pdear120dsBy now, many if not most hospitals nationwide have begun to receive RAC requests based on the approved issues posted on their Web sites. All four RACs have been approved for issues related to MS-DRG validation and coding accuracy, and it is important to remember that:


“DRG validation requires that diagnostic and procedural information and the discharge status of the beneficiary, as coded and reported by the hospital on its claim, matches both the attending physician description and the information contained in the beneficiary’s medical record.”

Now the obvious understanding here is that, although the request for services is made to the hospital provider, the attending physician is intimately involved in the request. What appears to be missing is the connection to the physician services delivered and assumedly billed for these hospital services. The focus would appear to be on the hospital bills, which of course are more substantial.

This connection (or lack thereof) has been discussed in previous RAC Monitor articles, including one that outlined a conversation held last summer with CMS Commander Casey, but it is not the subject of this article. However, I do want to address something similar.

False Sense of Security

Let’s consider these two questions:

Should physicians get a sense of “comfort” from this apparent focus on hospitals; and

Have the RACs already posted any issues by which physicians will be impacted?

The answer to the first question is “no,” because CMS has made it quite clear that all providers that provide and bill for services to Medicare beneficiaries are subject to review by RACs. Plus, the RACs haven’t really forgotten about you, which leads us to our next answer.

The answer to the second question is a resounding “YES – physicians are already under review,” because the RACs already have been approved for issues affecting Part B providers. And those issues, incidentally, are not exactly small potatoes.

What’s at Risk?

Physicians should be paying close attention to the posted RAC issues, as some already may have begun to receive RAC denials. Also, physicians should consider that their relationships with their facilities may be at risk if those facilities start receiving denials based on incomplete or insufficient physician documentation. Remember, the hospitals are being denied and are the ones losing the money, but it is CMS, and more specifically the RACs, that are making those decisions – not the hospitals.

But what about issues that directly affect the physician and his/her revenue? What issues should physicians be examining to see how they might fare against RAC review?

The RACs already have been approved to review, audit and subsequently deny claims related to hydration services, chemotherapy, NCCI edits, MUE’s (Medically Unlikely Edits), the technical component of radiology services and “new patient” visits. Let’s look at lists of these issues compiled by the two most active RACs, Connolly Healthcare and Health Data Insights (HDI).

Part B Issues Already Approved for RAC Review

Here’s the list of Part B issues posted by Connolly Healthcare, the RAC for Region C, through February:

  • J2505: Injection, Pegfilgrastim, 6 mg.
  • Pediatric codes exceeding age parameters
  • Once in a lifetime procedures
  • Bronchoscopy Services
  • IV Hydration Therapy
  • Untimed Codes
  • Blood Transfusions
  • Barium Swallow Studies Units Billed (Physicians)
  • Adenosine – Dose vs. Units billed
  • Nebulizer, Demonstration and Evaluation Units Billed
  • Medically Unlikely Edit List



All of the above issues currently only are approved for automated review – meaning the issues are found via data-mining techniques, and the RACs are not required to have the medical record or have someone look at the record in order to issue a denial. The denials for these issues supposedly are “certain” and are issued without any judgments necessary, being so-called “black and white” issues. Of course, that assumes that no mistakes are made on the part of the RACs, which nevertheless is possible.

Let’s look at another list, this one Part B issues posted by the RAC for Region D, HDI, again through February:

  • Once in a Lifetime
  • Excessive Units-Untimed Codes
  • Newborn Pediatric CPT Codes Billed for Pts Exceeding Age Limit
  • Facility vs. Non-Facility Reimbursement (Inpatient)
  • Excessive Units-Bronchoscopy
  • Excessive Units-Blood Transfusions
  • Global vs TC/PC
  • Excessive Units- IV Hydration
  • SNF Consolidated Billing
  • Not a New Patient
  • TC of Radiology
  • Hospice Related Services – B
  • NCCI Edits
  • CSW During Inpatient


While the two lists are similar, there are also some differences. Of particular interest should be the MUEs (Medically Unlikely Edits) and the NCCI Edits, as both issues are likely to touch MANY claims. However, another one that jumps out at me is “Not a New Patient.”

This issue represents the first approved RAC reviews of Evaluation & Management (E&M) codes
, albeit just a subset of those codes – the ones that are used for a “new” patient, which is defined as a patient who has not been seen by any physician in a practice within the previous three calendar years. Since dates are involved, this is analyzed easily by an auditor through data analysis that can be performed without anyone ever seeing the record itself. The auditing of E&M codes, even just a subset of them, is a sensitive issue for the physician community.

