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ernieThis article has been reposted. We have revised a few numbers in this article, due to differences we have noted since publication. We incorrectly reported DRGs 309 and 813 as approved for medical necessity when they are currently only approved for DRG Validation. We apologize for any inconvenience this may have caused our readers.


CGI Federal, the CMS Recovery Audit Contractor (RAC) contracted for reviews of Medicare claims in seven states, posted approvals for the review of both Medical Necessity and DRG Validation for new and updated issues including 29 DRGs since Aug. 12. Of the 29 DRGs half are among the top 20 DRGs for US healthcare providers when ranked according to total discharges nationwide for 2009, according to the latest figures published by CMS. The states now under review by CGI are Illinois, Indiana, Kentucky, Michigan, Minnesota, Ohio and Wisconsin.


Among the top 20 DRGs for FY2009, 10 made this new list. More importantly, it is now quite likely that half of the top 20 DRGs in any facility are either now or soon will be targets of RAC reviews for medical necessity. And remember they were already likely targets for reviews of physician admission orders, DRG validation and the coding for principal and secondary diagnoses.


The First 29 DRGs Approved for Medical Necessity


Let’s take a more detailed look at the list —the 29 DRGs now posted on the CGI website as approved for review of Medical Necessity are the following:


MS-DRG Description


056 Degenerative Nervous System Disorders w MCC
057 Degenerative Nervous System Disorders w/o MCC
069 Transient Ischemia
190 Chronic Obstructive Pulmonary Disease w MCC
191 Chronic Obstructive Pulmonary Disease w CC
192 Chronic Obstructive Pulmonary Disease w/o CC/MCC
249 Perc Cardiovasc Proc w Non-Drug-Eluting Stent w/o MCC
253 Other Vascular Procedures w CC
254 Other Vascular Procedures w/o CC/MCC
291 Heart Failure & Shock w MCC
292 Heart Failure & Shock w CC
293 Heart Failure & Shock w/o CC/MCC
302 Atherosclerosis w MCC
308 Cardiac Arrhythmia & Conduction Disorders w MCC
312 Syncope & Collapse
313 Chest Pain
314 Other Circulatory System Diagnoses w MCC
315 Other Circulatory System Diagnoses w CC
316 Other Circulatory System Diagnoses w/o CC/MCC
391 Esophagitis, Gastroent & Misc Digest Disorders w MCC
393 Other Digestive System Diagnoses w MCC
551 Medical Back Problems w MCC
552 Medical Back Problems w/o MCC
640 Nutritional & Misc Metabolic Disorders w MCC
682 Renal Failure w MCC
683 Renal Failure w CC
684 Renal Failure w/o CC/MCC
689 Kidney & Urinary Tract Infections w MCC
811 Red Blood Cell Disorders w MCC

DRG Validation Included


All of the above have also been approved for DRG Validation. In fact DRG Validations have been approved for over 75 percent of all DRGs since the RACs began garnering approval for such issues in late 2009. The earliest approvals for so-called “complex reviews” were posted in December 2009 by Connolly Healthcare, the RAC for Region C — a region that includes 17 states in the south and southeastern US.



Complex reviews require a human to review the medical record, as opposed to an “automated review” that can be accomplished with computer software, usually involving more simple true-false comparisons or what CMS likes to call “black-and-white” issues. However, since the first complex reviews were approved for the RACs by CMS the review of medical necessity was specifically excluded for any and all issues.


This was expected


“Given the findings from the RAC Demonstration Project, we always knew medical necessity would be reviewed by the RACs, we just didn’t know when CMS would finally let it loose so to speak,” said Paula Digby, a co-founder of eduTrax and the consulting firm of AlphaQuest, LLC.  “But the time has come just like we knew it would. Now they have full access. First, they can look at admission orders and question whether the physician’s admission order is properly worded and documented. Then they can question the coding to validate the DRG, move the code up or down in the DRG or even move to a different DRG. And now finally they can look at medical necessity, which could affect the admission itself and even lead to a complete denial of the entire claim.”


