Healthcare experts are questioning whether outside auditors for the Medicare program are prepared to take on a new type of advanced audit that addresses a touchy and personal subject: the necessity of a patient's care.
The CMS said it approved the first “medical necessity review” audits for the Recovery Audit Contractor program, opening the door to more potential problems for providers, who fear added delays and increased rejection of reimbursements. RAC third-party auditors hired by the CMS get to keep 9% to 12.5% of provider payments they identify as improper.
So far, the agency has approved 18 types of inpatient hospital claims and one type of durable medical equipment claim for medical necessity reviews. As of now, “All of the RAC regions have some medical necessity reviews approved,” a CMS spokeswoman said. Medical necessity reviews are likely to begin in the next couple of weeks.
RACs previously had mainly been conducting automated audits, which are less-complex reviews that involve running data queries and seeking immediate claims denials, and complex reviews, which ask for medical records and the coding of a specific claim.
Medical necessity reviews, though, delve into the appropriateness of medical care given to a patient, meaning they'll require more resources from hospitals and more digging on behalf of the RAC program auditors. The addition of these reviews adds “another complicated burden to the RAC process,” said Karen Schmidt, director of medical records for 777-bed Henry Ford Hospital in Detroit. Hospital clinicians are already pressed for time, and the medical necessity review adds a clerical component, where “the hospital will have to coordinate with a physician or caregiver in preparing an appeal” in the event the hospital wants to challenge the review, she said.
What concerns the American Hospital Association and others in the industry is that RAC auditors may lack the necessary clinical and Medicare knowledge to determine whether prior hospital care was reasonable, given the experiences of hospitals during the RAC program's three-year demonstration project.
The AHA “continues to have concerns about RACs being paid on a contingency basis to do medical necessity reviews,” which caused more problems during the demonstration project than any other type of audit, said Don May, the AHA's vice president of policy.
Although the CMS has tried to make improvements to the RAC program since the demonstration, such as appointing medical officers to each of the four permanent RAC contractors, it is unclear what the officers' scope of knowledge is, and whether other medical staff will be employed to provide expert advice, May said.
“For example, if the RAC is doing a specific review of a type of cancer care, will they have an oncologist doing the review” or a doctor with no expertise in this area, he said.
According to the demonstration data, providers won almost two-thirds of appeals filed. “That speaks frankly to the fact that RACs were not prepared to conduct medical audits in line with clinical and regulatory guidance provided by the CMS,” said Robert Corrato, president and CEO of Executive Health Resources, Newtown Square, Pa., which offers medical necessity compliance services. The hope for the permanent program is that the RACs will be more adept in conducting these reviews—but at the same time, hospitals shouldn't necessarily assume that, Corrato said.
For that reason, hospitals need to be on guard—and prepared—once these reviews start rolling out, Corrato said.
Hospitals have to ensure that every day they're complying with the medical necessity review process, that patients are being admitted to the right status, whether inpatient or observation, he said. Doing so will make them better prepared for the RAC appeals process, something they were not prepared to deal with during the demonstration, he said.
A number of potential roadblocks face these types of reviews, said Bo Martin, director of healthcare disputes compliance and investigations practice at Navigant Consulting, Chicago. He provides consulting services to hospitals and other healthcare providers in response to RAC audits.
First off, there are no clear-cut standards for arriving at medical necessity determinations, Martin said. Guidelines exist in the private sector, but none are applicable to all types of care.
There's also no guarantee that all of the information relevant to a review will be fully available to the RACs in making these medical necessity decisions, he said. Hospitals aren't the custodians of people's medical histories, or the clinical information pertinent for medical necessity determinations, he said. As an example, a patient may go to a physician's office and get tests done to decide whether they need an implantable cardiac device—but the result of that may not be included in the medical chart maintained by the hospital. That means a RAC audit of medical necessity for that particular patient may not be accurate based on the fact that the information is incomplete, he said.
The RAC program has been implemented in all 50 states and currently conducts audits only in fee-for-service Medicare, although provisions in the new health reform law call for an expansion of the RAC program to Medicare Parts C and D and Medicaid by Dec. 31.
