White Paper: Clinical Documentation and the RAC Prepayment Demonstration Project

After an initial delay, the Centers for Medicare & Medicaid Services (CMS) in early February announced that the Recovery Audit Contractor (RAC) Prepayment Review Demonstration Program will move forward on or after June 1, 2012.i The new date leaves providers in the affected states with limited time to evaluate and adjust their internal documentation and coding processes to mitigate the program's potential financial impact.

Cardiovascular services in particular are expected to be hard hit by the three-year demonstration project, the goal of which is to reduce improper payments.ii That is because of both the case volume and the intense scrutiny surrounding inappropriate placement of stents and implantable cardiac defibrillators (ICDs), as well as rising concerns over the appropriate use of diagnostic testing.

In fact, the Medicare Administrative Contractor (MAC) in Florida, one of seven states selected for the project by CMS based on fraudulent claim volumes, has already instituted prepayment reviews of 11 cardiovascular diagnosis-related groups (DRGs). In supporting its decision, the MAC cited statistics - also cited by CMS for the broader demonstration project - indicating that 50-100 percent of inpatient cardiac procedures are unjustified. Those statistics were drawn from Comprehensive Error Rate Testing (CERT) of a medical record against the requirements for documentation as delineated in a National Coverage Determination (NCD).iii

The American College of Cardiology (ACC), the Society for Cardiac Angiography and Interventions (SCAI) and other professional societies continue to push for greater clarity on the demonstration projects.iv In the interim, the organizations are educating their membership on ways to ensure claims will withstand RAC scrutiny. For most, those efforts begin with improving documentation to provide the necessary level of detail to demonstrate medical necessity, which in turn improves the accuracy of coding and billing processes.v

Shifting Risk

Currently, high volumes and low funding levels mean MACs are able to conduct only a small number of prepayment claims. This leaves the traditional and fairly ineffective pay-and-chase method as the primary channel for recouping improper payments. By allowing RACs to audit for medical necessity prior to payment, CMS expects to increase the volume of claims reviewed and to save taxpayer dollars.

The project will roll out initially in 11 states. Florida, California, Michigan, Texas, New York, Louisiana and Illinois were selected based on a high level of fraudulent claims and providers. Pennsylvania, Ohio, North Carolina and Missouri were chosen based on high claim volumes for short inpatient hospital stays.

According to CMS, the demonstration project will initially focus on short hospital stays and three specific types of errors:

  1. Claims are incorrectly coded with the DRGs
  2. Patients are admitted via the emergency department but should instead be treated in observation
  3. Patients are receiving elective surgery during short-term inpatient stays when they should be treated as outpatients.vi

Because it increases the number of audits and therefore the likelihood that a claim for services already rendered will be denied, the prepayment audit program shifts greater risk to providers. It will be more critical than ever to ensure that the provided care was clinically appropriate and that documentation exists to support that decision.

As noted by The Advisory Board Co., the demonstration "showcases CMS' urgency to not only improve the quality of care provided to Medicare beneficiaries by eliminating potentially inappropriate procedures but also right-size utilization, reduce variability, and slow spending across certain populations and providers."vii

Cardiovascular in the Crosshairs

As previously noted, many expect cardiovascular service lines to be among the hardest hit by prepayment audits. The Florida MAC, at the direction of CMS, has already suspended automatic Part A payments for inpatient services related to 11 cardiac DRGs, and other states are expected to follow suit.

In Florida, the targeted DRGs are:

  • 226 - Cardiac defibrillator implant without (w/o) cardiac catheter with (w/) major complications or comorbidities (MCC)
  • 227 - Cardiac defibrillator implant w/o cardiac catheter w/o MCC
  • 242 - Permanent cardiac pacemaker implant w/MCC
  • 243 - Permanent cardiac pacemaker implant w/CC (complications or comorbidities)
  • 244 - Permanent cardiac pacemaker implant w/CC or MCC
  • 245 - Automatic implantable cardiac defibrillator (AICD) generator procedures
  • 247 - Percutaneous cardiovascular procedure w/drug eluding stent w/o MCC
  • 251 - Percutaneous cardiovascular procedure w/o coronary artery stent w/o MCC
  • 253 - Other vascular procedures w/CC
  • 264 - Other circulatory system or procedures
  • 287 - Circulatory disorders, except acute myocardial infarction (AMI), w/cardiac catheter w/o MCCviii

