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RACTrac report shows increase in outpatient coding denials

Latest report shows RAC denials are being overturned

Latest report shows increase in outpatient coding denials.

Complex denials by Recovery Auditors (RAs) for outpatient coding have risen sharply over the last year, according to the latest survey by the American Hospital Association (AHA).

In the third quarter 2014 AHA survey, more than 1,000 hospitals were asked to rank complex denials by reason, and the results showed 28% of hospitals reporting denials for outpatient coding errors. That number is up from 10% in the first quarter of 2014 and 7% in the fourth quarter of 2013.
Part of the reason could be RAs are focusing more on outpatient coding claims due to the CMS prohibition on inpatient hospital status reviews on claims from October 1, 2013, to March 31, 2015. In the latest survey, only 23% of hospitals reported short-stay medically unnecessary denials, down from 59% in the first quarter 2014. Inpatient coding denials were also down to 25% from 59% over the same time period.
The rise in complex denials related to outpatient coding could have a major impact on hospitals’ bottom line. Among respondents to the latest survey, the nationwide average dollar amount of automated denials was $688, while complex denials averaged $5,615.
However, the survey also found that hospitals successfully appealed RA recoupments 70% of the time. Respondents reported appealing nearly half (48%) of automated and complex denials.
Respondents were still waiting for the results of 59% of appealed claims, with more than 130,000 appeals out of 223,000 awaiting determinations. That number climbs as the appeals reach higher stages, with 62% of claims at the Administrative Law Judge stage nationwide past the 90-day statutory deadline. Respondents from Region D, comprised of Western and Midwestern states, reported 85% of appeals at that level were past the deadline for a ruling.
In addition to the time it takes for hospitals to recover money via appeals, hospitals face the administrative burdens related to the process. They must coordinate across departments to collect information, find the necessary documentation to submit, and write appeals. According to the survey, 58% of hospitals spent more than $10,000 on managing the RA appeals process during the third quarter, with 39% spending more than $25,000, and 9% spending more than $100,000.
Editor’s Note: This article originally published in the APCs Weekly Insider eNewsletter.

TBT: CDI role in audit defense

Editor’s Note: In social media memes Throw-back Thursday generally means sharing an old high school photo, something you wish had been left unpublished–like your 80s bouffant or 70s bell bottoms. We thought we’d pick up on the theme and occasionally go back into our CDI archives to highlight some salient CDI tid-bit. This week’s installment comes from the October 2012 edition of the CDI Journal. 

When hospitals appeal their denials they typically win. The AHA’s RACTrac report indicates that hospitals appeal more than 40% of their denials with a roughly 75% success rate. That’s where CDI professionals come in.

CDI specialists know how to piece the various components of the medical record together, says Mary Smith (her name has been changed at her facility’s request) a Florida-based RAC denials coordinator. Smith joined her facility’s CDI team in 2007 during the program’s inception. She worked as the CDI coordinator for four years before making the leap to the RAC denials team. Smith, who also spent two years in the case management role, says she has “the perfect blend of professional backgrounds for this line of work. [She] can look at the record and see the different pieces of it and use that knowledge to
formulate an appeal.”

To get a head start on preparing for a possible full-time prepayment review process, ensure the completeness of medical records before they go out the door Make sure that the records do not have any signature issues, have been prereviewed, and contain all the necessary documentation. CDI specialists can also help with audit defense simply by being “aware of the targeted areas and [paying particular attention] when reviewing charts with those DRGs,” says Melanie Haycraft, RN, CCDS, RAC/government audit coordinator for North Oakes Health Systems in Hammond, La. “Consistent documentation with the appropriate criteria met is the only way to audit-proof the chart.”

