In June 2009, RAC Monitor published a brief article following a CMS outreach session on the RAC program in which questions were taken from attendees and answered by CMS, creating some general concern and confusion. RAC Monitor later was invited to interview CMS officials to discuss concerns related to ‘reach-through take backs' for Part A and Part B providers. This article provides the questions and answers from that interview.

Commander Marie Casey, deputy director of CMS's Audit Division, spoke frankly and directly with RAC Monitor about a few concerns that recently had been expressed by many providers. The concerns started mounting after reports were published of remarks being made at provider outreach sessions concerning when, about what, or even if physician providers were going to be audited by RACs during the permanent program.

Present on the CMS call were Casey, Connie Leonard, director of the CMS Division of Recovery Audit Operations; Howard Coan of the CMS Press Office; Chuck Buck, President/CEO of RAC Monitor; Patricia Dear of the RAC Monitor Editorial Advisory Board and President/CEO of eduTrax; and Ernie de los Santos, RAC Monitor Contributing Editor and Vice President of Technology for eduTrax.

The CMS Perspective on Reach-through to Physicians

Prior to the interview, I spoke to many contacts and clients in the provider community, asking, "if you were going to speak with Commander Casey, what would you like to ask?" Hence, each of the questions posed during the call represented a majority of the questions we received from the field. I facilitated the discussion during the interview, and Commander Casey graciously answered several additional follow-up questions with candor.

Question 1: "If a hospital is denied for any service or admission due to failing to meet ‘medical necessity' as described by CMS, will the physician face takebacks related to their orders for those denied services?"

Cmdr. Casey: "We have posted that answer on our Web site. A RAC may choose to look at those associated physician services as part of that inpatient stay. However, a review of the Part B services must also be preapproved by CMS, and will require additional records requests from the other providers involved."

The post mentioned above by Cmdr. Casey was a clarification posted in June 2009 on the CMS Web site:

"CMS is often asked about other claim types that may be affected by a full inpatient denial and if the RACs will deny other claim types associated with the inpatient stay, such as physician evaluation and management services. At this time the RAC will not automatically deny claims that are associated with a full inpatient denial. However, these claims may be reviewed individually and there may be a need to fully/partially adjust the claim based on the documentation submitted."

Audits of Part A Services vs. Part B Services

What we learned from the first question and answer is that as physician services are paid under Part B, and not reimbursed under Part A like inpatient hospital stays, there is no "automatic" reach-through effect related to claims denied for Part A services. Additional discussion included commentary on the need for Part B services (in fact, for any services) to be preapproved by CMS, then posted on the RAC-approved "New Issues" pages, reflecting the areas in which each RAC can audit.

When a RAC conducts an audit for medical necessity on an inpatient admission, it is necessarily a complex audit (which requires human review of medical records), and the review only will be considering Part A services. Any associated Part B services are not necessarily approved to be under review in such a case.

So, while Part B services CAN be reviewed, such reviews require separate prior approval by CMS and additional record requests. This is part of what Cmdr. Casey termed "the New Issue Review Process."

The RAC New Issue Review Process

Cmdr. Casey further explained the process for us since we previously had not heard of it:

"The New Issue Review Process requires that the RAC submit a proposal for widespread review in one or more states. CMS then either (a) approves the issue as submitted  for review, (b) gives a conditional approval for review in a smaller area, (c) gives a conditional approval with some caveats, or (d) declines to approve the issue as submitted. For example, CMS may decline an issue for automated denial, where CMS thinks the issue might need to be a complex review instead."

This "more complicated answer" gives us all more insight into how the RAC program is being conducted - in particular how the RACs will be monitored and "controlled" by CMS. Nevertheless, not even this New Issue Review Process likely will dispel the fears and frustrations of some hospital administrators regarding insufficient physician documentation, which ultimately could support denials based upon medical coding, DRG assignment selections and even site-of-service ‘medical necessity.'