All Entries in the "Regulations" Category

Hospitals must begin using revised ABN form November 1

CMS has released a new advance beneficiary notice (ABN) form that hospitals must use beginning in November. The form is currently available for immediate use.

The changes affect the ABN form’s format, but not its substance, Judith Kares, JD, wrote in a blog post for Medicare Mentor. Kares, an expert in Medicare rules and regulations, is an HCPro Medicare Boot Camp-Hospital Version^® instructor.

“The purpose of an ABN is to provide prior notice to a beneficiary (or his or her representative, in the event that the beneficiary is not competent) when the provider believes that Medicare will not pay for certain Part B outpatient services because limitation on liability applies,” Kares said in an earlier post. Limitation on liability applies when Part B outpatient services fall within one of three categories:

• The services do not meet Medicare’s medical necessity guidelines for a patient’s condition;
• The frequency of  a screening service exceeds Medicare coverage for that benefit; or
• The services are custodial.

The intent of the ABN form is to explain to patients that a provider anticipates Medicare will not pay for certain services. Patients will be responsible for payment to providers when they (or their representatives) opt to receive these services.

Use of the ABN form is more common in outpatient settings, but case managers may issue it to observation patients. For example, an observation patient who refuses to leave the hospital may receive an ABN form that explains Medicare will not pay for custodial care.

CMS will allow providers that have supplies of the current form may continue using it until November.  However, ABN forms with a March 2008 release date issued on or after November 1, 2011 will be invalid.

Learn more about ABN and other patient notification forms during HCPro’s August 9 audio conference, “Delivering Inpatient Notifications: Manage The Important Message from Medicare and HINNs”. For more information, visit www.hcmarketplace.com/prod-9598/Delivering-Inpatient-Notifications.html.

UPDATE: CMS releases final rule on Medicaid HCACs

By Andrea Kraynak, CPC

Provider-preventable conditions (PPC), including health care-acquired conditions (HCAC), are now subject to payment adjustments under the Medicaid program, according to the final rule released by CMS June 1.

The rule, “Medicaid Program; Payment Adjustment for Provider-Preventable Conditions Including Health Care-Acquired Conditions,” implements provisions in the Patient Protection and Affordable Care Act requiring HHS to prohibit federal payment to states for specified HCACs, as well as additional conditions determined on a state-by-state basis.

“We found that 29 states do not have existing HCAC-related nonpayment policies,” according to the final rule. “Most of the 21 states that currently have HCAC-related nonpayment policies identify at least Medicare’s HACs [hospital-acquired conditions] for nonpayment in hospitals.

“However, it is important to note that at least half of the existing policies we reviewed exceeded Medicare’s current HAC requirements and policies, either in the conditions identified, the systems used to indicate the conditions, or the settings to which the nonpayment policies applied.”

CMS introduces the term PPCs in the rule, which consists of two categories: HCACs and other provider preventable conditions (OPPC). OPPCs would be those additional conditions identified and approved by states that are not found on the list of HCACs, which are included on pages 20 and 21 of the final rule. This also allows states to expand beyond the inpatient hospital setting HCACs.

“We believe, and confirmed through public comment, that incorporating Medicare’s HACs in Medicaid’s policy is inherently complex because of population differences across programs,” according to the rule. “We fully understand that the HACs developed for Medicare’s population will not directly apply to various subsets of Medicaid’s population. While we have established Medicare as a baseline, we understand that states will, through their payment policies, appropriately address these differences.”

As with the Medicare HAC program, there will be no payment reductions for those conditions that existed prior to treatment by the provider, according to the rule.

In addition, payment reductions are limited to only those PPCs that would otherwise result in a payment increase and those that the state can “reasonably isolate for nonpayment the portion of the payment directly related to treatment for the PPC.”

In the rule, CMS notes that while the point of the Medicaid PPC payment adjustments is to improve quality of care, it does expect to realize cost savings on a state and federal level.

The federal government expects to save approximately $4–5 million annually between 2012–2015, with states experiencing an additional savings of $3–4 million each fiscal year, leading to a total savings of $35 million through 2015.