CMS limits audits related to new 2-midnight rule

Kimberly Anderwood Hoy Baker, JD, CPC

Kimberly Anderwood Hoy Baker, JD, CPC

by Kimberly Hoy Baker, JD, regulatory specialist for HCPro

On September 28, CMS held a special Open Door Forum on the 2-midnight rule (released in the fiscal year 2014 IPPS Final Rule) and its implementation, starting October 1, 2013. CMS declined to delay implementation of the inpatient status benchmark, but instead put in place a 90-day “implementation period” with a moratorium on audits with the exception of “probe and educate” reviews by  Medicare Administrative Contractors (MACs).
During the call, CMS referenced a written announcement dated September 26, in which the agency stated it will not permit Recovery Auditors to review cases with less than two midnights of inpatient care for the 90 days following the October 1 implementation date. During this time however, CMS has instructed the MACs to audit a probe sample from every hospital of 10-25 cases that had less than two midnights of care.
The probe audits will be done on a pre-payment basis, and if the hospital receives a negative determination on a case, the hospital will be able to rebill the case under the new Part B inpatient billing rules. Following the probe audit, the MAC will identify “issues” with the hospital’s cases and provide further education if necessary.  If no “issues” are identified, the MAC has been instructed not to conduct further reviews of cases with less than two midnights during that 90 day implementation period.
Editor’s Note: This article was originally published on the Revenue Cycle Institute Blog. Hoy is the director of Medicare and compliance for HCPro, Inc., a lead regulatory specialist for HCPro’s Revenue Cycle Institute, and the lead instructor for HCPro’s Medicare Boot Camp®-Hospital Version and Medicare Boot Camp®-Critical Access Hospital Version.

CDI Week: Expanding CDI scope provides program success


Front row left to right are Robin Magulre, RN, Department Director Kelly Stafford, RN, Deborah Marcum, RN; at back are Sarah LaSource, RN, Michelle Towater, RN, Denise Hunt, RN, and CDI Department Manager Amy Havard, RN.

by Amy Havard, RN

West Tennessee Healthcare is a public, not-for-profit healthcare system.  Modern Healthcare magazine lists it as one of the top 10 largest, public, not-for-profit, healthcare systems in the country.

Jackson Madison County General Hospital (JMCGH), where we work, is considered the flagship of West Tennessee Healthcare. A 635-bed tertiary care center, it is the only tertiary care hospital between Memphis and Nashville, and serves a 17-county area of rural West Tennessee where approximately 400,000 people live. The CDI program at JMCGH was established in 2008 in an effort to face the challenges related to the impending changes in healthcare, especially the implementation of ICD-10.

We have a team of five experienced registered nurses who challenge themselves daily to come up with innovative ways to engage our medical staff.  We believe our program is different from many because our primary focus is physician education, not the “number of charts reviewed.”  We are also honored to have “hands on” support from the HIM/coding specialists, as well as our CDI department manager, director, and administration.

We are beginning to expand our focus to include educating our medical staff regarding the rising number of claims denials. These include Recovery Auditors (RAs), Medicare Administrative Contractors (MACs), TennCare (Medicaid), and other commercial cases.

Believe it or not, over the past five years our physicians have begun to ask us for information and look to us for education about what’s going on in the wide world of coding, documentation, reimbursement, and claims denials. We’ve found that they have no idea what a RA does or what a denial actually is. They had no concept that cases are being denied up to three years post discharge or that appeals could take up to two years more than that.  They also had no idea that some regions are already recouping from physicians if their documentation/bill doesn’t correlate with the hospital charges/codes.

When the denials come in, I share some of the cases with the CDI nurses and then we use those examples in our educational sessions with the physicians. To see it in “real time” has had quite an impact on the medical staff.  And once we started presenting them with dashboard graphs of the RA denial process (including the amount of money recouped by CMS from both our region and nationwide), the physicians (across most specialties) became almost frantic for our guidance. They’ve really started to call us, page us, email us….. You name it.

To help them really understand the situation in a meaningful way they want to see:

  • Examples of denials and examples of how good documentation overturned or helped avoid a potential denial.
  • How specificity and acuity of the illness/conditions could have been better captured in the documentation.
  • How the lack of specificity in the record resulted in either the inability to appeal at all or caused the denial to be upheld.
  • How the additional specificity of ICD-10 will affect not only their documentation but also denial management. We’ve really seen a spike in their willingness to begin putting ICD-10 specificity requirements into practice since we tied it back to the big picture regarding denial prevention. We are even started to query for some ICD-10 related diagnoses.