It’s a Persistent Problem


If a patient’s treatment does not meet established criteria for an inpatient admission then the claim should be billed as outpatient, paying the hospital substantially less since they likely used far fewer resources to treat such a case. The criteria used to determine whether a patient visit should be billed as inpatient or outpatient, however, are not well understood by physicians who are the only ones who can legally write the admission orders. Confusion reigns. And for many years now this has been a persistent problem for facility providers.


In 2007 St. Joseph’s Hospital of Atlanta agreed to pay $26 million to settle allegations by the government that it overcharged Medicare between 2000 and 2005. The problem: billing Medicare for inpatient admissions that should have billed as outpatient for five years.


More recently there was news of a $7.9 Million settlement paid by Mercy Health System in Pennsylvania after it self-reported overpayments for one-day inpatient admissions that should have been billed as outpatient visits, in four hospitals, during a six year period beginning in 2001.


It is not hard to see why CMS has hired the RACs, especially given the current health reform environment we all work in today.


But there is one thing happening that we didn’t expect – at least this writer certainly didn’t see it coming.


This Was Unexpected


While the approval of Medical Necessity review is, in fact, being posted on the RAC website, it is being done in a manner that could be described as “obscure.” Some of these approvals become simply “edits” instead of “new” line items.


According to the RAC Statement of Work, before a RAC can begin sending out requests for documentation to conduct complex reviews or even demand letters for automated reviews already completed, the RAC must first win the approval of any audit issues from CMS and then must post all those approved issues on a public website.


Last August we all began watching those websites take form and grow with the addition of more and more new, approved issues. In December the first complex reviews were posted in the form of DRG Validations with Medical Necessity excluded. As it turns out, the RAC Statement of Work is quite vague about what the format of these websites should be and how “approved issues” should be “posted” on the sites. In fact it says ZERO about such things. Given that void it is perhaps understandable that the RACs each have their own interpretation of how they should “post” the approved issues.



How Do You Define “New”?


It is important to note here that there does not seem to be a consensus on what “new” means. The method that CGI has chosen for posting approvals of Medical Necessity reviews is to either (a) post it as a new issue as if the DRG has never appeared on their list before, or (b) merely change the name or title of a previously approved DRG Validation to include Medical Necessity review for one or more of the already approved DRGs. So some of the 29 DRGs listed above were not posted as “new” line items but some simply had their titles “edited” and therefore did not appear as “new” line items in the list.


The word “new” is small and would appear to be simple to define, but I guess not everyone agrees. Evidently CGI, at least, has decided that “new” has a perhaps more narrow meaning that you or I might want to believe. To CGI, “new” means something never mentioned before — at all. Therefore an issue previously approved and described as “DRG Validation, Medical Necessity excluded at this time” is not a “new” issue, if it later is approved and described as “DRG Validation, Medical Necessity included,” or something to that affect.


The list of 29 DRGs is compiled from 18 total “approved issues” listed on the CGI website. Of those 18, only six (6) were “new” in CGI’s world. The other 12 issues had all been previously approved as early as December 4, 2009, although they were only approved for “DRG Validation, Medical Necessity excluded (at this time).”


Since December I think many were thinking that we could watch the RAC websites and see the “new issues” get posted from week to week. We all thought perhaps, that we could simply sort the list (somehow) by date posted and we’d know if there was anything “new” on the list or not.


It would seem that “new” doesn’t have the same meaning as we now see with the way a “new” review approach (medical necessity) is embedded in the original posted issue. Keep this in mind: there’s no reason to think that other RACs will not adopt this same approach because “new” doesn’t have the same meaning to everyone. And there is no reason to think the other RACs will not adopt this same definition. Instead of posting “new” issues for Medical Necessity, they may simply rewrite the descriptions of their “old” issues, just as CGI has done.


Anyway, more “new”…oops… “edited” issues can be expected any day. They’ll just be harder to track now because we’ll have to read every issue, every day, to see what changed.


And so, what’s new about that?


About the Author


Ernie de los Santos is the chief information officer for eduTrax®. He joined the company at its inception and has been responsible for the creation, development and maintenance of the eduTrax® portals — a set of Web site devoted to providing knowledge, resources and compliance aids for U.S. healthcare professionals who are involved in revenue cycle management.


Contact the Author




To read next article, “Beware: RACs to Apply New Signature Requirements,” please click here


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