“These steps will encourage health professionals and hospitals to reduce preventable infections, and eliminate serious medical errors. As we reduce the frequency of these conditions, we will improve care for patients and bring down costs at the same time,” CMS Administrator Donald M. Berwick, MD, said in a June 1 press release.

Due to the fact that the majority of hospitals already have programs in place to reduce the occurrence of Medicare HACs, CMS does not believe the cost of implementing a similar program for Medicaid HCACs will be significant.

The effective date of the rule is July 1, 2011; however, CMS is delaying compliance action until July 1, 2012.

Editor’s note: Access the display copy of the final rule here. The proposed rule was published in the Federal Register February 17.

CMS publishes IPPS proposed rule for 2012

Editor’s note: This blog by Kimberly Anderwood Hoy, director of Medicare and compliance at HCPro, Inc., first appeared on the Medicare Mentor blog.

On April 20, CMS put on display the proposed rule for IPPS services and other inpatient initiatives for 2012. This year’s proposed rule contains the widest variety of inpatient clarifications and initiatives we’ve seen in a number of years. It contains something for everyone, from the finance/accounting departments to the quality department, not to mention the coders and billers.

The proposed rule this year contains a proposed payment reduction of nearly half a billion dollars compared to payments in 2011. This reflects a controversial documentation and coding adjustment of -3.15%. This is greater than expected, although CMS indicates that it is required to recoup 3.9% and will recoup the remaining .75% in the future to avoid too great an impact on hospitals in 2012.

The documentation and coding adjustment is supposed to recoup increases in payments due to better coding and documentation, unrelated to real increases in the complexity of patients. However, it’s unclear whether CMS appreciates the increased use of observation in hospitals, resulting in less complex patients being taken out of the inpatient case mixes, causing case mixes to increase related to more complex patients rather than coding and documentation changes.

The proposed rule also includes some new quality initiatives, including a new proposed HAC for contrast-induced acute kidney injury and information on the readmission project required by the health care reform laws (PPACA). The new HAC works slightly differently than existing HACs because it will be triggered by the combination of the diagnosis code 584.9 (acute kidney failure, unspecified) and a procedure code for a diagnostic service using contrast (specific codes are listed in the rule). Current HACs require only the presence of a diagnosis code.

The hospital readmission reduction program will be implemented by an adjustment factor for excess readmissions that will apply to a particular hospital’s DRG base amount. The adjustment factor can be no more than 1% in FY2013, the first year the program will be implemented, and will be phased in until the full adjustment factor of 3% is reached in FY2015. The factor will be based on the excess readmission ratio for each hospital for applicable conditions, defined as acute myocardial infarction, heart failure, and pneumonia in FY2013, and may be expanded by four additional conditions by FY2015.  The readmission timeframe is specified as 30 days, and there are exclusions for readmissions unrelated to the original diagnosis, as specified by the National Quality Forum monitoring of readmissions for these three conditions.

Finally, of note, are a number of “clarifications” to existing policies. These should always be read carefully, even if you believe you understand the policy, because simple “clarifications” have all but turned some areas in hospitals upside down recently. The most significant of these clarifications, operationally, is related to the three-day payment window. CMS clarified that the payment window applies to non-provider based, wholly owned or operated physician offices, i.e. hospital-owned freestanding physician practices. At one point during the hospital open door forum, CMS stated that only provider-based locations were included, but there was conflicting authority in a 1998 Federal Register. CMS now states this Federal Register is the correct interpretation of the statute, specifically applying the rule to non-provider-based hospital-owned practices.

Although the rule excludes the professional portion of services in these locations, the overhead portion of these services are included, meaning the hospitals would have to include the overhead on the inpatient claim and the physician’s claim would have to be reimbursed at the lower facility amount. It is unclear how this overhead should be calculated or how the payment reduction to the physician’s payment will be made. CMS indicated it will issue further clarifying instructions in the physician fee schedule proposed rule in August. In the interim, hospitals should apply three-day payment window logic to the diagnostic and non-diagnostic services at any freestanding practices they own. Additionally, I would recommend that these cases are tracked internally until the physician fee schedule rule is issued to ensure hospitals have the information for billing or rebilling the physician portion, as appropriate, under the new guidance in that rule.