The financial implications for cardiovascular service lines are significant. The 11 targeted DRGs represent approximately 24 percent of all volume, 28 percent of total revenue and 28 percent of total contribution profit for cardiac services. Estimated contribution profits for these DRGs range from $3,053 to $14,250.ix

Recent figures from the current retroactive RAC program are also an indication of just how significant the impact may be. According to CMS, $397.8 million in overpayments were collected in the fourth quarter of 2011x alone, bringing the total for fiscal year 2011 to $797.4 million.xi

Further, RACTrac reports that during the fourth quarter of 2011, the average dollar value of a complex denial, which includes medical necessity, was $5,262. Medical necessity accounted for 78 percent of all denials, incorrect MS-DRG or other coding error accounted for 17 percent, and insufficient documentation accounted for 5 percent.

Three of the top five DRGs for medical-necessity denials were cardiology related. Notably, 60 percent ($120 million) of medical-necessity denials for one-day stays and 20 percent ($14 million) for partial-day stays were rejected because the care was provided in the wrong setting - not because the care was not medically necessary.xii

Finally, even when a hospital prevails, the audit process adds a 60-90 day delay to the payment cycle. While Medicare Part B payments will not be withheld pending audit, physicians may be forced to repay any monies associated with a claim if the hospital's audit determines no medical need for the service or associated admission.xiii

Focus on Clinical Documentation

The premise for the prepayment RAC audit demonstration program proposes that physicians are not sufficiently documenting procedures to support medical necessity. Thus, while audits cannot be prevented, improving clinical documentation practices can lessen the chance of outright denial and may speed up the time that elapses between record request and final determination.

During an audit, RACs will be seeking to determine if the administered services were medically necessary and that they met Medicare coverage requirements. They will also look at whether the services were properly and fully documented and correctly coded and billed.xiv Complete and compliant documentation is the key to an effective - and successful - audit response.

Appropriate documentation is crucial for effectively demonstrating that procedures were medically appropriate and that claims were properly coded and submitted. To that end, the Florida ACC advises its members to "document compulsively and completely." This includes use of textual and narrative discussions when possible. The chapter also advises cardiologists to be particularly cautious with electronic medical record (EMR) documentation, taking care to provide specific detail on symptoms and to review any noninvasive test results that prompted any invasive procedure or device implant. Including office notes in the hospital chart is also recommended.

Because the initial statistics used to justify the prepayment audits were drawn from CERT against documentation requirements defined in the NCD, the Florida ACC also provides specific documentation advice for three NCDs that encompass all 11 of the cardiology DRGs identified by the Florida MAC for prepayment audits. These are:

  • 20.4 for AICD
  • 20.7 for percutaneous transluminal angioplasty (PTA)
  • 20.8 for cardiac pacemakers

For example, the chapter advises that because NCD 20.7 was written when PTA was confined primarily to single-vessel intervention, cardiologists must be sure "to accurately and clearly document that multi-vessel intervention is justified and in accordance with standard of care." In particular, documentation should specifically address angina refractory to optimal medical management, objective evidence of myocardial ischemia and lesions amenable to angioplasty. When documenting cardiac pacemakers, cardiologists should clearly document why atrioventricular (AV) sequential pacing is being used, as well as any symptoms and prior evaluation. This should also be included in the hospital history and physical (H&P) and procedure notes.xv

Leveraging Automation

In addition to improving documentation practices, cardiology practices and service lines also benefit from leveraging technology in their efforts to mitigate the impact of the RAC prepayment audit program. Automating cardiology procedure documentation and coding helps ensure that physicians and hospitals are able to more efficiently and effectively defend claims, thereby accelerating the audit process and avoiding unnecessary financial shortfalls.

Validly defending claims is accomplished in three ways. First, automation eliminates the human errors that can lead to incomplete documentation and incorrect coding. By guiding all documentation and flagging specific data for verification, software tools ensure no details are missed. Menu-driven documentation processes enable fast, easy capture of compliant data at the point of care and subsequently drives compliant, coder-ready documentation.

Second, automation serves to standardize documentation of criteria necessary to establish medical necessity while allowing other areas to be customized according to physician preference. The software automatically captures discreet data elements for each procedure and allows for free text documentation.