Ask yourself these questions when thinking about the future of your CDI program:

  • What helps determine the case-mix index (CMI), average length of stay (ALOS), and severity of illness (SOI) and risk of mortality (ROM)?
  • What can make the difference between a successful appeal and a denial being upheld?
  • What can help you prevent denials, substantiate medical necessity and ensure core measures data is correct?
  • What will help ensure you survive the implementation of ICD-10 in 2014?

The answer:  Accurate and codeable clinical documentation!


Audit your ED E/M criteria

Take a look at your emergency room records to ensure that E/M efforts are appropriately captured

Take a look at your emergency room records to ensure that E/M efforts are appropriately captured

Auditors have been reviewing medical necessity for inpatient services for years and Recovery Auditors (RA) have recouped millions of dollars in overpayments. Now outpatient providers are beginning to see more and more medical necessity audits, especially in the ED and for evaluation and management (E/M) levels.

CMS continues to monitor E/M levels and indicated in the 2013 OPPS Final Rule that level distribution remains fairly normal and relatively stable distribution. CMS also notes a slight shift of Level 4 and 5 visits in relationship to Levels 1, 2, and 3.

“This is something we certainly want to keep our eye on and maybe take a second look at our criteria and the medical necessity for the services that we’re coding and billing,” says Caral Edelberg, CPC, CPMA, CAC, CCS-P, CHC, AHIMA-Approved ICD-10-CM/PCS Trainer,president of Edelberg Compliance Associates of Baton Rouge, La. “When you see something in final rules or regulations or any of the transmittals that CMS is sending out, it tells you that CMS is going to be taking a closer look and that could mean audits for all of us.”

Overcoding in the ED is less of a problem than undercoding, Edelberg says.

CMS and RAs are increasingly scrutinizing short inpatient stays and observation services, says Joanne M. Becker, RHIT, CCS, CCSP, CPC, CPC-I, AHIMA approved ICD-10-CM/PCS Trainer. Becker is associate director in the Joint Office for Compliance at the University of Iowa hospitals and clinics in Iowa City.

Because of the increased scrutiny on one-day stays, many facilities are instead placing patients in observation, Becker says. The next logical step for RAs then is to focus on observation. “We even have heard that some RAs are looking at observation visits as to whether or not the patient should have even been there at all,” she says.

Editor’s Note: This article is an excerpt from

News: Latest RACTrac survey shows 53% increase in record requests

Latest report shows RAC denials are being overturned

Latest report shows increase in record requests with more than half not containing any overpayment concerns.

Hospitals continue to report dramatic increases in Recover Auditor (RA) activity, according to results of the latest RACTrac survey released June 4, from the American Hospital Association. The survey found that the number of medical record requests for survey respondents has increased by 53% in comparison to the cumulative total reported in the third quarter 2012.

Not surprisingly, 96% of hospitals indicated that medical necessity denials are the most costly type of denial. However, RAs issued the majority of denials (68%) not because the care was medically unnecessary but because the facility provided care (i.e., one-day stays) in the wrong setting.
The good news is that 58% of medical records did not contain an overpayment. In addition, hospitals reported appealing 44% of all RAC denials, with a 72% success rate in the appeals process. However, the appeals process continues to be a slow one. Three-fourths of all appealed claims are still sitting in the appeals process, according to the survey. Yet, the majority of hospitals indicated that RA responsiveness and overall communication was either ‘fair’ or ‘good.’
Stents and syncope and collapse were the top MS-DRGs denied by RAs in terms of dollar impact.
The RA process continues to burden hospitals financially. The survey found that 63% of all hospitals reported spending more than $10,000 to manage the RA process during the first quarter of 2013. Forty-six percent spent more than $25,000, and 10% spent more than $100,000.
Fifty-nine percent of respondents indicated that they have yet to receive any education from CMS or its contractors related to avoiding payment errors.


Editor’s Note: This article originally appeared on

Revenue Cycle Institute releases 2013 Recovery Auditor Benchmarking Report

Debbie Mackaman

Debbie Mackaman

by Debbie Mackaman, RHIA, CHCO

We’ve been on quite a ride since the start of the Recovery Auditor (RA) efforts. In 2012, RAs continued to expand. This report examines how providers have adjusted their approach in the past year, and it looks forward to some new initiatives and proposals that could alter the state of RAs as a whole.

