cbuck120dsMaryland hospitals regulated by the Health Services Cost Review Commission (HSCRC) will not be subject to DRG Validation audits, according to a Maryland Hospital Association (MHA) advisory issued Dec. 17.


In the advisory, MHA stated that Diversified Collection Services, the RAC for Region A, “acknowledged that, because the DRG assignment does not directly affect the reimbursement of an individual claim, an error in the DRG assignment does not result in a payment error.”


“DCS said it is outside the RAC’s scope and within the HSCRC’s purview to determine how DRG changes would affect a hospital’s aggregate reimbursement,” the advisory further indicated.


The advisory also noted that DCS Project Director Catherine Till, DCS Contractor Medical Director Eugene Winter, CMS Region A & B Lead Project Officer Scott Wakefield and CMS Region A Project Officer Ilene Jacobs had met with MHA staff and some hospital representatives last week to clarify RAC issues in Maryland and to provide an update on RAC activities.


Audit Activity in Maryland


As part of the aforementioned advisory, DCS provided the following updates on audit activity at Maryland hospitals:


  • Automated audits – which do not require medical record review – have begun.


  • Medical necessity audits – the only audits requiring medical records that will apply to Maryland hospitals – have yet to begin here.Medical necessity audits are expected to begin soon.


Issues Still to be Resolved


  • DCS is working to modify the list of approved audit issues on its website to clarify which approved audits apply to Maryland facilities.While the DCS decision-makers understand how the Maryland payment system affects the audit process, it has been difficult to pass that understanding on to all DCS customer service representatives.Hospitals that suspect errors in the DCS-approved audit list should notify DCS customer service and Traci La Valle at MHA.


  • The HSCRC has contracted with Ingenix to perform coding audits on a relatively small sample of cases.MHA asked that CMS exclude the cases audited by Ingenix from further RAC review, as is customary with cases reviewed by the Medicare Administrative Contractor, the Quality Improvement Organization and other federally contracted auditors.CMS Project Officer Wakefield is discussing the request and will return a decision.


Recommendations from Other States


Providers in other states find the notification of RAC audit results on the remittance advice confusing, according to MHA, which noted that Highmark Medicare Services identifies RAC payment errors on the remittance advice using remark code N432.  However, funds related to that payment error are not retracted until 41 days later.


Medical necessity RAC audits are expected to proceed in Maryland no differently from those in other states: DCS can use MS-DRGs to identify cases for audit even though Maryland hospitals are paid under the APR-DRGs.





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