First of all, it’s just wrong.


Also, let’s not forget the punishment that can be imposed by the federal government when an individual or hospital is considered guilty of fraudulent practices. We’re talking a range that goes from restitution, to treble fines, to exclusion from participating in the CMS programs, to imprisonment. (Yes, that’s right, there have been Hospital executives that have spent time in the big house.)


So why do I bring this unpleasant subject up? It’s because of the mounting frenzy of RAC preparedness that includes aggressive self-auditing to uncover all potential problem areas – hence, the title for this article. Let’s make no mistake about this point; when an improperly billed claim is discovered through any auditing means, the matter should be self-disclosed. Pure and simple.


The not so simple parts are:


1) What is the right amount of auditing for CMS compliance purposes, and
2) What should a Provider do when there is a question on any given case as to whether CMS criteria for medical necessity have been met?


Let’s start with question #1.


Questions regarding the right amount of auditing for CMS compliance purposes are arguably answered for the most part in The Office of Inspector General’s Compliance guidance for Hospitals, released in 1998, and Supplemental Compliance Program Guidance for Hospitals published in the Federal Register, Vol.70, No.19, January 31, 2005.


The suggested compliance program is not mandatory. To my knowledge, however, (even before the advent of the RACs) wise and responsible hospitals have implemented compliance programs that follow the many recommendations of the OIG.


With respect to auditing, the Supplemental Compliance Program Guidance asks the following:


• Has the hospital developed a risk assessment tool, which is re-evaluated on a regular basis, to assess and identify weaknesses and risks in operations?


• Does the risk assessment tool include an evaluation of Federal healthcare program requirements, as well as other publications, such as the OIG’s


• CPGs, work plans, special advisory bulletins, and special fraud alerts?


• Is the audit plan re-evaluated annually, and does it address the proper areas of concern, considering, for example, findings from previous years’ audits, risk areas identified as part of the annual risk assessment, and high volume services?


• Does the audit plan include an assessment of billing systems, in addition to claims accuracy, in an effort to identify the root cause of billing errors?


• Is the role of the auditors clearly established and are coding and audit personnel independent and qualified, with the requisite certifications?


• Is the audit department available to conduct unscheduled reviews and does a mechanism exist that allows the compliance department to request additional audits or monitoring should the need arise?


• Has the hospital evaluated the error rates identified in the annual audits?


• If the error rates are not decreasing, has the hospital conducted a further investigation into other aspects of the hospital compliance program in an effort to determine hidden weaknesses and deficiencies?


• Does the audit include a review of all billing documentation, including clinical documentation, in support of the claim?


So to answer the question as to how much auditing is necessary, a hospital should carefully consider whether their hospital has a Compliance Program in place that has been following the recommendations of the OIG. If so, it might not be necessary for the hospital to undertake additional auditing measures specifically in preparation for a RAC audit, and additional resources can be focused on compliance prospectively. On the other hand, if you do not have a robust Compliance Program in place, now is a very good time to start.


Now, for Question #2: What should one do when there is a question on any given case as to whether CMS criteria for medical necessity have been met?


This is a situation that will arise frequently because Medicare criteria and documentation requirements are very often subjective and therefore open to interpretation. For example, Medicare’s Inpatient Rehabilitation “screening” criteria cannot be relied upon to deny a claim. Rather, Medicare states:


For determinations about reasonableness, medical necessity, and appropriateness of setting, the QIO’s physician reviewer is expected to make a determination on the basis of their knowledge, expertise and experience, and upon an assessment of each beneficiary’s individual care needs rather than fixed criteria.


Given the subjective nature of medical necessity criteria and the unique circumstances for each patient, reasonable minds can differ as to whether a case meets criteria. To illustrate this point, consider the fact that to date, 34 percent of the cases appealed in the RAC Demonstration project have been overturned – mostly at the FI/Carrier and QIC levels. My point is that the same case can produce differing conclusions – often depending on just who is conducting the review and how the case is presented.


Another illustration of just how difficult it can be to ascertain whether medical necessity criteria is met is my recent experience conducting a clinical appeal writing workshop for experienced nurses. We utilized an actual case of a denied inpatient admission for a patient that presented to the ED with chest pain. (PHI was carefully redacted of course.) The FI indicated that Observation was appropriate rendering the inpatient stay ‘not medically necessary”. Our group of experienced nurses concluded that the Chest Pain decision tree tool developed by a QIO was not very helpful, and the group split evenly on whether the case met inpatient criteria. (Interestingly, the Provider at the Administrative Law Judge level ultimately won this particular case.)


So, given the subjective nature of medical necessity determinations, when there is uncertainty about any reviewed or audited case, a second opinion may be helpful.


The organization or individual rendering the second opinion should have expertise and experience with Medicare criteria and the Medicare appeal process.


Only a small fraction of the appealed cases were taken through to the Administrative Law Judge Level, and there is no data of which I am aware that explains this fact. However, anecdotal evidence suggests the reason may have been related to lack of expertise and resources rather than a lack of belief in the merits of the appealed case. I believe that the number of overturns would have been much higher had most of these cases been appealed all the way through to the Administrative Law Judge level. My firm’s experience is a success rate in the 68 percent to 100 percent range, although we generally must go all the way to the Administrative Law Judge to get a fair consideration of the case. There, the provider must prove the medical necessity and/or compliance with Medicare criteria by a preponderance of the evidence.


About the Author

Linda Fotheringill, Esq, is a founding member of Washington West, LLC, and is a nationally recognized expert on Denial and Appeals Management. Ms. Fotheringill successfully assists hospitals across the country, overturning “hopeless” denials and generating millions of dollars in otherwise lost revenue.




Linda Fotheringill is the Co-Founder & Principal of Washington & West, LLC

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