Brace yourself for Medicare's Recovery Audit Contractors
Demonstration project is being expanded nationwide
Now that the Centers for Medicare & Medicaid Services (CMS) is rolling out its Recovery Audit Contractors (RAC) project nationwide, it's more important than ever for case managers to make sure the medical record includes documentation that supports medical necessity for the services patients receive, experts say.
CMS wound up a three-year demonstration project in California, Florida, and New York to determine whether contracting with independent auditors would be a cost-effective means of identifying overpayments and underpayments for Medicare claims.
In 2007, CMS declared the project a success and moved to roll it out nationwide beginning in March, starting with the addition of South Carolina, Massachusetts, and Arizona to the three original states. CMS has divided the United States into four geographic regions, each with a single RAC to perform the recovery audit services in the region. Hospitals and other Medicare providers in all 50 states will be subject to RAC reviews by 2010 in accordance with the Tax Relief and Healthcare Act of 2006.
The Recovery Audit Contractors use proprietary software to analyze Medicare claims data and identify records for review. In some instances, they may determine that a hospital has been overpaid merely by analyzing the records. In other instances, they may request medical records from the provider or send an auditor on site to review the records.
Reasons for overpayments, underpayments
As of November 2006, the RACs had identified $289 million in overpayments and $10.4 million in underpayments during audits in the demonstration project. The overpayments were based on incorrectly coded claims, claims for services that were not medically necessary, and billing multiple times for the same services, according to Deborah Hale, CCS, president of Administrative Consultant Services LLC, a health care consulting firm based in Shawnee, OK.
Hospital inpatient and skilled nursing facility claims made up 78% of the overpayments. Hospital outpatient claims comprised 12% of the overpayments. The rest came from durable medical equipment and providers such as physicians, ambulance services, and laboratories.
The RAC audits are intended to identify overpayments due to incorrect payment amount, noncovered services including those that are not reasonably necessary, incorrectly coded services including DRG miscoding, and duplicate services.
Preparing for the audits
As the RAC program is rolled out in their states, case managers should be even more careful to make sure that the documentation in the medical record accurately reflects the services patients receive and that it supports medical necessity of inpatient admission, Hale says.
"Thorough physician documentation enhancement is more important than ever before — not just to make sure that hospitals get appropriate reimbursement but for compliance and for the Recovery Audit Contractor process. No one can avoid a RAC review but if hospitals are compliant and ethical with coding and billing and have captured essential physician documentation, the risk is minimized," adds Beth Kresse, RHIA, CCS, manager of coding quality review and education for Care Communications Inc., a Chicago-based health information management and revenue enhancement consulting company.
Case managers should be aware of the DRGs and MS-DRGs where the RACs are placing greatest emphasis and make these areas the focus of their quality improvement projects, suggests Carol H. Eyer, RHIA, senior manager, clinical compliance with Pershing Yoakley & Associates' Atlanta office.
"Some of the targeted DRGs should be quite familiar as DRGs under focus in the longstanding Office of the Inspector General reviews," Eyer says.
Kresse recommends that hospitals and health networks conduct a "pre-RAC coding validation review" on their own, or with the help of a consultant, prior to being audited.
"The review process gives hospitals and health networks the expertise and proactive approach they need to identify improper Medicare payments, both overpayments and underpayments," she says.
"Compliance with the post-acute transfer policy is an important element of the RAC audits where case managers' documentation of a patient's post-discharge plan can make a difference," Kresse points out.
Case managers should make sure the record accurately reflects the patient's final discharge disposition, Kresse says. Take for instance, the case of a patient who was discharged home, without post-acute services, but within the three-day window set out by Medicare, his family called the social worker or case manager and asked for home health services.
"In this case, CMS expects the hospital to submit a rebill, reflecting the updated discharge plan. Because the post-acute discharge rule provides for a different type of per diem reimbursement if the patient receives other services, it is essential to bill the patient's discharge disposition accurately," she says.
During the demonstration project, the RACs also looked for instances in which physicians and hospitals admit patients to the hospital in order for them to achieve the three-day qualifying stay for skilled nursing facility coverage from Medicare, even though medical necessity criteria do not support an inpatient stay, Hale says.
To assess their hospital's risk, case managers should determine how frequently their hospitals have three-day stays with transfers to skilled nursing facilities compared to the rest of the state, Hale suggests. The information is available in your hospital's Program for Evaluating Payment Patterns Electronic Report (PEPPER) data.
Having a high incidence of three-day stays with transfers to SNFs may mean your hospital does a good job of moving patients to the next level of care or it may mean that the hospital isn't meeting Medicare requirements, Hale says.
The RACs also focused on one-day and short-stay inpatient admissions and auditing records to determine if the patients met criteria for inpatient stays or if they should have been admitted in observation status, Kresse says.
"If patients are admitted for one-day stays, case managers should make sure that they meet criteria for an inpatient stay and that there is clinical documentation in the medical record to support it," she says.
Make sure that there is a physician order designating the admission status level and that is specifies observation or inpatient status.
"Case managers should review laboratory values, radiology findings, and other information in the chart and make sure that the physician documents them concurrently in the progress notes so that there is as much information as possible for the coder to use," she says, pointing out that coders can code only what the physician documents in the record.
Hale suggests that case managers make sure documentation is accurate and meticulous for all inpatient stays in case the RAC audit identifies an overpayment that may be overturned on appeal. For example, make sure that the physician's order uses precise wording to specify the level of care such as "Admit as Inpatient" or "Admit to Observation Status," Hale says.
