Healthcare Audit: Successfully pursue the RAC Appeals Process


Many of you may have worked at a hospital or hospitals over the years. And the auditors have never come. Okay, maybe the FI auditors came routinely. But other than that, nobody else has ever come to your hospital. Well, the RAC contractors will. There's no question about that.

Well, they're looking for overpayments (and also underpayments). Now, what they look for particularly medical necessity. And it's so easy to judge medical necessity after the fact. It's really hard to judge it before the fact.

Site of services: For instance, we simply provided the service in the wrong site. Instead of the hospital inpatient, it should have been the hospital allowed patient or maybe it should have been over an ASC. It maybe - this could have been in the physician's office. So they're going to hit us on that.

Sufficiency of documentation:Anybody can look at documentation and say, “Well, I don't think that's sufficient.” But then what audit guidelines do we have for documentation sufficiency? And that's an interesting question, everyone.

Basically, what you can do is look at the overall claims filing and payment process -- covered individual, covered service, ordered by a physician, medically necessary, provided by qualified person, appropriate written documentation, claim filed timely, claim properly adjudicated and paid.

Most of what hospitals, physicians and the home health agencies, et cetera, what we worry about is properly providing services, documenting them, developing our claim, doing the accurate medical coding and filing it appropriately.

Now, in some cases, you may be doing exactly that. And what may happen is that the FI for hospitals - the FI - it might end up paying you for something that they should not have paid you for. Sonow what happens? Well, it's still an overpayment.

But we have some real questions there that if the FI is paying you in error and your claim is correct, the FI had all of the information they needed to properly adjudicate your claim, we aregoing to question very much whether the RACs - are they coming after you, the hospital. They should really be going after the FI because the FI incorrectly paid out the money.

Here is an actual case. This was picked up in a healthcare audit several years ago and it involves the question of inpatient versus observation, all right. In the morning, an elderly female patient has presented through the ED with a severe electrolytic imbalance. The patient was recently placed on diuretics and they - for some reason, did not take the prescribed potassium supplements.

Her attending physician decides to admit her to the hospital because this can be a life-threatening situation, all right? She is placed on IV potassium. By the afternoon, she has completely recovered. Her attending physician comes, examines her, she's ready to go home. And the physician discharges her period.

Okay, so what's the big deal here? We placed the patient in the hospital and there's a little electrolytic imbalance and we took care of them and they got better fairly quickly and we sent them home. Now, inpatient criteria were met. In other words, the hospital could have been using Milliman or InterQual or something else, whatever. Their inpatient criteria were met.

However, we can assure that a RAC auditor would look at this and say, “Wow! This should have been handled as observation. It wasn't medically necessary to put the patient in the hospital. You just put them into observation, given them IV potassium, checked to see how they were several hours later, then you could have made a decision as to send them home or put them in the hospital.”

All right, we can assure you the RACs are going to go after this one period. So, do you want to appeal this kind of case? Well, now, if it's an isolated case, maybe not. But we're talking about several thousand dollars in “overpayments”. So, yeah, this is the kind of stuff you're going to be up against.

Now, what you're going to find on this inpatient versus outpatient observation condition medical code 44 business is that it's not going to be an isolated case. You're probably going to be talking about hundreds of cases. And as a result, it's going to be a lot of money.

All right, assuming the payment difference is $2,600, which could be a little low than lot. It depends. And so, the question for you is, well, what are we going to do? Now, the first reaction is that, “You know, we met inpatient criteria but this was an appropriate hospital admission and we took care of the patient.” So, we would suggest to you that you're going to have to do several things though if you are going to appeal this kind of a case.

What will you need to do in order to prepare for an appeal? Well, number one, you'll have to review the case; number two, you'll have to identify CMS documentation requirements if there are any, okay? This becomes - one of the big issues is - and one of the questions we're going to be asking again and again is, what are the audit healthcare guidelines? What are the Medicare guidelines, rules and regulations? What does Medicare say we have to do, et cetera?

And you know, sometimes we're going to find that we really don't have any guidance. For instance, today, the -25 modifier, that's the one we use on E/M levels to separate them from surgical and medical procedures, that's becoming a giant issue today.

The claim is that we hospitals are incorrectly using the -25 modifier, that we don't have sufficient documentation to justification its use. Okay, how do we fight that? Well, we need healthcare guidelines. We need guidelines. We need guidance. Where is that guidance? That's one of the questions you're going to ask.
Well, of course, look at the documentation for the particular case. We'll look for evidence-based payment criteria. And then we'll have to develop a case summary with supporting documentation. And write a little document that goes along with it, that's clear, concise, convincing. In other words, we've got to convince somebody that the RAC is wrong, that this case truly was handled properly and it was justified to make it an inpatient admission.

Now, if you're going to appeal this kind of a case, how far are you going to take it? Well, if it's an isolated case, you know, probably just maybe the first two levels. But if you're doing with a hundred of these, then you may want to go a little bit further in the process.

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