The Revenue Cycle Institute’s 2013 Recovery Auditor Benchmarking Survey had 325 respondents, representing both small and large hospitals, from all four RA regions. These respondents represented a number of different departments, including compliance, HIM, PFS, case management, and clinical documentation improvement.

The main theme of this year’s survey is the growing state of the RAs, and the fact that they only seem to be gaining speed.

The percentage of providers that have had recoupments from automated reviews rose by 14% this year. In addition, the amount of providers that have seen record requests for complex or semi-automated reviews has increased from 82% to 91%. This may not be shocking, as CMS continues to approve more issues and the scope of the RAs continues to expand, but it highlights the fact that the audits are ever-changing and will force providers to stay on their toes.

Another item providers need to pay attention to is the arrival of the prepayment RA reviews. As of right now, only two issues have been approved—MS-DRGs 312 and 069—with short inpatient hospital stays looming, and only 11 states are in the prepayment demonstration, but that does not mean that providers are unfamiliar with the prepayment review process. According to our survey, 74% of respondents have seen a prepayment review either from their MAC (52%), their RA (6%), or both (16%). A total of 52% said that they are not specifically changing any internal processes related to prepayment concerns but 33% said they’ve heightened awareness in departments affected by RAs. However, almost half of the respondents have felt the need to revise internal processes to meet auditor scrutiny, which appears to be increasing from year to year. As the RA program expands, providers need to be flexible to adjust to current issues and anticipate upcoming reviews.

Another RA-related demonstration project is the Part A to Part B rebilling demonstration. While only 380 hospitals are participating in this demonstration, 28 responded to the survey. Of these, the majority (62%) have been able to rebill and get reimbursed. Only 14% have not rebilled anything yet, but were planning on doing so in the future. This demonstration project will last three years, and although it could assist facilities in recouping some of their costs for inpatient stays that were deemed not medically necessary, it is certainly not an answer to resolving the daily operational issues facilities face.

The third recent development is the complaint filed by the American Hospital Association (AHA) against RAs. As you all probably know, the AHA, along with several other hospitals, issued a lawsuit against the RAs for unfair Medicare practices. Based on this bold move, I was curious what respondents thought about the initial action. Sixty percent think that something will happen as a result of the complaint, but 43% of those think that it will only involve very minor changes. On the other side, 17% think that nothing will happen, while 25% are just happy to see the RAs being called out on their current practices. This will be an interesting topic to follow and may set a precedent for other audit processes. Although respondents appear to be pessimistic regarding the potential outcome of the lawsuit, the fact that RAs are being challenged should give providers hope for changes going forward.

Editor’s Note: Debbie Mackaman, RHIA, CHCO, is a Regulatory Specialist with HCPro, Inc., and teaches its Medicare Boot Camps. This post is an excerpt from the benchmark report. To read the entire report, visit The Revenue Cycle Institute.

Recovery Auditor benchmarking survey open


It’s no test but we could use your input on this Recovery Auditor benchmarking survey.

ACDIS sister publication and network the Revenue Cycle Institute is conducting its annual Recovery Auditor Benchmarking survey to determine how facilities nationwide are handling this intricate auditing and denials management process. The survey explores experiences with Recovery Auditors and inquires about plans your facility has put into place to deal with them. It covers new developments, such as prepayment audits, Medicaid RACs, Part A to Part B rebilling, and much more.

ACDIS understands that many CDI professionals also play an important role in managing Recovery Auditor record requests as well as in denial management processes. We value your input and appreciate your time and effort in completing this anonymous survey. We know you must be as interested as we are in finding out what your peers are doing to handle the Recovery Auditor process, so all of this data will be compiled and shared with you in an upcoming report.

To take the short survey, please click here.

News: Medical necessity battle continues; AHA says lawsuit requires urgent attention

The AHA is suing CMS for inappropriately denying claims.

The fight over medical necessity continued last week as the American Hospital Association and its four co-plaintiffs asks courts to “expedite” a lawsuit against U.S. Department of Health and Human Services (HHS) for unfair Medicare practices pertaining to the Recovery Auditor program.

