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The healthcare industry is finally catching up to other industries in its deployment and use of advanced analytics tools. Payers, providers, and auditors are now able to quickly collect and analyze vast amounts of claims data. As they do so, previously hidden coding errors, documentation gaps, and misappropriated Medicare funds are being uncovered for all to see.

This has resulted, not surprisingly, in an ever-growing list of targeted audits and new auditors targeting providers. One example is Supplemental Medical Review Contractors (SMRCs). This article includes four key points for providers to understand about SMRCs in the year ahead. 

SMRC Audits

SMRCs target specific topics, time frames, and issues as identified and recommended by other auditing organizations such as the U.S. Department of Health and Human Services (HHS) Office of Inspector General (OIG) or the Centers for Medicare & Medicaid Services (CMS). While similar to Recovery Auditor (RAC) audits, SMRCs tend to be more focused, concerned mainly with the issue of medical necessity.

CMS contracted with Strategic Health Solutions LLC, an SMRC, in 2013 to perform medical reviews of Medicare Part A, Medicare Part B, and durable medical equipment (DME) providers and suppliers. SMRCs evaluate medical records and related documents to determine whether Medicare claims are being billed in compliance with coverage, coding, payment, and billing practices and regulations. Focus of the reviews may include, but is not limited to, vulnerabilities identified by CMS internal data analysis, the Comprehensive Error Rate Testing (CERT) program, professional organizations, and federal oversight agencies.

In accordance with part 1833 of the Social Security Act, providers and suppliers must provide documentation upon request to support claims for Medicare services. Such a request complies with the Health Insurance Portability and Accountability Act (HIPAA) privacy rule, which allows release of information (ROI) for treatment, payment, and healthcare operations. 

The SMRC, Strategic Health Solutions LLC, notifies CMS of any improper payments and documentation request noncompliance. At that point, a Medicare Administrative Contractor (MAC) may initiate claim adjustments and overpayment recoupment actions through the standard overpayment recovery process (for more details and contact information you can access the Strategic Health Solutions website at http://www.strategichs.com/.) 

SMRCs in Action

Outpatient procedures and ancillary testing often are overlooked by other contractors, but again, the SMRCs have a more focused approach to claim review. Sleep apnea testing is one such type of audit. Concern about this growing field of ancillary testing triggered an OIG study and summary report in October 2013 titled “Questionable Billing for Polysomnography Services.” According to the study’s executive summary, “increased Medicare spending on polysomnography (a type of sleep study), along with growing concerns about fraud and abuse, prompted OIG to conduct this study.” SMRC auditing of polysomnography services is just one example of stronger analytics in action. Here is quick overview of how the issue unfolded: 

  • From 2005 to 2011, Medicare spending for polysomnography services rose from $407 million to $565 million, an increase of 39 percent.
  • Medicare paid nearly $17 million for polysomnography services that did not meet one or more of three Medicare requirements. Eight additional measures subsequently were developed in collaboration with fraud investigators and sleep medicine professionals, both inside and outside OIG.
  • Use of inappropriate diagnosis codes was the culprit in the majority of cases, with 85 percent of claims with inappropriate diagnosis codes coming from hospital outpatient departments.
  • One provider agreed to pay $15.3 million to settle allegations of false polysomnography claims billed to Medicare and other federal payors. 

Based on the OIG’s recommendations, SMRCs were instructed to audit sleep apnea testing. Furthermore, 180 providers were specifically identified as exhibiting patterns of questionable billing for polysomnography services. From an auditor’s perspective, sleep apnea testing is low-hanging fruit for two reasons: the procedure involves a relatively small number of doctors and sleep-study specialists, and the number of sleep studies has skyrocketed over the past several years.

Through audits, conducted in no small part due to the study mentioned above, it was determined that $370 million was being inappropriately given for sleep-study and apnea treatment equipment. According to Medicare’s 2013 improper payments list, there was an increase of 56.1 percent on continuous positive airway pressure (CPAP) supplies, making for an estimated $370 million annual impact.

CPAP is a treatment that uses mild air pressure to keep the airways open. CPAP typically is used by people who have breathing problems, such as sleep apnea. CPAP denial is common, as providers must prove medical necessity, according to the LCD guidelines

This single example of SMRCs reviewing sleep apnea claims holds far-reaching implications and consequences for providers to understand.

Four Points to Know, Two Steps to Take 

While there are certainly similarities between SMRCs and RACs, there are also key points that set these review contractors apart. For example, SMRC audits are:

  • Focused and targeted (e.g. sleep apnea testing claims);
  • Concerned with determining if specific procedures, tests, and operations are medically necessary;
  • On the rise, may occur at any time, and conducted nationally by only one contractor; and
  • Based on different rules of documentation, possibly requiring documentation from multiple sources.

As mentioned in the OIG study, providers, in collaboration with vendors, should take a two-pronged approach to reduce SMRC audit risk and mitigate Medicare denials. The first step is proactive, focused education for clinicians and staff to reinforce documentation requirements and guidelines for medical necessity of SMRC targeted procedures, tests, and operations.

This education should be conducted across all steps of the clinical workflow, from physician offices to pre-authorization teams to coders. SMRC requirements for documentation are quite clear. So providers must focus on the ability to properly capture documentation, often from a variety of sources and places.

With education underway, work with IT departments, EHR, and clinical documentation vendors to build in documentation alerts reminding clinicians of proper medical necessity documentation requirements. 

Keep in mind that if there is a denial, it can be retroactive, forcing providers to play catch-up and fix past mistakes before making improvements to the current system to avoid future transgressions. On another note, SMRCs certainly give providers the impetus to conduct their own internal probe audits to improve compliance, promote performance, and minimize takebacks before the fact. 

About the Author

With more than 20 years of experience in the healthcare industry, Dawn exhibits a profound knowledge of hospital revenue cycle practices, audit management, and business intelligence analytics. Prior to joining HealthPort, Dawn was the network director of audit and compliance for a Midwest health system. She has healthcare experience in denials management, organizational development, continuous quality improvement (CQI), and corporate compliance.

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