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Fast Forward

Fast forward to today. If you lived anywhere in the Northeast during September 2001, you surely reacted strongly to the horrific events of 9/11, a day that forever changed how we live. But I was astonished (guess I shouldn’t have been) to travel to the West Coast several months after 9/11 only to witness a general malaise about the terrorism threat; this was particularly evident during airport security check points.

Consider how we reacted, and continue to react, to the threat of swine flu. Many initially believed that this was a major event. As time went on, the threat and our reaction to it waned, but now (if you follow the learned), the threat seems like a potentially major problem for the U.S. and world population come this fall and winter.

I am sure at this point you are asking, “what does this have to do with RACs?”

Medical Necessity Reviews and How You Prepare and React

For all hospitals, the threat of RAC denials of one-day and short-stay cases is real.

Let’s take a moment to highlight the facts:


  • During the RAC Demonstration Project, approximately 40 percent of the identified overpayments were related to medical necessity.

  • The RAC Scope of Work points to continued attention to the potential of claims denials due to lack of medical necessity.

  • Every RAC expert in the country is telling you it is going to happen.

  • The latest target date for these reviews is anticipated to be January 2010

  • You may have performed chart reviews that have indicated that your one-day and short-stay cases are having difficulty being in compliance with medical necessity documentation requirements

  • A RAC payback for a denied admission due to lack of medical necessity probably will result in a loss of the entire admission-related payment. These are significant dollars!

How to React

So what is the right reaction?

Hospitals need to be very careful not to overreact to the impending RAC medical necessity reviews. Even before the RACs, many hospitals have seen their medical necessity and notification denials increase significantly over the past year.

From my viewpoint, a hospital overreaction starts with the statement “these patients should not be admitted to the hospital.” The proper reaction, on the other hand, goes something like this: “what documentation standards and processes need to be established today to ensure that our short-stay admissions can be validated per our physicians’ clinical direction?”

The key learning point here is that place-of-service identification, documentation of patient conditions, etc. all will be driven by the admitting physician.  Yes, there are protocol standards (Interqual, Millemann) that everyone should be utilizing and of which the RACs remind us daily, but hospitals need to make certain that if a patient is admitted, all processes are enacted to ensure he or she will be receiving proper payment from Medicare for those services.

The Cost of Overreaction

You will have people who will overreact. I see it on a routine basis, traveling the country as a consultant.  Someone hears a discussion about RACs and medical necessity and decides to take a very, very conservative approach. He or she begins to change admissions to observation or outpatient status (whole different article), not because of any fraud issues but because something in the system (orders, documentation, lack of case management) has not worked right. In this scenario, the threat of the RAC could cost your hospital tens of thousands of dollars (maybe more) in reimbursement.

The other reaction is a proactive approach, or “let’s fix this process so we can receive proper reimbursement for our admitted patients.” I am not suggesting that you should have more admissions, but that your admissions simply be justified as appropriate (per regulations, including your physician’s documentation) and reimbursed as such.

Process fixes begin with an assessment of your current state. Efforts to concurrently review as many one-day admissions as possible, getting case management involved in cases 24/7, establishing a physician query system and educating/engaging/empowering your medical staff on this issue are just a few of the improvements that you might want to consider.

The threat of your staff overreacting to the RACs is real. Please take proactive efforts to make sure this is not happening in your hospital.

About the Author

Bret S. Bissey, MBA, FACHE, CHC, is a nationally recognized expert in healthcare compliance. He is the author of the Compliance Officer’s Handbook, published in 2006, and has presented at more than 40 regional and national industry conferences/meetings on numerous compliance topics. He has more than 25 years of diversified healthcare management, operations and compliance experience.

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Bret Bissey, MBA, FACHE, CHC

A veteran in healthcare compliance (since 1997), Bret Bissey has served as senior vice president and chief ethics compliance officer at UMDNJ in Northern New Jersey. The author of the Compliance Officer’s Handbook, he has been a thought leader and popular speaker at industry conferences and meetings for many years. Bissey has more than 30 years of diversified healthcare management, operations, consulting, and compliance experience.

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