The Trouble with E&M


From the outset of the permanent RAC program, the American Medical Association (AMA) has been highly critical of the concept of allowing RACs to review E&M codes. In a March 2009 letter to CMS, the AMA and more than 100 other state and national physician associations strongly voiced their concerns about this issue:

“We do not believe that E&M services are appropriate for RAC review as the broad parameters for reporting E&M codes do not lend themselves to basic review. The various levels of E&M services pertain to wide variations in skill, effort, time, responsibility and medical knowledge, applied to the prevention or diagnosis and treatment of illness or injury and the promotion of optimal health. A review of E&M codes requires that all factors, including mixed diagnoses, variations in age, and decision-making, are considered and carefully evaluated. Despite detailed Medicare guidelines that specify the documentation required for each level of E&M service, knowledgeable individuals often reach different conclusions regarding the E&M level of service justified by the documentation. These problems are further exacerbated by the fact that the people performing the audits are not physicians of the same specialty and state as the physicians being audited.

CMS has acknowledged the legitimate differences of opinion in determining how documentation aligns with the E&M level of service billed in other review programs.”

And later in the letter:  “…we strongly urge CMS not to allow RACs to perform E&M audits (emphasis is original).”



CMS’s Policy on RAC Reviews of E&M


Despite welcoming feedback from the provider community, CMS obviously holds an unpopular opinion about having RACs review E&M coding. In a reply letter to the AMA, CMS made its policy clear, as the following excerpts show.


First, CMS clearly will allow RACs to review E&M, albeit only after it offers approval:

“While the review of evaluation and management (E&M) coding is now available for RAC review, any issue the RAC identifies would still be required to be approved through the CMS New Issue Review (NIR) process and/or by the validation contractor.”

Second, CMS believes that some situations are imminently suitable for RAC review:

“…CMS does believe there are some situations such as duplicate claims, unbundling, and/or the correct choice of new or established patient codes that are self-explanatory and may be areas suitable for RAC review.”

Third, CMS likely will allow extrapolation of E&M level error findings in some situations:

“The RACs are allowed to apply [valid random sampling and] sampling methodology… but only after… obtaining explicit CMS approval… We will carefully weigh… requests to extrapolate, and we will likely only allow it in limited, highly focused situations.”

Fourth, CMS intends to give advance notice to the AMA and the physician community when RACs begin reviewing E&M levels.

“CMS does not intend to have the RACs begin reviewing the levels of an office visit and/or consultation services without advance notice to the AMA and to the physician community.”

There is also a FAQ on the CMS Web site that essentially gives the same answer – find it HERE.

Nowhere, however, is CMS’s intention to “give advance notice” defined. What does advance notice include, how will it be delivered, and how far in advance will it be?

More from the Letter


The letter also states that due to the NIR process, new issues must be posted on RAC Web sites so physicians will be able to determine ahead of time what types of claims the RACs will review. While this is indeed true, any advantage this may give to providers is dubious since the lists of issues currently provided on RAC Web sites are difficult to use. Also, since the RACs can look all the way back to October 2007, knowing the issues now doesn’t do much good for claims that already have been filed unless they can be re-filed. Of course, there will be costs incurred for researching them and re-filing them, if that is possible.

There also is one sentence in the letter that we find quite curious:

“Since it may be burdensome to some physicians to remember to check a particular Web site on a regular basis, CMS is working with the RACs to implement a subscription system to update the provider community when a new issue has been approved for widespread review.”

We find this curious, because such an update notification system is nowhere to be found in the RAC Statement of Work (SOW), and therefore CMS cannot require that such a system be created. In fact, in the CMS FAQs about the RACs, there is a question asking what the RACs must post on their Web sites. The question was, “will CMS require RACs to post all HCPCS/CPT codes included in their audits that are posted on their Web sites?” This is answered simply by describing what the RACs are required to do, according to the SOW, which does not include mandating the posting of such codes. So, what should a provider do in that case?  “When not present, CMS recommends that providers use the applicable policy to locate the affected codes” (see the FAQ here)

In other words, if it’s not required by the SOW, it’s not likely to be provided by the RACs.

In the Line of Fire


All the above issues paint a direct and clear line to physicians. Anesthesiology specialists, cardiology specialists and wound care medical professionals are just a few of the types of physicians on which RACs will spend review time – if not right now, then certainly in the future.

Should physicians spend time learning about RACs, separate and apart from the simple implications to the hospitals in which they work? Should they begin to consider conducting their own “RAC preparation risk analyses,” just as hospitals have been doing during the last 12-18 months?




Again, the answer, in this writer’s opinion, is a resounding “Yes!”

Education, process review and preparation are the wisest courses of action as these CMS contractors begin to hit their stride. Physicians can tend to approach these regulatory and reimbursement concerns rather conservatively, sometimes with an air of disdain or anger, often expressing a common overall concern: “how does this improve patient care?”

While the answer to that is debated, the RACs continue to seek their bounties. It would be wise to prepare.

About the Author

Patricia Dear, RN, has more than 30 years of experience in the healthcare industry, working within corporate healthcare entities, for-profit and non-profit 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




RAC University, powered by eduTrax®, has prepared an upcoming educational Webinar scheduled for April 22, 2010, to provide education and advice to both facilities and physician practices in one of the largest targets covered by the lists above already approved for RAC review:  injections and infusions.


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