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Connolly Consulting Associates, the Region C Recovery Auditor, is the first of the RACs to post issues related to the American Taxpayer Relief Act-mandated review of outpatient therapy costing more than the $3,700 threshold.

Connolly posted the approved issues on April 4. Four issues were posted.

As mentioned, there is a $3,700 cost threshold for physical therapy and speech-language pathology combined, and an additional $3,700 threshold for occupational therapy. Connolly’s approved issues covered prepayment and post-payment review of claims submitted to a carrier (private practice, physician, etc.) and prepayment and post-payment review of claims submitted on behalf of hospitals (which includes other Part A billers, such as rehab agencies, CORFs, SNFs, HHA, etc.).

Each of the RACs, under project direction from the Centers for Medicare & Medicaid Services (CMS), will conduct both prepayment and post-payment reviews. Prepayment reviews will take place in the states that currently are involved in the RAC Prepayment Demonstration program that began last September. Post-payment reviews will be conducted in the other 39 states. While the original legislation called for prepayment review, CMS has modified this process, effective April 1, as the RACs take over the program.

RACmonitor broke this story on March 22, following the CMS decision to refer the manual medical review program to the Recovery Auditors (as indicated by a message on the CMS website). There are 11 states in the RAC Prepayment Demonstration, including those seven states that CMS considers prone to high levels of fraud (Florida, California, Michigan, Texas, New York, Louisiana, Illinois) and four additional states that were identified as having high volumes of short inpatient stays (Pennsylvania, Ohio, North Carolina and Missouri).  

Connolly’s description of the posted issues provides little in the way of detail beyond that which CMS already has communicated to the therapy community. For example, here are some of those details about the prepayment review posting: “In accordance with The American Taxpayer Relief Act of 2012 (ATRA) signed into law by President Obama on Jan. 2, 2013, prepayment reviews will be conducted on Part B therapy caps for occupational therapy (at) $3,700 for 2013, and the combined cap for physical therapy (PT) and speech-language pathology services is also $3,700 for 2013.” 

Connolly has posted these issues for all Region C states and for dates of service “three years from (the) initial determination date,” which is consistent with the RAC lookback period. However, claims filed prior to April 1, 2013 cannot be reviewed. Resource information is listed as “CMS Medical Review and Education of Therapy Cap,” which is at the very least disheartening and lends credence to the therapy industry’s suspicion that the RACs may not be as experienced as the MACs in reviewing therapy claims (which in turn may create a higher denial rate, at the expense of the appeals process).

While the RAC Statement of Work called for the RACs to have therapists among their review staffs, it is not likely that members of the therapy industry will know if their claims are being reviewed by therapists or nurse reviewers. The therapy stakeholder community is awaiting further guidance from CMS on this as well as several other unanswered questions that have been submitted for review, in hopes that outreach education by the RACs and the MACs will take place to clarify how a complex medical review will take place on only the portions of claims that exceed $3,700.

It is no surprise that Connolly is the first RAC to post manual medical reviews of therapy claims above the $3,700 threshold as issues, as it was the first RAC to roll out provider education as the permanent program got under way (as well as the first RAC to post automated issues, including the outpatient issue related to billing of untimed codes). 

Connolly has been the subject of several RACmonitor articles, as some providers in Florida have reported that the edit on the automated issue was not programmed to differentiate between two different untimed therapy procedures occurring on the same date of service (as differentiated previously as a single untimed procedure being billed in units greater than one on a given date of service). RACmonitor also reported on a similar problem that providers in Region A were having with incorrectly applied edits for untimed codes. Region A resolved the edit problem, indicating that resources found on RACmonitor and discussion of the issue on “Monitor Monday,” the live Internet broadcast produced by RACmonitor, helped clarify the problem and allowed it to be corrected.

For hospitals that are all too familiar with the recovery audit program, this is just another set of issues to add to your internal RAC tracking system. Count on your therapy staff being fairly inquisitive about the process and eager to gain from your expertise. For outpatient therapy providers, this is a guarantee that if you have never been audited, you are likely to be audited going forward. And your first such experience will be one in which the stakes are high. 

Prepare yourself by ensuring that you have a clinical strategy involving compliance with the Medicare documentaiton requirements, your MAC’s local coverage determination, and an internal process to audit and monitor outpatient therapy services appropriately. 

There is no going back for rehab facilities: the RACs are here to stay.

About the Author

Nancy Beckley, president of Nancy Beckley & Associates LLC, is certified in healthcare compliance and has extensive experience specializing in rehabilitation and compliance. Her work includes establishing auditing and monitoring protocols for outpatient providers; conducting pre-acquisition compliance risk audits; strategic market-based planning and analysis; operational analysis, including benchmarking, coding and staffing; CORF development and implementation; managed care analysis; facilitation of credentialing, and managed care contract technical review.

Contact the Author


To comment on this article please go to editor@racmonitor.com


Nancy J. Beckley, MB, MBA, CHC

Nancy Beckley is founder and president of Nancy Beckley & Associates LLC, providing compliance planning and outsourced compliance services to rehab providers in hospitals, rehab agencies, and private practices. Nancy is certified in healthcare compliance by the Healthcare Compliance Certification Board. She is on the board of the National Association of Rehabilitation Providers and Agencies. She previously served on the CMS Professional Expert Technical Panel for Comprehensive Outpatient Rehabilitation Facilities. Nancy is a familiar voice on Monitor Mondays, where she serves as a senior national correspondent.

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