The Centers for Medicare & Medicaid Services’ (CMS) New Issue Review Board has recently approved the first “medical necessity review” audits for Medicare’s permanent Recovery Audit Contractor (RAC) program, allowing contractors to begin posting items of interest to their respective websites. This had been put on hold for quite a while by CMS. Look for the RACs to post the approved issues on their websites in next two weeks.
During the three-year RAC demonstration project approximately 40 percent of all improper payments identified stemmed from medical necessity; for inpatient hospitals this figure was 62 percent. The revenue impact of these denials was $513 million in just three states. This should be of great concern to hospitals.
CMS has stated that RACs cannot review cases that they already have audited (for MS-DRG validation for example) and issued a decision. They can however audit cases that they already have but have not issued a decision on for medical necessity and also for MS-DRG validation simultaneously.
Hopefully hospitals have prepared for this long ago. Strategies to mitigate this risk include “mining the 835 data to determine areas of vulnerability so that appropriate changes can be made going forward to avoid audit exposure and also having targeted medical necessity audits performed either internally or by a specialty firm to help identify issues.
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