Other clarifications that hospitals should consider reviewing include clarifying that IME and DSH provisions don’t apply to hospice patients, clarifying that routine services such as room and board may not be provided “under arrangements” with another provider, and clarifications to the threshold for discounts to devices that must be reported for payment reduction.

As I said, this rule has something for everyone, and some of the proposals are significant and hospitals would be well served to begin to prepare now. Additionally, some proposals will have a significant negative impact and hospitals may wish to comment to CMS on that impact in the hope that CMS will change or mitigate some of its proposals.

Understanding semi-automated RAC reviews

Editor’s note: The following post originally appeared on the Revenue Cycle Institute website.

Providers familiar with automated claims reviews and complex claims reviews by recovery audit contractors (RAC) now face another method of overpayment identification—the semi-automated claims review.

Semi-automated review is essentially a hybrid of the automated and complex methods of overpayment identification recognized in the RAC statement of work. CMS divides this new review process into two parts.

The first involves automated review of claims data to identify billing aberrations with a high index of suspicion of improper payment.

“The first part of the new process is essentially the data mining the RACs have done all along using their proprietary systems, and is very similar to automated reviews,” says Kimberly Hoy, JD, CPC, director of Medicare and compliance at HCPro, Inc.

“The only exception being that identified claims only contain possible errors, rather than assumed errors, as in a standard automated review,” she says.,

The second part includes a notification letter sent to the provider explaining the potential billing error and giving the provider 45 days to submit documentation to support the original billing, according to CMS. This is the same time frame for submitting documentation for claims selected for complex review.

Semi-automated reviews may lead to additional burdens for providers, says Elizabeth Lamkin, MHA, partner/CEO at Pace Healthcare Consulting, LLC, in Hilton Head Island, SC.

“We’ve known all along that automated reviews could turn into a complex review, and now they’ve added a formalized process,” she says. “This really emphasizes the risks of automated reviews because the RACs can scan unknown numbers of records for issues to be used for “mining vulnerabilities,” she says. “These could then become complex reviews and be used for identifying issues for extrapolation. This could be the tip of the iceberg as contractors become more sophisticated.”

RAC talk with Kimberly Anderwood Hoy

Kimberly Anderwood Hoy, Esq., is director of Medicare and compliance for HCPro, Inc., and an expert on all things Medicare. Our sister blog, The Revenue Cycle Institute, recently sat down with her and picked her brain on several Recover Audit Contractor (RAC) topics. Notice that she mentions the fact that RACs are moving setting their sights on medical necessity, which means case managers will play a key role.

What was one of most common front-end problems hospitals may have had that led to RAC audits and/or recoupments?

I’m not sure that there’s anything specific. I think that if there’s a strong compliance plan that is looking out for errors, a facility should and can be in good standing. In other words, the best defense is a strong compliance plan.

Was there any one particular CMS-approved issue that may have given providers the most trouble this past year, and why?

If you went by the last year, there hasn’t been one particular issue, but rather a number of issues across the board.  What’s been giving providers the most trouble are the operational difficulties the RACs have been having with everything from records receipt to timing of denial notices and recoupments.

When it comes to a facility’s RAC team, is there a specific member of the team that is the most integral?

In my opinion there are a few members that are most important, and then there are other members that—if a hospital can afford it—are helpful and valuable to the team as well. I do think a compliance auditor is an extremely vital member. I also think that somebody from case management is valuable too because the majority of the errors that caused problems in the demonstration were medical necessity. In addition, you need somebody from the business office or billing area who understands the appeals process and billing aspect that can truly determine whether an error was an overpayment or an underpayment.

Speaking of payments, in your opinion, what was it about Medicare’s three-day rule that had providers in such an uproar in 2010?

