Great news, right?


Well, not really. The RACs seemingly are reaching for the “low-hanging fruit” right now, which are the easily found automated claims errors and complex claims related to coding errors. But they know that an impending harvest is coming in 2010 when the next round of audits will cover complex claims dealing with medical necessity.



Automated claim errors are easily identified  and not easily appealed. Results are pretty black-and-white. An example of a favorable appeal would be a patient who is billed for two treatments of physical therapy on the same day. Medicare only covers one treatment a day, so the claim is flagged and appears on the demand letter. The reviewer goes back and finds that the same date was entered on the record accidentally, when in fact, physical therapy visits were provided on two consecutive days and not on the same day. An appeal is submitted, and no recoupment is made.


Complexity Abounds


Then there are the “complex claims.” Within the complex reviews, there are two subtypes: coding and  medical necessity. These patient files have either coding errors or insufficient clinical documentation deeming the treatment necessary. It is likely that the medical necessity reviews will not be included in RAC reviews until 2010, reason being if an appeal is to be made, a physician must provide the right supporting documentation to validate the treatment provided to the patient in order for the hospital to receive proper payment. This certainly requires extra effort, but can result in an appeal that potentially has better odds to be overturned than ones challenging the automated and complex coding error claims currently showing up on demand letters.


During the demonstration program, hospitals did well with their appeals of medical necessity because of the issue of physician judgment. The “low-hanging-fruit” of automated and complex coding reviews seemingly provide a better return for the RAC. They are easier to identify, the RACs can use a lower level of clinical staff (coders instead of nurses and doctors), there will be fewer appeals and there is less opportunity for overturns on appeal.  It’s a win, win, win, win for the RACs.


It is important to remember that RACs will review patient files dating back to October 2007, and they will be more prepared and better educated on how to review these records by 2010 … which is only six months away.


Take the time to conduct your own internal audit of patient record documentation and billing coding practices. Spending the necessary time and financial resources now will pay off in future RAC audits, allowing you to reap the harvest you sowed.


About the Author


Leo Paul. D’Orazio, MBA, FACHE, is the director of Healthcare Services Group, based in the New Brunswick, NJ, office of WithumSmith+Brown, Certified Public Accountants and Consultants. He has directed many consulting engagements for hospitals and physicians, home healthcare, mental health and addictive disease and outpatient treatment facilities, and is a fellow in the American College of Healthcare Executives. Leo can be reached at 610-737-7962 or


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