Section 306 of the Medicare Prescription Drug, Improvement and Modernization Act of 2003 (MMA) required The Centers for Medicare and Medicaid Services (CMS) to complete a demonstration project to determine the impact of the use of Recovery Audit Contractors (RACs). Specifically CMS is required to determine the RAC’s effectiveness in identifying underpayments and overpayments and recouping overpayments under the Medicare program for services for which payment is made under part A or B of title XVIII of the Social Security Act. The result of this demonstration project is that the RAC program became permanent and nationwide.
In the inpatient setting, the permanent RAC auditors were approved to conduct audits in the following order:
• Part A Diagnosis Related Group ( DRG) reviews
• Medical Necessity Complex Reviews
The RAC auditors are required to submit areas of potential focused review for approval by CMS. CMS has now approved the first set of “Medical Necessity” complex review issues with eighteen types of inpatient hospital claims in the approved audit focus.
The Medicare Region B[1] RAC, CGI Technologies and Solutions, posted the medical necessity issues approved by CMS on August 12, 2010. Half of the medical necessity complex review issues listed are related to existing MS-DRG validation issues. Adding the medical necessity component increases the vulnerability and exposure in these claims. The move to the “more subjective areas” of medical necessity opens the door to the “debatable diagnoses” such as respiratory failure, which has the potential to be considered medically unnecessary, if not properly documented. Of note, this diagnosis has been a focus of RAC reviews in the past for MS-DRG validation.
The Medical Necessity complex review requests are expected to roll out nationwide soon. Hospitals should be clear on their point of contact for requests and prepared for the additional documentation requests that are soon to come in order to avoid any potential denials.
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