The problem with the three-day payment window is that some fiscal intermediaries and MACS had misapplied it even after CMS came out with additional guidance.  The claims processing contractors were giving incorrect advice to providers and processing the claims incorrectly. Providers assumed the way the claims processing contractors were processing the claims followed the rule correctly, but unfortunately that was not always the case.  Even providers who understood the rule and billed it correctly were getting denials when they should not have been, causing them to doubt how the rule should be applied.

What type of impact do you expect RAC expansion into Medicaid to have on providers or what should providers be doing to prepare for the RAC expansion into Medicaid?

That will all depend on where providers are at.  Some Medicaid programs are much more sophisticated than others, because they have much higher populations in their states and therefore are much more fraught with errors and problems. I do think that in the end, the RAC program for Medicaid will be positive.  I think there are far more system problems and unclear guidance on the Medicaid side and as the RACs look for incorrect payments they will identify these and bring them to the state Medicaid agencies’ attention.   This may result in clarification of some issues that providers have struggled with in the past.

First it was DRG validation, then medical necessity issues – what will be the next big target of the RACs?

I thought that once the RACs started on medical necessity that it was going to be the next big thing and that would be all that we would see for a while, but they have continued to approve more automated issues. I think that by being unable to audit medical necessity issues for the beginning portion of the program they found other lucrative areas and realized that medical necessity wasn’t the only avenue for recoupment.

What is the one word of advice you’d give to providers when it comes to preparing for RACs in 2011?

My best word of advice when it comes to RACs—and I know some people may disagree—is to have a strong compliance plan and strong revenue cycle team to ensure what you are doing is correct in the first place, and let the chips fall where they may. If you focus more on getting what you are doing right and less on how the RACs will catch you on something, then you will benefit from it in the end. Hospitals truly should be taking control of their own agenda and not be driven by government auditors.

CMS says providers cannot use condition code 44 to backdate observation services

CMS issued a transmittal that explicitly states providers may not use condition code 44 to retroactively bill for observation services that the hospital provided prior to the physician’s order to change the patient from inpatient to observation.

The transmittal does not change the requirements providers must meet when applying condition code 44. It reiterates Medicare billing rules, which state that providers may not bill for observation services that occur prior to the physician’s order.

The new language is as follows:

When Condition Code 44 is appropriately used, the hospital reports on the outpatient bill the services that were ordered and provided to the patient for the entire patient encounter. However, in accordance with the general Medicare requirements for services furnished to beneficiaries and billed to Medicare, even in Condition Code 44 situations, hospitals may not report observation services using HCPCS code G0378 (Hospital observation service, per hour) for observation services furnished during a hospital encounter prior to a physician’s order for observation services. Medicare does not permit retroactive orders or the inference of physician orders. Like all hospital outpatient services, observation services must be ordered by a physician. The clock time begins at the time that observation services are initiated in accordance with a physician’s order.

While hospitals may not report observation services under HCPCS code G0378 for the time period during the hospital encounter prior to a physician’s order for observation services, in Condition Code 44 situations, as for all other hospital outpatient encounters, hospitals may include charges on the outpatient claim for the costs of all hospital resources utilized in the care of the patient during the entire encounter. For example, a beneficiary is admitted as an inpatient and receives 12 hours of monitoring and nursing care, at which point the hospital changes the status of the beneficiary from inpatient to outpatient and the physician orders observation services, with all criteria for billing under Condition Code 44 being met. On the outpatient claim on an uncoded line with revenue code 0762, the hospital could bill for the 12 hours of monitoring and nursing care that were provided prior to the change in status and the physician order for observation services, in addition to billing HCPCS code G0378 for the observation services that followed the change in status and physician order for observation services. For other rules related to billing and payment of observation services, see Chapter 4, §290 of this manual, and Chapter 6, §20.6 of the Medicare Benefit Policy Manual, Pub. 100-02.

