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To see how Connolly describes the issues and the way they will be reviewed, take a look below, and notice the new MS-DRG, 313:


Region C: Connolly


Issue Name:

Medical Necessity: Chest Pain


RACs will review documentation to validate the medical necessity of short stay, uncomplicated admissions of MS DRG 313. Medicare only pays for inpatient hospital services that are medically necessary for the setting billed and that are coded correctly. Medical documentation will be reviewed to determine that the services were medically necessary and were billed correctly.


RACs WILL ALSO REVIEW documentation for DRG Validation requiring that diagnostic and procedural information and the discharge status of the beneficiary, as coded and reported by the hospital on its claim, matches both the attending physician description and the information contained in the beneficiary’s medical record.  Reviewers will validate for MS-DRG, principal diagnosis, secondary diagnosis, and procedures affecting or potentially affecting the DRG.


Provider Type Affected:   Inpatient Hospital


10/01/2007 – Open


Please note the clarity in the description regarding the focus for these 29 issues, inclusive of DRG validation: the “wolves” are eager, it might seem, to “blow our house down!”


“Medical Necessity” Screening Criteria


Last fall, and again earlier this year, RACmonitor hosted webinars on the use of the nation’s two most widely implemented tools (McKesson’s InterQual® and Milliman CareGuidelinesTM) for helping provide guidance to providers on medical necessity of services, touching on matters including documented patient conditions, symptoms and possible location for the service provision (inpatient hospital, outpatient). The sessions generated a great deal of interest, dialogue and more than a little “heat.” Questions have continued to come in during recent months regarding which criteria the RACs will use and how providers should respond to denials for medical necessity when or if they should occur. A recent question (Aug. 16) is posted below, illustrating a theme echoed by many questions we have received;


Question: “We continue to see statements that the RACs do not necessarily have to strictly use InterQual or Miliman when their nurses review for medical necessity.  So, how are these decisions made if not by using objective criteria?”


Rephrased another way, the expressed concern appears to be “we use  criteria x, so what do they use? Shouldn’t they use the same, and if not, how can their decisions be valid?” Both questions have been answered by CMS in the final RAC statement of work and in two very recent publications released this year. Let’s get to it then…


The 2007 final RAC statement of work clearly lays out what is expected from the RAC and the provider regarding reviews of previously submitted claims (Oct. 1, 2007 forward) and supportive claim documents, so let’s review the language from key sections:


“Medicare Policies and Articles


The RAC shall comply with all National Coverage Determinations (NCDs), Coverage Provisions in Interpretive Manuals, national coverage and coding articles, local coverage determinations (LCDs) (formerly called local medical review policies (LMRPs)) and local coverage/coding articles in their jurisdiction. NCDs, LMRPs/LCD and local coverage/coding articles can be found in the Medicare Coverage Data Warehouse http://www.cms.hhs.gov/mcd/overview.asp. Coverage Provisions in Interpretive Manuals can be found in various parts of the Medicare Manuals. In addition, the RAC shall comply with all relevant joint signature memos forwarded to the RAC by the project officer.


RACs should not apply a LCD retroactively to claims processed prior to the effective date of the policy. RAC shall ensure that policies utilized in making a review determination are applicable at the time the service was rendered except in the case of a retroactively liberalized LCDs or CMS National policy. The RAC shall keep in mind that not all policy carriers the same weight in the appeals process. For example, ALJs are not bound by LCDs but are bound by NCDs and Rulings.


If an issue is brought to the attention of CMS by any means and CMS instructs the RAC on the interpretation of any policy and/or regulation, the RAC shall abide by CMS’ decision.”



So, first and foremost, the RACs must follow CMS decisions and coverage determinations when reviewing your submitted materials. They cannot go off on their own, and this is consistent with other reviewing entities, both in the past and present.


All right then, how must the RACs conduct this activity?


“Internal Guidelines


As part of its process of reviewing claims for coverage and coding purposes, the RAC shall develop detailed written review guidelines. For the purposes of this SOW, these guidelines will be called “Internal Guidelines.” Internal Guidelines, in essence, will allow the RAC to operationalize carrier and intermediary LCDs and NCDs.


Internal Guidelines shall specify what information should be reviewed by reviewers and the appropriate resulting determination. The RAC need not hold public meetings or seek public comments on their proposed internal guidelines. However, they must make their Internal Guidelines available to CMS upon request. Internal Guidelines shall not create or change policy.”


Well, here is a first key to the answer to the above question. The RACs can (and have) develop their own written review guidelines, and they must tell CMS what those are “upon request” – CMS’s request, not a provider’s. What, is that fair? Well, hang on, and let’s see what else there is from which to seek direction and answers.


