August 19, 2015

State of the Recovery Audit Contractor Program

By Nicole Smith

The Recovery Auditor (RAC) program may see significant changes in the near future, as the Centers for Medicare & Medicaid Services (CMS) has issued the proposed 2016 Inpatient Prospective Payment System (IPPS) rule. 

Among other things, the new guidelines address the controversial two-midnight rule, which has resulted in the pause of inpatient status reviews for the RAC program since 2014. Inpatient status reviews made up the majority of recovery audits and with a statute in place prohibiting inpatient reviews, hospitals have experienced a drastic decline in audits. While audit activity has started to increase as review contractors focus on other claim types, most hospitals still are not receiving the number of requests they had grown accustomed to prior to the pause. The proposed changes to the two-midnight rule address some of the concerns raised by hospitals and organizations representing hospitals.

Under the proposed changes, CMS provides further explanation about the “rare and unusual” exception to the two-midnight rule, and it acknowledges that inpatient admissions that are reimbursed as Medicare Part A claims may be allowable even if the physician does not feel that the hospital stay will span two midnights. These situations will be examined on an individual basis and will require examination of medical records that contain supporting documentation from the admitting physician who determines that the patient would require inpatient services regardless of the expected length of stay. 

CMS has stated that the following scenarios will be instrumental in determining whether a patient is admitted with an inpatient classification: a) the medical predictability could be adversely affected by not admitting as inpatient; b) the seriousness of the signs and symptoms the patient is presenting; and c) if diagnostic tests are being performed that would under normal circumstances be performed on an outpatient basis. 

CMS also will shift the responsibility of two-midnight rule education and enforcement to the quality improvement organizations (QIOs), whereas the responsibility previously fell on the RACs. This may be a positive change for the provider community, as the QIOs are focused on protecting the integrity of the Medicare Trust Fund and ensuring that Medicare beneficiaries receive quality care.  

The QIOs are comprised of clinicians and experts that are dedicated to improving quality healthcare. The QIOs will work with the provider community proactively in order to improve the two-midnight rule process, as opposed to retrospectively identifying and attempting to correct errors. Historically, QIOs have utilized learning action networks (LANs) to support best practices across the healthcare community. Under the proposed rule, QIOs will begin inpatient status reviews no later than Oct. 1, 2015. This may be a welcome change for providers as they look to navigate the changes within their organization to comply with the rule.  

Providers will need to focus on improved documentation and length-of-stay attestation requirements. The QIOs will begin by reviewing a sampling of post-payment claims in an effort to make a determination on the appropriateness of inpatient status admission; they also will take the opportunity to educate hospitals on any denied claims under the two-midnight rule.

Hospitals will need to make adjustments in their billing practices and documentation protocols as a result of the education provided by the QIOs. Hospitals that continue to receive denials will be referred to the RACs for additional claim reviews. 

I see these proposed changes resulting in increased audit activity for hospitals, with audit requests later this year climbing back to peak volumes experienced prior to the pause. Hospitals need to make sure they have procedures in place to respond to these documentation requests in an accurate and timely manner in order to avoid denials.

About the Author

Nicole Smith is vice president of government services at MEA|NEA, a provider of secure, HIPAA-compliant cloud storage solutions, health information exchange, and secure attachment solutions for the healthcare industry. More than 45,000 medical and dental practices partner with MEA|NEA to exchange their health information.

Contact the Author 

nicole.smith@nea-fast.com

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