Whether condition code 44 allows facilities to backdate observation services has been a contentious debate on case management blogs, listservs, and message boards. This transmittal may finally end the backdating debate amongst providers, says Sandra McCune BSN, RN, utilization management specialist at Lakeland Regional Health System in St. Joseph, MI. “Finally, a clarification in language we can all understand!”

The transmittal also confirms that hospitals may report outpatient nursing charges and other services that occurred while the patient was incorrectly an inpatient, even though Medicare won’t pay for them, McCune says. “It is important that claims reflect all of our costs,” she adds.

Position your resources to prepare for RAC medical necessity audits

The recovery audit contractors (RAC) have certainly been busy lately. CMS gave permission to three RACs (Connolly, Health Data Insights (HIS) and CGI Federal) for them to begin medical necessity audits. Connolly announced that it intends to conduct medical necessity audits on the 20 DRGs it is currently focused on. View the Connolly list here.

The following are the areas CGI is targeting for medical necessity review:

• Syncope and collapse MS-DRG 312 (Medical necessity review and MS-DRG validation)
• Red blood cell disorders with MCC MS-DRG 811 (Medical necessity review and MS-DRG validation)
• Other vascular procedures w CC, w/o CC/MCC MS-DRG 253, 254 (Medical necessity review and MS-DRG validation)
• Other circulatory system diagnoses with MCC MS-DRG 314, 315, 316 (Medical necessity review and MS-DRG validation)
• Chest pain MS-DRG 313 (Medical necessity review and MS-DRG validation)
• Atherosclerosis with MCC MS-DRG 302 (Medical necessity review and MS-DRG validation)
• Heart failure and shock with MCC, with CC and w/o CC/MCC DRG 127 MS-DRG 291, 292, 293 (Medical necessity review and MS-DRG validation)
• Esophagitis, gastroenteritis and miscellaneous digestive disorders w/MCC DRG 182 MS-DRG 391 (Medical necessity review and MS-DRG validation)
• Musculoskeletal disorders 539-541, 545-558, 564-566 (Medical necessity excluded except for MS-DRG 551 and 552)
• Chronic obstructive pulmonary disease DRG 88 MS-DRG 190, 191 (Medical necessity review and MS-DRG validation)
• Respiratory 175, 176, 180-188, 192, 196-206 (Medical necessity excluded except for MS-DRG 192)
• Nutritional and metabolic disorders DRG 296 MS-DRG 640 (Medical necessity review and MS-DRG validation)
• Kidney and urinary tract infections w/MCC DRG 320 MS-DRG 689 (Medical necessity review and MS-DRG validation)
• GI disorders 368-370, 374-376, 380-390, and 392-395 (Medical Necessity Excluded except for MS-DRG 393)
• Percutaneous cardiovascular procedures MS-DRG 247, 249, 251 (Medical necessity excluded except for MS-DRG 249)
• Renal failure DRG 316 MS-DRG 682, 683, 684 (Medical necessity review and MS-DRG validation
• Nervous system disorders MS-DRG 052-063, 067-074, 077-086, 088-093, 097-099, 101, 102 (Medical necessity excluded except for MS-DRG 056, 057 and 069)
• Cardiac arrhythmia and conduction disorders with MCC or w/CC DRG 138, MS-DRG 308, 309 (Medical necessity excluded except for MS-DRG 308)

HDI announced that it will focus on the following areas for medical necessity review:

• DRG validation-cardiovascular, other (Medical necessity review may be performed for MS DRG 312 only)
• DRG validation-musculoskeletal disorders (Medical necessity review may be performed for MS DRGs 551 and 552 only.)
• DRG validation-blood and immunological disorders (Medical necessity review may be performed for MS DRG 811 only.)
• DRG validation-cardiovascular diseases (Medical necessity review may be performed for MS DRGs 253, 254, 291-293, 302, 308, 313-316 only.)
• DRG validation-nervous system disorders (Medical necessity review may be performed for MS DRGs 056, 057 and 069 only.)
• DRG validation-kidney and urinary tract disorders (Medical necessity review may be performed for MS DRGs 682-684 and 689 only.)
• DRG validation-endocrine, nutritional and metabolic disorders (Necessity Review may be performed for MS DRG 640 only.)
• DRG validation-gastrointestinal disorders (Medical necessity review may be performed for MS DRGs 391 and 393 only.)
• DRG validation-cardiac procedures (Medical necessity review may be performed for MS DRG 249 only.)
• DRG validation-MDC 04 respiratory (Medical necessity review may be performed for MS DRGs 190, 191 and 192 only.)