According to a motion filed in Washington, D.C., December 13, the crux of the issue is this: Recovery Auditors second guessing physicians’ right to make decisions regarding where to best provide patient care. It suggests that Recovery Auditors “examine cold paper records and determine—at an alarming rate—that the physicians were wrong and patients should not have been admitted to [the] hospital,” the motion states.

Recovery Auditors collected $2.29 billion in overpayments in fiscal year (FY) 2012, according to CMS’ November report. The top concern listed for three of the four Recovery Auditors was medical necessity for cardiovascular procedures. The fourth was for medical necessity related to admissions for minor surgery. The latest recoupments represent a staggering increase of nearly three-times more than FY 2011, according to an article in Fierce HealthCare. (A November 27 report from the Office of the Inspector General indicated it expected some $6.9 billion in total fraud and related HHS recoupments.)

Determining where to best provide care and understanding Medicare’s rules and regulations surrounding payment for that placement continues to be difficult issue for many facilities. A recent 60 Minutes investigation “Hospitals: The Cost of Admission”, focused on admission practices of the 70-hospital for-profit Health Management Associates Inc. The news report alleged the chain pressured physicians to admit a set quota of patients in order to receive increased reimbursement for the services provided. Despite the company’s denial of the allegations its stocks fell sharply following the report.

Nevertheless, the AHA states that CMS is illegally withholding funds. Its motion “seek(s) an expeditious resolution … because … the nation’s hospitals, are being harmed on an ongoing basis by an arbitrary government policy: [CMS] has refused, and is still refusing, to pay the nation’s hospitals for hundreds of millions of dollars’ worth of medically necessary care that they provide to Medicare beneficiaries,” the report states.

Editor’s Note: This article was originally published in the December 20, 2012 edition of CDI Strategies.

Book Excerpt: Financial implications of clinical documentation improvement efforts

Some feel establishing goals based solely on reimbursement leads to compliance concerns. Others assert accurate documentation of the care a patient receives naturally leads to improved reimbursement and tracking it just helps support the need for the CDI program. Regardless, the financial return on a facility’s investment in its CDI staff is undoubtedly beneficial information to help prove the value of the CDI program, especially in the current healthcare environment where every expense and departmental budget is scrutinized.

Conveying the financial benefits of CDI can be fairly easy; the addition of a single complication or comorbidity (CC) or major CC (MCC) can shift the designation of patient care into a higher weighted diagnosis related group (DRG), thereby increasing a facility’s reimbursement by thousands of dollars.

For example, if a patient who suffered a heart attack requires surgery for a pacemaker and lead implant the principal diagnosis would be coded 410.01, acute myocardial infarction of other inferior wall, initial episode of care, and the procedures would be coded 37.72 (initial insertion of trans venous [pacemaker] leads [electrodes] into atrium and ventricle) and 37.83 (initial insertion of dual-chamber [pacemaker] device). At the time of admission, the patient is noted to have a history of congestive heart failure (CHF) and the chest x-ray in the emergency room showed venous congestion, which improved after the administration of Lasix intravenous push (IVP). The medication record indicates Lasix 40 mg IVP was given twice in the emergency room.

The figure below illustrates how different ICD9-CM codes roughly translate into MS-DRG codes and the estimated payment changes associated with such differences.

Employ caution, however, when illustrating the CDI program’s affect on reimbursement. While improved capture of clinical documentation may increase reimbursement, it may not always do so, and creating a CDI program for financial gain cannot be the program’s only purpose. Money earned from inappropriate means today is simply money taken back–with interest–by the government later.

Editor’s Note: This excerpt was taken from The Clinical Documentation Improvement Specialist’s Handbook, Second Edition, by Marion Kruse, MBA, RN, and Heather Taillon, RHIA.

ICD-9-CM code          MS-DRG Payment
Case 1
428.0, Congestive heart failure, unspecified 244, Permanent cardiac pacemaker implant w/o CC/MCC $11,510
Case 2
428.0 and 428.32, Chronic diastolic heart failure 243, Permanent cardiac pacemaker implant w/CC $13,728
Case 3
428.0 and 428.33, Acute on chronic diastolic heart failure 242, Permanent cardiac pacemaker implant w/MCC $17,554