Let’s look at the hospital experience, focusing on Medicare recovery audits for a lesson that applies to physicians. Auditors currently are enforcing a plethora of admission and billing rules, some of which have been on the books for many years (and some of which, despite hospitals generally considering themselves compliant and trying to do the right thing, in many cases have been misinterpreted and frequently violated . Not only were hospitals often unaware of many of these regulations, they had little incentive to learn about them or comply with them, because they generally were paid promptly despite the infractions. The RAC program was a game-changer; hospitals began to receive demand letters and Medicare recouped funds that previously had been received and were thought to be secure. Now this reality is reaching physicians as well.

First Coast Service Options Inc. (FCSO), the Florida MAC, has begun phased implementation of 100 percent prepayment review of hospital inpatient claims for 15 MS-DRGs, including AICD and pacemaker implants, PCIs, some spinal surgery procedures and hip and knee replacements. On March 9, six more MS-DRGs were added for 30 per cent prepayment review  based on findings of a Certified Error Rate Testing (CERT) report that showed a high rate of billing for procedures that lacked documentation to support the medical necessity for the procedure and/or  the admission. According to a Nov. 15, 2011 edition of First Coast Service Options Billing News, “The review of these DRGs will affect both the Part A hospital surgery claim and related Part B services.”

In accompanying local coverage, determination outlining the medical necessity documentation required for payment for lower-extremity total joint replacements (LCD L32078) was addressed.

“The medical record must contain documentation that fully supports the medical necessity and justification of the procedure performed,” FCSO warned “Lacking compelling arguments for an exception in the supporting documentation, the hospital and physician services can be denied … (and) effective February 1, 2012, FCSO will also perform post-payment review/recoupment of the admitting physician’s and/or surgeon’s Part B services.” It will also substantiate medical necessity for payment of physician services performed in conjunction with the hospital stay.

Similarly, the CERT (Comprehensive Error Rate Testing), in Notice No. 14632 (affecting Colorado, Texas, New Mexico and Oklahoma), commenting on the high rate of denials of hospital claims for total joint replacements based on lack of documentation supporting medical necessity, stated that that “including adequate history of the presenting illness in the hospital record will improve the likelihood of Medicare payment of the hospital claim.”

The CERT contractor further stated that “favorable audit findings would have required medical record documentation clearly demonstrating that the patient has end-stage joint disease and should have included evidence of prior failed conservative therapy.”

The handwriting is on the wall for what to expect from Medicare audits in the coming year and beyond: Medicare auditors will not be looking solely at DRG coding and level of care. They will be diving into the record to look for specific elements of documentation to support medical necessity for procedures, and they may deny both hospital and physician payments when this documentation is lacking.

With their reimbursements at risk, physicians and hospitals finally have aligned incentives. They know they must provide documentation of medical necessity for admission and procedures, or lose payment for those services – even if they were truly medically necessary, performed correctly, and resulted in good outcomes. With the expanding role of prepayment review, notice of nonpayment will be a stronger motivator than the potential risk of an audit years later.

Now that physicians are in the game, hospitals can expect greater interest on physicians’ part in learning how to document medical necessity. Hospitals must accept the challenge of communicating and educating them, because the financial health of hospitals is now tied to the adequacy of physician documentation as never before. When physicians see that it’s in their own and their patients’ best interests, they will learn how to comply with regulations and will change their behavior if necessary.

Case management is the essential link between hospitals and physicians. The case managers and physician advisors are specialists in Medicare regulations who can help physicians in the areas of level of care and documentation requirements. Consistently doing this well will support appropriate payment for physicians and hospitals alike.

About the Author

Steven J. Meyerson, MD, is a Vice President of Accretive Physician Advisory Services®. He is Board Certified in Internal Medicine and Geriatrics. He has recently been the medical director of care management and a compliance leader of a large multi hospital system in Florida. He has distinguished himself by creating innovative service lines and managing education for Accretive PAS®.

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