On September 23, 2010 CMS simultaneously released two additional MLN Matters that address more prominent aspects of the RAC Demonstration Project.  RAC veterans may feel they know all of this information already, but each document contains some new information and each merits a close read.


MLN Matters SE1027 addresses medical necessity issues from the RAC Demonstration project.  It highlights 17 medical necessity issues (that’s an odd number, isn’t it?) in order of gross, pre-appeal dollar recovery.  The DRGs listed are all familiar, both from the RAC Demonstration Project and from the initial medical necessity issues approved for the permanent RACs.  Although you can see the MLN Matters write-up for the full list, the DRGs range from Cardiac Defibrillator Implant with a reported pre-appeal recovery of $64,739,662; include Medical Back Problems (short stays) with a reported pre-appeal recovery of $9,978,346; and range to Percutaneous Cardiac Procedures with a reported pre-appeal recovery of $2,314,001.


Listing the “vulnerabilities” in order of pre-appeal recoveries is somewhat of a mystery.  Without the net recoveries after appeal, which are certainly known to CMS by now, you can throw a figurative blanket over all of these issues and just alert hospitals that these are all potential problems of some significance.


In addition to the specific DRGs listed as Medical Necessity vulnerabilities, CMS also reports the following general issues that impact multiple DRGs:


o   Medical Necessity denials for multiple codes not previously listed;

o   ASC List Violations for codes paid at the inpatient rate that should have been paid as outpatient procedures when there is not significant documentation to identify complications which would justify an inpatient stay; and

o   Other outpatient charges that should have been billed since services were not medically necessary in the inpatient setting.


In providing suggestions for hospitals, CMS quotes the Medicare Benefit Policy Manual, Chapter 1 and emphasizes the proper documentation of a patient’s severity of illness, including:


o   The severity of the signs and symptoms exhibited by the patient;

o   The medical predictability of something adverse happening to the patient;

o   The need for diagnostic studies; and

o   The availability of diagnostic procedures at the time when and at the location where the patient presents.


The documentation of medical necessity needs to be legible, complete (including checklists and templates) and consistent to pass RAC scrutiny.


The last item in SE1027 (identical to the last item in SE1028) is perhaps more significant for what it doesn’t say as for what it does say.  “CMS reminds providers to ensure that any information that affects the billed services and is acquired after physician documentation is complete, must be added to the existing documentation in accordance with accepted standards for amending medical record documentation.”  Note that CMS does not directly reference physician queries, nor do they endeavor to establish any proper timeframe for acceptable physician queries – only that documentation must be “in accordance with accepted standards.”


SE1028 covers High-Risk DRG Coding Vulnerabilities, specifically when documentation does not support the codes billed.  In an effort to decrease coding errors, CMS cautions hospitals to correctly identify principal diagnosis and secondary diagnosis that affect patient care.  As examples of prominent coding issues, CMS displays 4 issues and the associated pre-appeal improper payment amounts for vent support ($15,999,757), closed biopsy of the lung ($11,769,645), OR procedures for infections and parasitic diseases ($10,014,530), and coagulopathy ($2,127,568.)


As your HIM Director will tell you, and could have told you in 1995, the principal diagnosis must be the condition that is primarily responsible for the admission of the patient to the hospital, and secondary diagnoses are documented by the attending physician and:


o   Clinically evaluated, or

o   Diagnostically tested, or

o   Therapeutically treated, or

o   Cause an increase in the length of stay.



Just a note to the proofreaders at CMS – does the following sentence make sense? “For Non-surgical DRGs, CMS recommends that providers ensure “secondary” or “other” diagnoses which are documented in the medical record and on the discharge summary.”


I thought not.


About the Author


Dennis Jones is the director compliance services for CBIZ KA Consulting. While Dennis is recognized as a leading RAC issues expert, his expertise covers a wide variety of topics including Managed Care, Uncompensated Care, Medicare and Medicaid Compliance, HIPAA, and Process Improvement. As a result he has spoken previously for NJHA, World Research Group, and various state chapters of HFMA, AAHAM, and AHIMA. Dennis is a past-president of the New Jersey Chapter of AAHAM and has held senior management positions in provider, IT vendor and reimbursement consultant arenas. He is a graduate of the Pennsylvania State University with a degree in Health Planning and Administration and hopes to be able to afford season football tickets some day.


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