Potential Impact on Case Managers

The good news for case managers is that the RACs’ targets are not terribly surprising. If you check your hospital’s CERT and PEPPER reports you may find that some administrators have already flagged these issues.

Hopefully, your organization has been working on improving utilization in these areas. However, if you have not had the time or the staff required to focus on managing Medicare medical necessity, you may be feeling overwhelmed the additional admission reviews that you will need to complete during the initial inpatient day.

Redeploy support

Albert Einstein said insanity is doing the same thing over and over again and expecting different results. If hospitals do not modify processes to meet the increased RAC scrutiny we can not hope to protect our Medicare revenue. Adding case managers is an option, if you can find and afford them. But unfortunately that option is not open to many facilities.

Consider deploying a coder to work in conjunction with the case managers. The coder can review charts with the case managers on admission to identify the potential DRG assignment for the patient. The case manager can then work with the physician to ensure he or she documents the record to accurately support utilization and medical necessity.

If you can’t afford to move a coder, consider using coding interns and coders-in-training to work with case managers. It is a good match. Case managers can teach coders how to navigate the record and the trainees can teach case managers the rudiments of how to choose a potential DRG based on the documentation available. This collaboration should result in improved documentation.

Software

If your organization was considering case management support software, now is the time to determine the potential the return on investment. Calculate the dollar value of your potential DRG medical necessity denials. This will help you predict the return on investment on your dollars invested in software. You may be surprised that the tools pay for themselves fairly rapidly. Ask vendors for a free trial of their product. Be sure to look for brands that offer reporting capabilities important to your process.

Besides streamlining the case management process, most brands also offer electronic access to utilization data, which can enhance your case managers’ productivity and reduce denials.

Ramp Up Training

According to the Fall 2009 OIG Semiannual Fraud and Abuse Report insufficient documentation cpst the Medicare Trust Fund $2.6 million beyond the RAC findings. An additional $800,000 was wasted on medically unnecessary services and supplies.

These numbers illustrate the problem of inadequate documentation. Work with your hospital’s physician leaders and implement documentation improvement training for all medical staff. Yes, there will be an initial pushback, but process improvement in this area will reward you going forward.

Partner with Your Compliance Department

Ask your hospital’s compliance department to audit your departmental processes. Identify root causes and make changes to your work flow to mitigate losses. Request your compliance team educate case managers on the latest CMS regulations. Hospital auditors can also review your case managers’ notes to determine if there is any room for improvement with regard to Medicare regulations.

Case managers say medically necessary readmissions are being denied

We all know that Medicare will not pay for preventable readmissions that occur within 30 days. But many providers are reporting that certain Medicare managed care plans are also denying medically necessary readmissions.

Several case managers on the American Case Management Association’s LearningLink listserv have shared their experiences on the subject. Most say they have received denial letters of readmissions that occur within 30 days regardless of whether the reason for the second stay relates to the first.

According to some LearningLink contributors, attempts to appeal the denials fall on deaf ears. Providers have presented clinical evidence that shows the admissions are appropriate, meet criteria, and not related to the original admission, but contractors have not reversed the denials.

Has this been happening at your facility?

Case management involvement in implementing healthcare reform

Where healthcare reform is going, is anyone’s guess at this time.

Contact your legislators and be heard!

The government powers have voted the Patient Protection and Affordable Care Act into law, but the appropriate implementation is lacking. This creates a situation where the nursing profession, especially case management, should make its voice is heard.

I know you are thinking, “right, like anyone on Capital Hill is going to listen or care what I have to say”. That is where you are wrong.