“Individual Claim Determinations


The term ‘individual claim determination’ refers to a complex review performed by a RAC in the absence of a written Medicare policy, article, or coding statement. When making individual claim determinations, the RAC shall utilize appropriate medical literature and apply appropriate clinical judgment. The RAC shall consider the broad range of available evidence and evaluate its quality before making individual claim determinations. The extent and quality of supporting evidence is key to defending challenges to individual claim determinations. Individual claim determinations which challenge the standard of practice in a community shall be based on sufficient evidence to convincingly refute evidence presented in support of coverage.  The RAC shall ensure that their CMD is actively involved in examining all evidence used in making individual claim determinations and acting as a resource to all reviewers making individual claim determinations.”


So, the RACs must utilize “appropriate medical literature and apply appropriate clinical judgment;” in other words, along with their own internal guidelines, they must look to what we look to in reaching a determination.


“Staff Performing Complex Coverage/Coding Reviews


Whenever performing complex coverage or coding reviews (i.e., reviews involving the medical record), the RAC shall ensure that coverage/medical necessity determinations are made by RNs or therapists and that coding determinations are made by certified coders. The RAC shall ensure that no nurse, therapist or coder reviews claims from a provider who was their employer within the previous 12 months. RACs shall maintain and provide documentation upon the provider’s request the credentials of the individuals making the medical review determinations. If the provider requests to speak to the CMD regarding a claim(s) denial the RAC shall ensure the CMD participates in the discussion.”


“Complex ReviewComplex review occurs when a RAC makes a claim determination utilizing human review of the medical record. The RAC may use complex review in situations where the requirements for automated review are not met or the RAC is unsure whether the requirements for automated review are met. Complex medical review is used in situations where there is a high probability (but not certainty) that the service is not covered or where no Medicare policy, Medicare article, or Medicare-sanctioned coding guideline exists. Complex copies of medical records will be needed to provide support for the overpayment. In cases where an improper payment was identified, the RAC shall inform the provider of which coverage/coding/payment policy or article was violated.”



Complex Review

(with medical record)

Written Medicare policy/article or Medicare-sanctioned coding guidelines exists

No written Medicare policy/article or Medicare-sanctioned coding guidelines exists



(often called “Individual Claim Determinations”)



Rationale for Determination


The RAC shall document the rationale for the determination. This rationale shall list the review findings including a detailed description of the Medicare policy or rule that was violated and a statement as to whether the violation resulted in an improper payment.”


Let us be very clear on who is conducting the RAC complex reviews, which now include the review for medical necessity. They most certainly are experienced professionals: RNs, case managers, utilization management reviewers, managed care staff, former government or FI and payer-based skilled individuals. They have worked in locations like yours. In those settings these staff members are often the “best defenders” because of their knowledge of InterQual® and or MillimanTM, and of the internal issues involved with defending (where possible) against challenges initiated upon post-payment review. They know where to look in the records; they have heard it all regarding reasons for deficient, illegible, unspecific, unauthorized or just plain absent physician documentation. But wait: what about the CMS-promised oversight by a RAC medical director?


No different than post-payment reviews of the past (internal ones performed by a provider or external ones performed by another entity), RAC RN reviewers will have access to the medical director for vague or difficult clinical judgments when conducting a complex review, and upon a second appeal by a provider, so will the provider. But do not assume or expect that the RAC medical directors will be involved on all the reviews, any more than your internal/community-based physicians are involved with day-to-day determinations made by your own reviewing (supportive) staff regarding the same concerns.


Below are two recently published federal documents that continue to clarify the position of how medical necessity complex reviews can be expected to be conducted and the clinical judgment used in reaching those decisions. They describe the playing field that we, the provider community, must understand, accept and ADOPT for ourselves:


SUBJECT Clinical Review Judgment (CRJ)

EFFECTIVE DATE: April 23, 2010





A. Background: Medicare claim review contractors (carriers, fiscal intermediaries (called affiliated contractors, or ACs), Medicare Administrative Contractor (MACs), the comprehensive error rate testing (CERT) contractor, program safeguard contractors (PSCs), zone program integrity contactors (ZPICs) and recovery audit contractors (RACs)) are tasked with measuring, detecting and correcting improper payments in the fee for service (FFS) Medicare program. These contractors review claims and medical documentation submitted by providers.


This section applies to ACs, MACs, CERT, RACs, PSCs, and ZPICs, as indicated below.


B. General


The CRJ involves two steps: (1) the synthesis of all submitted medical record information (e.g., progress notes, diagnostic findings, medications, nursing notes) to create a longitudinal clinical picture of the patient, and (2) the application of this clinical picture to the review criteria to make a reviewer determination on whether the clinical requirements in the relevant policy have been met. AC, MAC, CERT, RAC, PSC, and ZPIC clinical review staff shall use CRJ when making complex review determinations about a claim.


