Defending against medical necessity denials

Three best practices are emerging to minimize revenue loss from “take back” denials due to errors in medical necessity determinations: Compliance with standard processes, a Physician Advisor, and expanded technology solutions.

“It is imperative for leaders to look at the organizational processes as to how medical necessity determinations are made, and implement best practices to prevent medical necessity denials”

The CMS Recovery Audit Contractor (RAC) demonstration project concluded in 2008 that 62% of overpayments to Inpatient Hospitals were the result of "errors in the determination of Medical Necessity". The revenue impact of these "take back" denials was $513 million dollars in just three states. It is imperative for leaders to look at the organizational processes as to how medical necessity determinations are made, and implement best practices to prevent medical necessity denials.

Now, in an uneven fashion, the RAC program is rolling out across the country with large volume medical record requests for complex review to begin in January, 2010. Hospitals have already begun sending large numbers of charts to Medicare Administrative Contractors (MACs), Medicaid Integrity Contractors (MICs), and multiple other review entities. Managing these processes from initial chart request to final appeal has become an operational challenge. Projections are that 33% or more of these cases will result in payment error due to problems with medical necessity determination.

Leaders of hospital "RAC Teams" across the country have been focused on best practices in three key areas to address this revenue threat:

1. Compliance with processes for determination of medical necessity
2. Physician Advisor role
3. Technology solutions for process improvement.

Compliance with Processes for Determination of Medical Necessity

Hospitals have historically evidenced vulnerabilities in how medical necessity status determinations are made to bill services. Given various circumstances, reviews on Medicare & Medicaid patients were deferred, done inconsistently, or completed retrospectively after discharge, in the case of week-end admissions. Confusion over ever-changing interpretations of outpatient Observation status made matters worse. Documentation would be incomplete and illegible on worksheets kept apart from the medical record, sometimes unable to be located. Cases were not routinely escalated in a timely manner to a Physician Advisor or for oversight by the Utilization Management committee.

The screen for medical necessity is most commonly done by RNs as part of the case management role in doing utilization review. The patient's clinical presentation is reviewed in reference to standard criteria sets for level of care (Interqual or Milliman), as approved by the UM Committee. The review can be initiated pre-admission for elective procedures, in the ER or on admission to the inpatient unit within 24 hours.

In the event the patient does not meet criteria for the inpatient level of care, the case must be escalated for Physician Advisor review and final determination. If a Condition Code 44 change to move the patient from Inpatient to Observation status is required, this must occur prior to the patient's discharge to prevent significant revenue loss.

Observations cases are managed closely as outpatients within the defined 24-48 hour requirement, no exceptions. Admission reviews and continued stay reviews occur per a defined protocol with the same discipline of meeting review requirements for commercial payers.

All of this occurs ongoing, seven days a week for inpatients and outpatients. Staffs are educated on the appropriate review criteria to insure inter-rater reliability. Most importantly, in the event a case does not meet criteria, action is taken by the case manager to escalate the case to a Physician Advisor.

Physician Advisor Role

The screening of the case by an RN immediately to verify that admission services are medically necessary is just that, a screening. If a patient's condition does not meet criteria, or is questionable, timely referral to a Physician Advisor is essential to make the final determination. Review of the case is completed using evidence based guidelines and, if needed, collaboration with the attending physician. A medical necessity determination is documented with a rapid turnaround time response to the case manager.

In the 2009 ACMA National Case Management Survey, one third of respondents indicated that a Physician Advisor was specifically compensated for performing this role. A rapidly growing trend is to provide the Physician Advisor services through an externally contracted service. Facilitation of documentation in the record is most effectively done by a Physician Advisor with expertise in medical necessity determinations, and concurrent and retrospective denial/appeal processes.

Technology

Technology solutions with a specific focus of the utilization management and tracking of all types of denial and appeal processes are now the standard. The 2009 ACMA National Case Management Survey found that two out of three hospitals have a software program specific to case management, of which nearly 90% report using the system for documentation of utilization management processes for medical necessity determinations.

Worksheets have disappeared as automation is introduced to validate compliance with the organization's process for medical necessity determinations. The review criteria approved by the UM committee is integrated into the software for consistent use with each review. Automation further enables continuity of the process when hand-offs occur between staff, as each entry is time and date stamped.

Innovative solutions also improve the efficiency of referrals for Physician Advisor review. Typically done via phone or fax, the new standard is to electronically refer the patient's demographics, standard ADT data, and clinical information using an E-Referral to the Physician Advisor. The result has been improved turnaround time. When not meeting criteria, the review is sent at the time of completion, versus being set aside while other work takes precedent. Users of this technology describe a clearer picture of the patient. These aides in the accuracy of the Physician Advisor's determination of medical necessity.

Technology solutions continue progression from basic utilization management functionality, to core systems tracking all steps of any type of retrospective audit. This model provides automatic notifications, organizes chart requests, interfaces readily, and manages all stages of denial and appeals. Most important is the data rich reporting. This information completes a feedback loop to analyze and improve processes across departments.

These three best practices will continue to show significant value in averting revenue loss from "take back" denials. Let's make "errors in medical necessity determinations "a thing of the past.