A few weeks ago, I was privileged to be a part of the American Case Management Association’s (ACMA) Advocacy on Capital Hill event. I joined other ACMA representatives in Washington DC to visit my state’s legislators, as well as other officials. It was a great experience, and we were able to voice our concerns as a powerful, organized association.

Our goal was to focus on specific areas of healthcare reform that case management can positively affect. Case managers are skilled, clinical experts in the areas of transitional care and the admit per case management protocol. Many credible healthcare organizations are developing great processes for measuring transition of care outcomes. The healthcare reform law is huge, so we focused on the areas we can speak to with expertise and authority. Nurses can greatly impact healthcare reform, as we are advocates for the patients and our healthcare organizations.

I was impressed and amazed at the differences in knowledge there was on Capital Hill regarding case management and its importance. We visited some offices where the lawmakers had little knowledge, if any, about case management, while others were well-versed in the impact of case management.

My visit to Senator Charles Grassley’s (R-IA) office is one that sticks out in my mind. I was very impressed with his knowledge of case management. He sees the importance in having case management involved in healthcare reform and the Accountable Care Organizations (ACO). I have e-mailed Senator Grassley’s office a couple of times since my trip and his staff quickly replies to my questions and concerns.

I encourage nurses and case managers to get to know their senators and representatives. Become knowledgeable of what their views are on nursing involvement in healthcare reform  Contact them, and advocate for nursing participation in healthcare reform.

My experience on Capital Hill was awesome, and I learned so much. It is great to discuss these important matters and develop relationships with my senators and representatives. Don’t be afraid to be heard!

CMS update indicates high provider success rate for appealing denials

Editor’s note: This post originally appeared on HCPro’s Revenue Cycle Institute website.

A recent CMS report indicates that providers have been winning more appeals since the last update.

The June 14 report “The Medicare RAC Program: Update to the evaluation of the three-year demonstration,” updated information from CMS’ previous report, issued during January 2009 and including data inclusive through March 27, 2008. The new report, which includes statistics through March 9, 2010, reveals that the number of appeals claims dropped significantly from 118,051 reported in 2009 to 76,073 in the new data. This is because CMS no longer counts claims individually at each level of appeal. It now counts each claim once if appealed to any level.

CMS also removed claims from the appealed category if a claims contractor reversed a denial after a provider submitted additional documentation. However, because the claims contractor decides the first level of RAC appeals, it is unclear why these aren’t considered appeals, says Kimberly Anderwood Hoy JD, CPC, director of Medicare and compliance at HCPro, Inc., in Marblehead, MA. If CMS counted each of these claims as an overturned determination it would have shown that providers were even more successful in appealing denials, says Hoy.

“It would be interesting to see how much higher the overturned percentage would be if these cases were included,” she says. “Already, the stats show RACs were overturned in about two-thirds of appealed cases.”

CMS also increased the number of overall RAC determinations by 73,000 claims. The effect of including more claims in the determinations number caused the overall percentage of overturned cases to appear lower than it otherwise would have been, says Hoy.

“The new report shows a much lower number of appealed claims from 22.5% to 12.5%,” she says. “By excluding claims that were overturned by the contractor, this number shows a more favorable picture of the overall accuracy of the RAC than previous reports demonstrated.”

With the success rate of appeals so high, it may indicate that perhaps providers weren’t appealing as many cases as they should, says Donna Wilson RHIA, CCS, senior director at Compliance Concepts, Inc., in Wexford, PA.

“With the numbers reflecting 48,993 (of 76,073) cases overturned on appeal, this tells me providers should have been more proactive in appealing their overpayments,” she says. “However, healthcare providers today are extremely busy and short-staffed, so devoting numerous employee hours on appealing a RAC overpayment may not be top priority.

Given the success rate of providers who did choose to appeal, this information may prompt providers under the permanent RAC program to address their appeal efforts through alternative options, according to Wilson.

“Providers may consider hiring outside assistance in appealing RAC denials,” she says. “Seeking the opinion of a consultant will allow for expert opinions on the case and lessen the load on the existing staff.”