Approximately 40 percent of all improper payments identified during the three-year RAC demonstration project stemmed from medical necessity; for inpatient hospitals, a whopping 62 percent of overpayments were the result of “errors in the determination of medical necessity.” The revenue impact of these denials was $513 million in just three states.


Providers anxiously have been awaiting the arrival of medical necessity audits, since CMS announced last year that such audits would be delayed until 2010. As Ernie de los Santos, chief information officer for eduTrax®, reported for RACMonitor on May 24, ( CMS officials since spring have been implying that medical necessity audits were on their way.


During the May 5 RAC 101 conference call, Scott Wakefield, a CMS RAC project manager for Region B, stated that providers may begin to receive RAC medical necessity reviews “within the next month or so” — intimating that these issues already had been approved.


What Happens Now?


Many providers are concerned that since the RACs already have many records being reviewed for DRG validation, contractors won’t even have to make additional ADRs to perform medical necessity reviews for records they already possess.


CMS clarified its position on this issue via an April 13 post to the Frequently Asked Questions (FAQs) portion of its website. CMS responded to the question, “can (a) Recovery Audit Contractor (RAC) do a medical necessity review on a claim that they originally reviewed for DRG validation?” CMS replied, “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.”


Stay tuned to RACMonitor as issues are posted to the RAC Web sites.


About the Author

Carla Engle, MBA, is a product manger for MediRegs, a Wolters Kluwer company. Her background includes more than 20 years in hospital and physician practice operations, particularly in reimbursement and billing functions. Prior to joining Wolters Kluwer recently, she was the vice president of compliance for a national revenue cycle solutions company, and prior to that she was in the reimbursement training department with HCA. For several years she headed up the Part A Fraud Investigation Unit for a CMS Program Safeguard Contractor (PSC), where she was successful in the prosecution of several national cases. In her revenue cycle compliance capacity, she has worked with a number of clients in California and Florida with Recovery Audit Contractors (RACs) in setting up processes and appeals.


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