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CMS: Medical Necessity Reviews Are Coming, and Soon

James Carroll, for HealthLeaders Media, May 13, 2010

There has been much speculation as to when providers would see the first wave of medical necessity reviews by Medicare Recovery Audit Contractors (RAC); but the May 5 nationwide RAC 101 call helped to dispel a bit of that uncertainty.

In the second nationwide RAC 101 conference call for DMEPOS (Durable Medical Equipment, Prosthetics, Orthotics, and Supplies), CMS addressed the imminent arrival of medical necessity reviews for the permanent RAC program, stating that providers might see medical necessity reviews "within the next month or so," according to Scott Wakefield, project officer, CMS. He added that, "We don't have a specific time frame for it but it will begin soon."

When the permanent RAC program was implemented, RACs began looking at automated reviews and eventually moved into complex review for coding errors and DRG validation. Currently the DRG validation issues that are being reviewed specifically exclude medical necessity. Thus far, a reason for the exclusion of medical necessity reviews is unclear, but one reason could be the complexities of clearly defining what "medical necessity" actually is, suggests Debbie Mackaman, RHIA, CHCO, regulatory specialist for HCPro, Inc.

"RACs wouldn't want to make these types of determinations only to have providers challenge them through appeals and win, so the guidelines for determining medical necessity have to be clear or the documentation would have to be very poor," says Mackaman. "For example, with outpatient services such as observation, the documentation would have to show that some or all of the observation time was for patient or facility convenience."

A facility's preparation against impending medical necessity reviews should begin the same way providers prepare against currently reviewed issues, which is ensuring proper documentation with a sound team in place, according to Elizabeth Lamkin, MHA, an associate at Axcel Healthcare Group in Tampa, FL.

"If you don't have documentation to justify what you did, you can't fix it now," says Lamkin. "As you look at vulnerabilities, you begin to shift the workload to the front to ensure it's right on the front end."

Beyond astute documentation and front-end preparation, providers need to be both prepared and educated when the demand letters come in. CMS states that the decision to admit as an inpatient is a "complex medical judgment" made by the patient's physician based on the severity of the signs and symptoms, probability of an adverse outcome, and need and availability of diagnostic studies.

Once demand letters come in, the immediate response from providers may be to challenge the RAC's determination of "not medically necessary" if the documentation can support this complex judgment, according to Mackaman. It may be prudent to get the admitting physician involved in the appeal process to clarify the decision, she says.

Through clear documentation and conscientious internal processes, a facility puts itself in a better place to appeal medical necessity RAC issues. Most providers have already audited their documentation in preparation for RACs and the myriad of other reviewers, so they already know where their "weak spots" are, but a lack of follow up could lead to problems, according to Mackaman.

"If providers took action to enhance documentation problem areas, they should be okay going forward for medical necessity reviews," says Mackaman. "However, if the providers only conducted an audit but did not follow up on their findings, they could find themselves in a disadvantaged position when the RACs begin these reviews."


James Carroll is associate editor for the HCPro Revenue Cycle Institute.

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