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How Revised RAC Statement of Work Will Impact Providers

James Carroll, for HealthLeaders Media, September 23, 2011

The updated SOW also places an emphasis on the fact that RACs are expected to give CMS feedback on areas where guidance is unclear, which—down the road—could ultimately be quite beneficial for providers. Take LCDs (local coverage determinations), for example. The updated CMS guidance states:

The majority of coverage policy in Medicare is defined through Local Coverage Decisions (LCD). Therefore, LCDs typically provide the clinical policy framework for Recovery Auditor medical necessity reviews. If a LCD is out of date, technically flawed, ambiguous, or provides limited clinical detail it will not provide optimal support for medical review decisions.

CMS states in the SOW that RACs are using guidance in the LCDs for medical necessity decision making, and that the RACs will be tasked with helping CMS and the other contractors to improve that guidance over time, according to Taylor.

"So what could be an outcome of that? It's possible that we may begin to see the evolution of more specific types of medical necessity guidance, which would make the hospitals' jobs a lot simpler," he says.

Other items of potential interest for providers include:

Complete denials vs. partial denials

Although it is not a change from the previous program, CMS now states that a recovery auditor may find a full or partial overpayment, but it is now written in such a way that suggests that the contractor should be denying the overpayment, but permitting payment for the lower level—and medically necessary— level of care, says Taylor.

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1 comments on "How Revised RAC Statement of Work Will Impact Providers"


Terry Myers (9/23/2011 at 11:30 AM)
The example provided for the partial denial using an inpatient admission down graded vs. denied to observation is very misleading. The RAC auditor can not downgrade/allow a partial payment in this situation. If this is an inpatient admission with an inpatient admission order the RAC auditor can not create an observation (refer to observation) order only a physician (primarily responsible for the care of the patient with proper privileges at the hospital) can create an order. The RAC has no choice in this situation but to deny the inpatient admission. The hospital can try to go back and bill for services provided, lab, X-ray and others (no observation) IF they have valid physician orders for the services that include the medical justification. The job of the RAC is not to bill for the hospital. The above example is driven by three primary issues: 1) Physician education on inpatient vs. refer to observation requirements is important. 2) Lack of case management and other physician support assessing a patient upon admission that provides assistance to physicians in [INVALID]ing the appropriate service. 3) CMS has clarified that an admit order without any further clarification as to inpatient or refer to observation is an inpatient admission. Good forms design along with a process to assure a proper admission order is also required. A valid example would be a partial denial caused by a coding change that takes away a CC or MCC. In this case the hospital will see the removal from the MAC of the total payment for the original DRG than a payment for the new (lower) DRG. This example also requires that a valid physician inpatient admission order exists. A normal validation item for the RAC audit.