Contractor (QIC), thereby allowing an independent review of medical necessity issues by a panel of physicians or other health care professionals. (This is a change from previous programs, but did not originate with the RAC. These reviews were instituted in Section 521 of the Medicare, Medicaid, and SCHIP Benefits Improvement and Protection Act of 2000 (BIPA), and replaced the Hearing Officer Hearing process for Medicare Part B claims, while creating a “new” second level of appeal for Medicare Part A claims.)

The provider took the claims to the next level of appeal, the Administrative Law Judge, or ALJ. There were four claims in question for four different beneficiaries at O’Connor. On September 16, 2009, the ALJ overturned the RAC denial for three of the four claims, thereby reversing the denial and granting Medicare coverage for the inpatient services, as filed. The fourth claim, however, was a more sticky situation.

While the ALJ agreed with the RAC and denied the coverage for the inpatient services provided as billed on the fourth claim, the ALJ nevertheless found that “the observation and underlying care are warranted.” In other words, yes, the inpatient admission was not warranted, but the observation and other outpatient services were warranted and should therefore be paid by CMS, even though the services were never billed as such. Or, put another way: “down-code” the claim to Part B services and pay those.

The net effect was to reduce the recoupment to simply the difference between the Part A and Part B services provided for the fourth claim only, compared to complete recoupment of all four inpatient claims, as the RAC originally decided.

Even without knowing the exact figures involved, this all suggests that CMS may have lost money on the entire process — they had to return all monies recouped, less the difference noted, but the RAC got to keep their entire commission/fee/bounty, per their contract with CMS.

Of course, while the provider got back almost all their reimbursements for the four claims, they still had to pay legal fees out of their own pocket. Considering the time involved, these were likely not insignificant.

Without reviewing all the documents here, we do wish to note a few things we think providers should consider about these decisions, regarding potential strategies for RAC appeals:

First: Bring these decisions to the attention of your legal counsel. Providers should bring both these  decisions to the attention of their legal counsel, and their RAC Team.

Second:  In Part A Medical Necessity Denials, fight for reimbursements for Part B services, if provided. Medical necessity reviews have not yet been approved for RACs, but they are likely to begin at any time. Although the O’Connor case was a result of a RAC Demonstration project denial, the Medicare Appeals Council decision is at least the second time that the Council has reminded CMS that they in fact have current policies in place that not only say that such claims should be paid as described in these cases (unbilled Part B services are sometimes payable when Part A is denied), but that CMS even instructs contractors to do exactly that. These cases offer good reason to believe the Council will render decisions in the future that are consistent with these two.

Third: In such cases, refile for Part B services as provided. The date for “refiling” a claim under such circumstances could be difficult to determine, but may depend upon what the Medicare Appeals Council considers as “new evidence” — which, at least in the case of the UMDNJ appeal, could be inferred from the fact that the contractor reached a denial decision and informed the provider of same, thereby supplying the provider with “new evidence.” Even without such a date for “reopening” the file, in the case of the O’Connor appeal, the Council found that the time limit is simply the end of the entire process, its “finality.”

Fourth: Familiarize yourself with these decisions. The Council cites several documents that are important to the decisions.

The documents cited can all be found HERE on www.myedutrax.com in our Documents Section.

Limits Now Apply to All Institutional Claim Types, Not Just DRG Validations

The Centers for Medicare & Medicaid Services (CMS) modified its FY2010 Additional Documentation Request (ADR) Limits, expanding the scope of the rule to include all institutional providers, on January 28, 2010. Previously, the rule applied to ADRs for DRG Validation issues only, as posted by CMS on December 1, 2009, and would have only applied to Medicare Part A providers. CMS also indicated that more changes are yet to come, with rules applying to physicians and other types of providers, including DME suppliers.

The December posting indicated that there would be two “caps” made on RAC ADRs, during FY2010. Through March 2010, the cap would remain at 200 ADRs per 45 days for all providers/suppliers. However, from April through September 2010, providers/suppliers who bill in excess of 100,000 claims to Medicare, across all claims processing contractors, would have a cap of 300 ADRs per per 45 days.

These limits would apply per “campus” instead of per NPI (National Provider Identifier). The definition of a campus is CMS’s new method of calculating limits, and is based on providers’ Tax ID Numbers plus the first three numbers of the ZIP code where those provider entities are physically located.

This most recent posting does not change any of the previous limits or definitions, but does expand the rule to apply to all claim types, not just DRG Validations.

Read the new document  HERE , along with a copy of the text from the December document.

Claims Data Not Yet Distributed

The RACs have evidently not yet given the RAC Contractors access to the claims data warehouse. The natural question is then, so when will they give the contractors access to the data? No date has been set, that we’ve heard of, but it would seem that it should be soon. After all, they have already begun the “provider outreach,” (see previous post) which was a stated requirement before demand letters could be sent out. So, there would appear to be no more stops to remove. Realistically, however, we would guess that demand letters probably won’t start appearing for a month or two, at least, for the first states affected.