The CRJ does not replace poor or inadequate medical records. CRJ by definition is not a process that ACs, MACs, CERT, RACs, PSCs and ZPICs can use to override, supersede or disregard a policy requirement. Policies include laws, regulations, CMS rulings, manual instructions, policy articles, national coverage decisions, and local coverage determinations.



Now, finally we proceed to the question of InterQual® and or MillimanTM, and the relative objectivity of criteria to be used by a RAC when conducting a complex medical necessity review. Although no RACs are named, it follows that this “response” is applicable to them as well.


FEDERAL REGISTER August 11, 2010


42 CFR Parts 431, 447, and 457

Medicaid Program and Children’s Health Insurance Program (CHIP); Revisions to the Medicaid Eligibility Quality Control and Payment Error Rate Measurement

Programs; Final Rule

(page 48828)


“Comment: Regarding the process for determining medical necessity, one commenter questioned whether or not the PERM review is based solely on InterQual Criteria, as some States not only utilize InterQual Criteria but also a utilization review that includes a nurse and physician review in certain instances for determination of medical necessity. The commenter stated that through this process, the physician may override the nurse’s finding based on experience and clinical judgment. The commenter recommended that physician findings for inpatient hospital stays not be overridden by CMS for States that utilize medical experts to augment their determination of medical necessity.


Response: The purpose of the PERM review is to conduct an independent review of the sampled claims to identify improper payments. During the PERM medical review orientation conducted with each State prior to the beginning of the medical review process, the State specific criteria and guidelines used to determine medical necessity are requested as States use various methods (for example, Milliman’s, InterQual, the Quality Improvement Organization (QIOs)). Our contractor takes into consideration the medical necessity criteria used by the individual State for screening purposes, and, if a medical necessity error is identified, the record is reviewed by a second level reviewer with greater expertise than the first reviewer. Where there are co-morbidities or complications documented in the record, clinical review judgment is applied before any error is reported to the State. In no case does clinical review judgment override statutory, regulatory, ruling, or policy provisions. All documentation and policy requirements are met before clinical review judgment applies.


For example, if the State uses InterQual Criteria to determine medical necessity, our contractor screens the medical record using InterQual Criteria at the first level of review. When an improper payment is identified, the case is referred to a second level review for verification that the InterQual Criteria are applied accurately and that State policy, rulings, statute and Federal statute, regulatory, ruling, and policy provisions are applied with accuracy. Clinical review judgment is applied only if needed after all other review is completed. It may be needed when the medical decision requires clinical judgment based on the patient’s condition, co-morbidities or complications documented in the medical record submitted. If an error is found and the State disagrees with the finding, the State has the opportunity to request difference resolution with the contractor. For errors disputed by the State, the difference resolution review is conducted by review supervisors or managers and if the medical necessity error is upheld, the record is reviewed by a review panel consisting of review managers, directors and a board certified physician. During the difference resolution process, the State can provide to the PERM contractor any relevant utilization review findings that will be given full consideration when the claim is re-reviewed and a final determination is made.”




Legislative activity in 2010, including the March passage of the Patient Protection and Affordable Care Act (ACA), really has been unlike anything most providers or their staffs have experienced when it comes to the acquisition and retention of federal or state dollars for our services. The president has directed the secretary of health and human services to set the goal of a reduction “in half” of improper payments to healthcare providers. As taxpayers, beneficiaries certainly would support this objective. The issue of medical necessity is not new to us in healthcare; we have been dealing with this (to a greater or lesser success rate) for a long time. But now the issue is taking center stage, and it will not go away.



Confidence in appealing these RAC claim denials and recoupment rests on your document integrity, the ability to present compelling information to support the services you have billed for, and improvements to your internal processes going forward such that challenges are infrequent and defendable. Waste no more time worrying about criteria and look to your internal experts and expertise to eliminate the concern regarding current and future claim payment. The big bad wolf cannot “blow down our houses” if they are built on solid ground, regardless of what criteria or screening guidance the RACs may use.


WE really do know how to do this, so getting the house “built” now is what we all should focus on.


About the Author


Patricia Dear, RN, has more than 30 years of experience in the healthcare industry, working within corporate healthcare entities, for-profit and non-profit hospital systems, legal defense and plaintiff counsel. She is a recognized national speaker on reimbursement and compliance. She is the president and CEO of eduTrax®.


Contact the Author




To view “RAC Denials and the Coder’s Quandary: Clinical Indicators Inconsistent with Documented Diagnoses,” please click here


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