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CMS has adopted these payment policies with the intension to reduce so-called “hospital acquired conditions” (HACs) and preventable medical errors, or “never-pay events.”


One system it has instituted is Present On Admission (POA) indicators, which are required codes that tell CMS whether an ailment was “caused” by a hospital or by a condition already present in a patient when he or she arrived.

Automatic edits in the payment system should catch missing POA indicators. However, there is judgment involved in deciding which indicator is appropriate – and it’s through that process that a RAC has an open door to recoupment.

POA indicators were required on all Medicare claims beginning in April 2008, as claims assigned to the Principal and Secondary diagnoses without them were automatically denied. They can, however, be re-filed with the indicators.

The Advent of HACs

Then, on October 1, 2008, CMS began denying payments for inpatient claims that included diagnoses determined to be hospital acquired, the HACs.


Upon admission to a general acute care facility, a physician dictates a patient’s history and physical (H&P). In the H&P, all the diseases or conditions that already are being managed for a patient typically are mentioned. As long as a symptom for a condition is present at that time, a coder later can use this report as evidence that the condition led to a particular diagnosis and was present upon admission. Therefore, the diagnosis can have “Y,” or Yes, assigned as its POA indicator, and CMS will pay the DRG, including any additional payment for the condition even if it is one of the HACs.


If the physician, however, is unable to determine what the cause of symptoms was at the time of admission and therefore cannot determine if the condition was present, a coder must make a judgment about the POA status to decide whether or not the physician was “unable to clinically determine whether the condition was present at the time of admission.”
If the coder decides that is the case, he or she can use the “W” code, meaning “clinically undetermined.” CMS will pay for the DRG and include the condition as if it were presented at the time of admission. Since the coder must make a judgment call therein lies the risk


RAC Disagreement

A RAC later may decide to disagree based upon existing documentation. That is, the RAC may argue that there was in fact insufficient documentation to show that a condition was present and therefore rule that the case should have been coded as “U” or “documentation insufficient to determine.” That code means that CMS does not include the diagnosis in the payment calculation and therefore does not pay for that condition. In a common DRG such as pneumonia, the difference could be over $3,000 per claim.

Educate, Educate, Educate

Education is the key to assigning POA indicators and protecting reimbursement from RAC attacks.

RAC University has a complete course about assignment of POAs and how to deal with HACs, showing many examples of exactly what the impact can be to your bottom line.

The course is called RACs, HACs and Never Events. You can find it here at RACUniversity where you will also be able to watch a short preview of the course.




Chuck Buck

Chuck Buck is the publisher of RACmonitor and is the program host and executive producer of Monitor Monday.

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