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As RACs roll out nationwide, it’s more important than ever to establish those lines of communication now by working together to assess documentation risk areas and install processes and procedures to ensure claims are not denied due to improper documentation or lack of documentation. The most important approach with clinicians is to focus on how improved documentation improves a hospital’s ability to respond to a RAC audit and patient outcomes at the same time.


During the demonstration period, approximately one-third of payments identified by RAC auditors as improper were cited due to the fact that claims did not meet Medicare’s medical necessity criteria for a particular service or in a particular setting. Another large percentage of claims were identified as improper due to the fact that there wasn’t enough documentation on requested medical records or information could not be gathered in time to respond to the audit deadline. Through March 2008, payments totaling more than $391 million were recouped due to claims not meeting medical necessity criteria. Another $74 million was taken back due to insufficient documentation.


Steps to Prepare


According to recent HMS announcements, detailed medical necessity reviews will begin in 2010. To be ready, preparation is required to identify and reduce documentation deficiencies.


Step 1: Assess Your Risk Areas


The first step is diagnosis. By looking at past medical records, your organization can determine its risk areas. Automated tools that can help audit past claims to identify coding problem areas and potential missed revenue are available. These tools also utilize several methodologies to flag charts that may be potential targets for RAC auditors, including those that may be audited due to medical necessity.


It’s extremely important that this assessment involve your coders and clinicians, including your physicians. You consistently should keep your medical leaders informed of your goals, progress, and proposed changes, as their leadership and feedback makes the biggest difference in determining whether or not your entire clinical staff buys into your plan.


Step 2: The Importance of Quality Clinical Documentation


Your clinical staff may not realize the part it plays in helping your organization prepare for RAC audits. Clinical documentation must translate well into the ICD-9 terminology utilized by coding professionals within your health information management department.


If it doesn’t, this could lead to recoupment from Medicare based on medical necessity or lack of documentation to support the diagnoses and services provided.


Also, this lack of detail could impact your organization’s revenue cycle since proper reimbursements for services rendered aren’t being sought from payers.


How do you approach physicians on a topic such as this? First, it’s important to speak their language. Consider, for instance, how a key wording difference on progress notes can make an impact. The following progress note is on a patient admitted with pneumonia and “CHF”:


  • 75 YO female admitted with pneumonia
  • Past history: CHF on Lasix
  • Admit to medical floor
  • PE lung with bilateral rales
  • CXR: shows pneumonia and CHF




  • Pneumonia start antibiotics
  • CHF increase Lasix to twice a day


The MS-DRG 195 would read “simple pneumonia without cc/mcc.” Assuming a $5,000 base rate, the reimbursement for this case would be: $5,000 x 0.7316 = $3,642.


By specifically describing the type of CHF as acute systolic heart failure, if appropriate, the MS-DRG is changed to 193: “simple pneumonia with mcc.” Here, the reimbursement would be at the higher 1.4327 rate, totaling a reimbursement of $7,163. More than $3,500 in reimbursement is being missed because of lack of detail in progress notes. More importantly, this documentation could impact negatively a physician’s risk of mortality profile at your hospital.


For denials, let’s say a physician writes the following:


  • Admit patient to telemetry


H&P reads:


  • Chest pain for two hours, no EKG changes, no shortness of breadth
  • Orders: Place on monitor, cardiac enzymes x 3, regular diet, out of bed as tolerated


An admission like this may be denied by the payer because it does not meet medical necessity for acute inpatient admission to a telemetry unit. Chest pain is a symptom, and there is no documentation describing the potential etiology. The lab work and treatment do not require hospitalization with telemetry. These services could be performed in an observation setting.


Step 3: Close the Gap on Documentation


Involving your clinical staff from the beginning, having your medical leadership champion the cause and using real-world examples in education efforts is vital to ensuring your organization’s documentation is thorough enough for clinical and billing needs. Physicians and clinical staff play an important role in RAC audit preparation.


Engaging physicians and getting their input during the assessment can help identify ways to improve documentation and reduce the chance of RAC recoupment while improving the quality of care you’re providing to patients.


About the Author


Sandra M. Miller, MD, is the senior medical director for MedAssets Inc. Dr. Miller has provided consultative services in the areas of documentation and compliance to hospitals nationwide and has performed utilization management for a major healthcare insurer in the Northeast. Dr. Miller is a board certified internist with more than 20 years of experience in the healthcare industry.

Contact the Author: smiller@medassets.com


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