Finally, built-in reporting and analytics tools simplify audit preparation - as well as quality reporting and even clinical research - with pre-built reports and customized query-writing capabilities that enable every captured data element, including free text, to be queried, exported and submitted in appropriate formats.

A Proactive Stance

Prepayment audits are a reality that cardiology practices and service lines are facing, whether or not they are in the 11 states impacted by the CMS RAC demonstration project. As evidenced by the actions of the Florida MAC, providers can find their Medicare reimbursements held pending an audit at any time. Further, once the demonstration project gets underway, most expect the financial outcomes to justify its expansion nationwide.

As such, cardiology providers must take immediate action to ensure that they are prepared to successfully defend claims, as well as to shorten the audit cycle. Improving clinical documentation quality is an important first step.

Technology is another powerful weapon in the provider's arsenal to mitigate the impact prepayment audits have on their financial stability. Software that automates the documentation and coding process increases accuracy, enhances standardization and improves compliance. This enables a more rapid response to audit notifications and ensures justification of medical necessity.


i Walsh, B. (2012, February 6). Delayed RAC review demo to begin in June. CMIO. Retrieved from http://www.cmio.net/index.php?option=com_articles&view=article&id=31716:delayed-rac-review-demo-to-begin-in-june

ii Centers for Medicare & Medicaid Services. (2011, November 15). Recovery audit program prepayment review demonstration. Retrieved from https://www.cms.gov/apps/media/press/factsheet.asp?Counter=4170

iii Florida Chapter of the American College of Cardiology. CMS audit background information. Retrieved from http://www.accfl.org/take-action/take-action.html

iv Wood, S. (2011, December 9). Waiting game: ACC, SCAI, HRS await details on CMS prepayment audits. Heartwire. Retrieved from http://www.theheart.org/article/1325457.do

v Florida Chapter of the American College of Cardiology. CMS audit background information. Retrieved from http://www.accfl.org/take-action/take-action.html

vi O'Riordan, M. (2011, December 22). CMS announces DRGs under scrutiny as part of trial prepayment audit program. Heartwire. Retrieved from http://www.theheart.org/article/1333623.do

vii Maher, B. (2011, December 5). CMS doubles down on appropriateness with new prepayment review demonstration. The Advisory Board Co. Retrieved from http://www.advisory.com/Research/Cardiovascular-Roundtable/Cardiovascular-Rounds/2011/11/CMS-Doubles-Down-on-Appropriateness-with-New-Prepayment-Review-Demonstration

viii Husten, L. (2011, December 4). CMS tightening the screws on unnecessary procedures in Florida and 10 other states. Forbes. Retrieved from http://www.forbes.com/sites/larryhusten/2011/12/04/cms-tightening-the-screws-on-unnecessary-procedures-in-florida-and-10-other-states/

ix Maher, B. (2011, December 20). How CMS's prepayment review will impact demand for CV services. The Daily Briefing. Retrieved from http://www.advisory.com/Daily-Briefing/2011/12/20/How-will-CMS-prepayment-review-demo-impact-demand-for-CV-services

x Centers for Medicare & Medicaid Services. (2012, January). Medicare Fee for Service National Recovery Audit Program (October 1, 2011– December 31, 2011). Quarterly Newsletter. Retrieved from https://www.cms.gov/Recovery-Audit-Program/Downloads/RecoveryAuditProgram_1st_qtr2012_vj.pdf

xi Centers for Medicare & Medicaid Services. (2011, October). Medicare Fee-for-Service Recovery Audit Program FY 2011. Retrieved from https://www.cms.gov/Recovery-Audit-Program/Downloads/FY2011Corrections.pdf

xii American Hospital Association. (2012, February 12). Exploring the impact of the RAC program on hospitals nationwide: Results of AHA RACTrac Survey, 4th Quarter 2011. Retrieved from http://www.aha.org/content/11/11Q4ractracresults.pdf

xiii Florida Chapter of the American College of Cardiology. CMS audit background information. Retrieved from http://www.accfl.org/take-action/take-action.html

xiv Liles, R. (2012, January 11). CMS delays RAC prepayment demonstration project ... for now. [Website article]. Retrieved from http://www.lilesparker.com/2012/01/11/cms-delays-rac-prepayment-demonstration-project-for-now/

xv Florida Chapter of the American College of Cardiology. CMS audit NCD listing with comments. Retrieved from http://www.accfl.org/take-action/take-action.html