Black & White Issues First

The RACs claim that in the interest of causing as little controversy as possible, at least to begin with, the first denials will all be for so-called “black and white” issues. That is, the RACs will begin with only automatic denials, which are not subject to appeal. Automatic denials happen by “scrubbing” the data for issues that are known to be absolute violations of the payment rules, but were somehow missed by the edits already in place in the payment system. These denials do not require the RAC to see the documentation, and therefore they do not send out any requests for copies of the records from the facilities/practices. So, the good news is, they won’t ask for you to copy any records for these denials. The bad news is, you have no right to appeal, period.

Disclosures Encouraged (by CMS)

The RACs recommend that self-disclosure of overpayments is the best course of action. That is, if you know about a problem, because you’ve found it in an internal self-audit, they say you should go ahead and tell them about it. It’s not hard to see why they would recommend this action. First, it lets CMS not have to pay the bounty-hunter fees to the contractors, and it also gives CMS additional data to use to find the same problem in other facilities. So, is it really a good idea for a facility to self-disclose? We’d advise you — maybe.

We’re not lawyers, so we can’t give legal advise. However, we would advise any facility to tread carefully and with legal counsel at your side, absolutely. Preferably, you should have counsel with experience in healthcare audits and appeals. We work with several such firms: if you need recommendations, just contact us.

Medical Necessity Is Still A Major Target

But this is no surprise, yes?  If you’ve been following this process, you already know that Medical Necessity denials made up about 40% (in reimbursement dollars) of all denials in the RAC Demonstration Project. One thing we wish to continue to point out: when the RACs mention Medical Necessity, you need to keep in mind what they can look for, in the documentation.

Reread our previous post on clinical versus contract language. The RACs do not have to show or even disagree with the clinical decision associated with a billed code — they don’t have to question whether the patient needed the procedure or care given. They could, but they don’t have to go there to get a denial. They can simply disagree with the location, the setting that the care was given in — e.g., was the care appropriate for outpatient versus inpatient? Sometimes, the answer is clear, and sometimes it’s not.

You must pay attention to the setting, AND the documentation to show that the setting was appropriate, in order to keep the reimbursement. If the RAC decides that the documentation does not support the setting (for example, that the procedure billed should have been billed as outpatient, rather than inpatient), then the RAC can recoup the entire claim, including all the ancillary procedures, codes, bills, etc., even the ones from the physicians themselves. And you can recover little, if anything, on appeal.

The only good news in this last part, is that these types of denials can only be done via the Complex Reviews, not the Automatic Reveiws. So, since the RACs will start with the Automatics, these denials will come later.

That gives you, dear reader, a month or two extra perhaps, to do more internal audits and figure out your own problems before the RACs find them.

One last thing to remind you about, and hopefully motivate you to do those internal audits…

RACs Can Use Extrapolation

It was confirmed at this conference that the RACs will be able to use the practice of Extrapolation, but without the usual constraints of having to do all the scientific proofs of how they got the data, and used statistically valid random samples. Whatever that means, we are certain that it means that the RACs will be even more motivated to find these issues, because now they will be allowed to figure out an error rate, as a percantage of your claims, and M-u-l-t-i-p-l-y.

Example: The RAC asks for 100 records from you, concerning 1-Day Stays, for DRG XXX. In that batch, they find 45 errors for lack of documentation for Medical Necessity. That means they get to recoup 100% of the claim, for each of those errors. Let’s say that just cost you $450,000. Bad, but not horrific, you think…but they’re not done. The RAC can use Extrapolation, going back 3 years (but not earlier than 10/1/07).  So, based on that, they find that you filed 450 claims like those, over that time period. Now, via the magic of Extrapolation, they get to say that 45% of all 450 were likely in error — or 202 claims, at an average reimbursement of $10,000.

Voilà!  Now they recoup $2,020,000. And that’s just one DRG. Ouch!

It gets worse: since the denial was based on Medical Necessity, you cannot win on appeal.

See our other posts on Medical Necessity:

• Medical Necessity: Clinical vs. Contract
• CMS Bans Rebill For RAC Denials
• Largest Risk Area: Medical Necessity
• RACs Affect MDs Also
• Likely RAC Targets
• What’s Medical Necessity? Try…40%

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Here’s our version of the schedule by region…

CLICK ANY IMAGE TO SEE A LARGER VERSION

Region A:

Region B:

Region C:

Region D:

CLICK ANY IMAGE TO SEE A LARGER VERSION

And finally, here’s the link to the original CMS document:

RAC Provider Outreach Schedule [PDF, 3pgs, 52KB]

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We’ll keep watching for more info and let you know here when we have anything.

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