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.’

Hospital Impressions Remain Unchanged

Facilities widely feel that physician services are not being targeted as much as inpatient facility services, and administrators express concern regarding what appears to be a distinct bias toward Part A services.

We must remember that physicians are responsible for initiating care through expressed patient orders and supporting those services (and the selected sites of service) with adequate and accurate documentation. Part A providers are understandably frustrated when, upon retrospective review, those services are challenged and/or subsequently denied.

The Social Admissions Challenge

During our call, Cmdr. Casey referenced a practice seen across the country often referred to as “social admissions,” in which a patient is admitted to a hospital on doctor’s orders despite the fact that the patient does not meet CMS standard medical necessity criteria as an inpatient The purpose of these admissions often is to qualify for a subsequent Medicare-approved Skilled Nursing Facility admission. To qualify, a patient needs to remain an inpatient for three overnights.

Denials in such cases can be very costly for a hospital and not nearly as costly for a physician, which presents a problem: how can hospitals influence physicians to change their behavior when faced with these cases?

Motivation and Education for MDs

I asked Cmdr. Casey a follow-up question requesting an expanded response on her first comments.

Follow-up to Question 1:Since physician services may or may not be audited or possibly denied in these instances (above), how might you suggest facilities educate and/or motivate the physicians to improve their documentation to protect facilities?

Cmdr. CaseyFirst, physician claims are being audited. The MACs now also have Part B data, so the MACs may start to deny Part B services, and there are other agencies reviewing physician claims as well. Furthermore, RACs have and will be submitting proposals to review ‘issues’ related to Part B claims.

Where there is a need for information, a hospital should implement their own outreach to their physicians. They need to point out that such admissions are really an unreasonable cost to everyone – there needs to be an alternative kind of service, and the physicians need to consider this before they order that inpatient admission.

While emphasizing that there are several agencies overseeing reviews of physicians’ claims and pointing out that MACs now can review claims for Part B services, Cmdr. Casey simply was reminding providers of requirements already clearly stated in previously published guidelines (e.g., the ICD-9-CM Official Guidelines for Coding and Reporting). Consistent and complete documentation in the medical record must be a joint effort, and hospitals should take a more active approach in working with the physician community in that regard.

That idea, however, begs the question of how hospitals will get physicians to listen to them and change their behaviors. This was, not surprisingly, another common concern expressed to me by many providers when I was preparing for this interview.

How to Partner with the Physicians?

As further follow-up, I then asked if this “New Issues” process might be a help in this regard.

Further follow-up to Question 1:Providers have felt that the RAC program could have been seen as a potential answer, which could bring physicians and hospitals in sync, regarding site of service and documentation reimbursement challenges that each face. Might the New Issue Review Policy you’ve just explained be seen as a way to help hospitals ‘partner’ more with physicians?”

Cmdr. Casey: CMS has never claimed that the RAC program will be the ‘end-all’ answer program for these kinds of issues. However, from a RAC program perspective, I can’t really say. There have been some education efforts to providers via the MACs about documentation, about how some inpatient procedures could safely be done as outpatient, how the MD should be sure to note in their documentation what their thought processes were, etc. CMS publishes bulletins, online articles… hopefully the physicians will see how these inappropriate services are impacting healthcare costs everywhere.

CMS does not dictate the issues the RACs will address, but CMS can approve or decline potential issues, and they will be posted on the RAC Web sites. If someone sees an issue [with how the RACs are operating], CMS wants to know immediately so we can avoid the problems seen during the demonstration project.”

Commander Casey’s remarks make it clear that CMS sees the education of both physician and facility providers as an important task in the efforts to reduce healthcare costs. It is also clear, however, that despite such efforts, CMS will continue to move forward with holding both physicians and hospitals accountable for medical record accuracy and contractual performance concerning reimbursement for claims they file.

Other “Down Stream” Concerns

Another widely expressed concern from providers, while perhaps somewhat related to the first question, nevertheless induced a different answer. Many hospitals and hospital systems include Skilled Nursing Facilities (SNFs). Since Part A claims  provide medical necessity basis for a SNF admission and subsequent stay, a denial of that Part A claim for a lack of medical necessity therefore would seem to negate/deny any “downstream” claims filed from or associated with the SNF admission and stay.

It was, therefore, a natural segue, to ask this next question of Cmdr. Casey.

Question 2: “What about Skilled Nursing Facilities, a SNF? That is, will there be automatic denials for a SNF admission where a qualifying inpatient admission is denied for lack of medical necessity?

Cmdr. Casey: “No, there is no automatic denial for the SNF admission following the inpatient (and subsequently denied) stay. In the RAC Statement of Work, it is clearly stated that a RAC cannot review a claim where, if denied, the beneficiary (patient) can be held liable for the denied reimbursement amounts. In such cases, the RACs cannot review the claim.”

That said, however, in a case like that, the denied inpatient claim information is sent to the MAC so the appropriate adjustment may be made. There is not an automatic denial of the SNF stay by the MAC upon receipt of the denied inpatient claim file from the RAC. CMS plans to post a question and answer to their Web site that clarifies this issue.”

An Improper Payment Excluded by the Statement of Work

What Cmdr. Casey was referring to above can be found in the RAC Statement of Work under Task 2, paragraph B, sub-paragraph 5 (see page 8 of that document HERE).

Here’s the relevant text:

“B.  Improper payments EXCLUDED from this Statement of Work …

  • Claims where the beneficiary is liable for the overpayment because the provider is without fault with respect to the overpayment

    The RAC shall not attempt to identify any overpayment where the provider is without fault with respect to the overpayment.  If the provider is without fault with respect to the overpayment, liability switches to the beneficiary.  The beneficiary would be responsible for the overpayment and would receive the demand letter.  The RAC may not attempt recoupment from a beneficiary. One example of this situation may be a service that was not covered because it was not reasonable and necessary but the beneficiary signed an Advance Beneficiary Notice.  Another example of this situation is benefit category denials such as the 3 day hospital stay prior to SNF admission.”

While this may offer some comfort to a SNF, knowing that there is no automatic denial of their claims as a result of a denial of a qualifying Part A claim, there is still some question as to what the MAC will do with the information. MACs have a different agenda, it is true, and are controlled by CMS directly, as opposed to the RACs, which are not. While it remains to be seen then just what a SNF can expect as a result of a qualifying Part A claim denial, we at least have an assurance that no RAC can take action to review such claims, much less issue denials for them.


Our interview with Cmdr. Casey included more discussion centered on NPI record request limits, and that portion will be published soon.

The interview was insightful and open, with new clarity brought to previously misunderstood information. That said, hospital providers and staff MUST remain abreast of ongoing RAC program ‘tweaks’. This is a new program, and there is a new administration in Washington with some even newer priorities.

Changes are likely, but even without any changes to the program as it stands today, there may be unintended consequences, or even unexpected expansion of programs like the RACs into areas many of the program authors and us have not anticipated!


About the Author

Patricia Dear has more than 30 years of experience in the healthcare industry, working within corporate healthcare entities, for-profit and nonprofit hospital systems, legal defense and plaintiff counsel. She is a recognized national speaker on reimbursement and compliance. She is the president and CEO of eduTrax®.

Contact the Author

Share This Article