"We have seen a case in which the RAC auditor found that the hospital was improperly paid for an inpatient stay when the patient was admitted in respiratory failure on a ventilator and died three days later in the intensive care unit," Hale says.
The rationale for their determination was that the physician order said "Admit to the ICU" rather than "Admit as an Inpatient to the ICU."
Excisional debridement has come under scrutiny for incorrect billing in the demonstration states, Kresse says.
"This is a huge area where hospitals can increase their documentation. During reviews, we've found that the procedure wasn't coded correctly because the physician didn't enter the appropriate documentation into the record," she adds.
Make sure that wound care is documented properly and that the record clearly states whether it was a decubitus or a diabetic ulcer and that the debridement was necessary, she says.
Other areas that have gotten RAC attention include physician orders for hospice care and medical necessity for a wide range of services including home health, echocardiograms, physical therapy, and respiratory therapy, Kresse says.
"They are looking for physician orders and a justified diagnosis that meets medical necessity for the services," she adds.
The auditors also have reviewed claims to determine if services that were ordered as an inpatient service could safely wait until discharge, or, if it needed to be performed on an inpatient basis, the physician documentation supported it, Kresse says.
"Many services can wait until the patient is discharged without jeopardizing patient safety. For instance, a patient does not need a continued stay in the hospital to wait for a PSA test that could safely be performed in the outpatient setting," she says.
Two types of reviews
The RACs conduct two types of reviews to determine if the payments were improper before seeking reimbursement from hospitals. During an automated review, the RAC makes the determination that a service is not covered or correctly coded without having a person review the medical records. For instance, if a certain service is never considered reasonable and necessary for people with a certain condition, the RAC may identify the overpayment by an automated review.
A complex review is ordered when there is a high probability that a service is not covered but a review of the medical records is necessary to make a final determination. For instance, if the service is rarely considered reasonable and necessary for people with the condition, the RAC will conduct a complex review and request medical records to determine if the hospital was overpaid.
If a RAC review determines that a hospital was improperly paid for a claim, hospitals have the option of going through the Medicare appeals process.
"If the RAC findings nationwide are the same as they were in the pilot project, hospitals will have a lot of appeals to write," Hale points out.
RACs have denied coverage when procedures that are not on Medicare's inpatient-only list were performed on an inpatient basis.
"Medicare does not say that procedures not on the list can't be performed on an inpatient basis if the patient's condition warrants it, but this hospital still had to go through the appeals process to avoid returning reimbursement for these hospital stays," she says.
Some of the reviews determined erroneously that there were problems with medical necessity that arose because the audits were conducted by nurses, who can review the records and determine only whether an admission meets inpatient criteria, unlike medical necessity reviews by Quality Improvement Organizations (QIOs) in which a physician reviewer must evaluate for medical necessity before a final determination can be made, Hale points out.
"During the demonstration project, there was no physician review in the RAC's decision-making process. The decision about whether a procedure doesn't meet criteria should be based on medical judgment but the RACs don't use medical judgment. The nurse reviewer can only determine if the procedure is on the wrong list," Hale says.
The American Hospital Association (AHA) has asked CMS to remove medical necessity determination from the RAC Statement of Work, arguing that medical necessity reviews require extensive clinical reviews.
"Each medical necessity review should involve a comprehensive assessment of the medical record by a clinician with relevant experience who reviews physicians' orders, patient history, execution of the patient's plan of care and other details to determine whether the care provided satisfies Medicare coverage criteria. We believe that RACs have not used qualified clinical staff to review claims and medical records for medical necessity," Rick Pollack, executive vice president of the AHA wrote in a letter to Kerry Weems, acting CMS administrator.
The letter urged Weems to resolve other problems with the RAC project before rolling it out nationwide.
CMS has not announced plans to delay the project but it has made some changes in the program, based on the pilot project, Hale says.
In the demonstration, the RACs were able to review records dating back to 2004 but it was comparing old data with new criteria. As the program is expanded, the RACs can go no further back than Oct. 1, 2007.
CMS also has changed its original procedure, which reimbursed the contracts only for what they found as overpayments.
"In the initial pilot project, the contractors had no incentive to look for underpayments," Hale points out.
CMS has changed that procedure and is reimbursing contractors if they identify underpayments as well. In addition, the auditors have to refund the contingency fee if the provider wins the appeal, Hale says.
If your hospital is audited, don't accept the RAC's findings at face value, Eyer suggests. Do your own due diligence to ensure the RAC auditor is applying the current coding and medical necessity guidelines, and be willing to invest the time necessary to appeal the RAC's findings if they don't seem to be correct, she advises.
"Like anything that CMS implements, we're in the early stages and changes can be expected but once CMS latches onto something that seems to be working, it will continue to grow. If hospitals are reluctant to go through the appeals process, CMS will assume that the project was a success. The fewer the appeals, the more successful the project will appear to be,: Eyer adds.
(Editor's note: For more information, contact Deborah Hale, president of Administrative Consultant Services LLC, e-mail: [email protected]; Carol Eyer, senior manager, clinical compliance with Pershing Yoakley & Associates, e-mail: [email protected]; Beth Kresse, manager of coding quality review and education for Care Communications Inc., e-mail: [email protected].)
Now that the Centers for Medicare & Medicaid Services (CMS) is rolling out its Recovery Audit Contractors (RAC) project nationwide, it's more important than ever for case managers to make sure the medical record includes documentation that supports medical necessity for the services patients receive, experts say.You have reached your article limit for the month. Subscribe now to access this article plus other member-only content.
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