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How to steer clear of the RAC
Dictate everything to avoid an audit

Keywords: Medicare billing and coding policies: good documentation avoids RAC audit problems


by David Frenz, MD and Sue A. Lewis, RN, CPC, PCS



Published in the December 2010 issue of Today's Hospitalist

ARE YOU READY FOR MEDICARE to expand its level of scrutiny when it comes to fraud and abuse?

Like all third-party payers, the Centers for Medicare and Medicaid Services (CMS) is concerned about health care fraud and abuse. Hospitals and physicians are being closely scrutinized for the care they provide. Quality of care is not the target; what is at issue, however, is the documentation to support why care was provided.

The CMS has contracted with various organizations to conduct post-payment claim reviews to look for inappropriate health care payments. These organizations are collectively
A little "dictorrhea" will reduce your chances of an unfavorable audit.

known as recovery audit contractors, or RACs. For those who are already cynical about Medicare, the acronym contains a perverse but presumably unintended irony. (Think "rack," the medieval instrument of torture used to extract confessions.)

The goal of the RAC program is to identify improper payments made on claims for a variety of health care services provided to Medicare beneficiaries. The CMS defines improper payments as either an overpayment or an underpayment.

An overpayment occurs when claims do not meet Medicareís coding or medical necessity policies. In contrast, an underpayment occurs when a claim is submitted for a simple medical/surgical procedure but the medical record reveals that something more complicated (and thus remunerative) occurred. For each payment made in error, RAC contractors receive a "recovery" fee. This, as you can imagine, provides a very substantial financial reward for contractors, which has led critics to label the program "a RACket." Under the RAC program, Medicare has the ability to review health care claims with "dates paid" that go as far back as October 2007.

Implications for hospitalists
Before instituting the RAC program, the CMS conducted a pilot project to investigate inappropriate payments. Data from that project identified diagnosis-related groups (DRGs) that would be subject to initial scrutiny. (DRGs are the system for classifying hospital care for billing purposes.) New targets are being added all the time. (See "A selective list of RAC targets," below, which summarizes some current areas relevant to hospitalists.) RAC audits focus on the documentation in the medical record that justifies the services eventually billed. Accordingly, hospitalists need to comply with CMS requirements for documenting services rendered. The medical record should clearly address and/or reflect the following:

  • admission status: inpatient or observation care;
  • the patientís principal diagnosis;
  • medical comorbidities;
  • severity of the patientís illness;
  • intensity of the service/care provided; and
  • date and time of service.


The medical record must reflect the status of patients at the time they entered a hospital bed. The Medicare benefit policy manual (chapter 1, section 10) provides a definition of an "inpatient" and addresses whether the patientís condition and subsequent treatment is best provided in the inpatient setting. Observation care, which is a form of outpatient care, is also defined.

Hospitalists must provide detailed documentation concerning the admitting diagnosis and relevant comorbid medical conditions. Diagnoses should be very specific and linked to complications that will influence medical care. For example, "type 1 diabetes mellitus, severe, uncontrolled" is a much better way to go than "diabetes." If the patient also has a history of diabetic nephropathy (or, chronic kidney disease, if you prefer) this should also be noted.

Nothing is obvious
The medical record must reflect the severity of the patientís illness and indicate why hospitalization (rather than a lower level of care) is required. Donít assume that anything is self-evident. While "chest pain with risk factors" is good enough for telephone sign-outs, dictations should tell a much more compelling story.

Hospitalists must justify the intensity of service for each hospital day. The rationale for the setting for care (ICU vs. general floor), tests and procedures all need to be clearly documented.

Again, donít assume any medical decisions are obvious. If you pull the trigger on IV antibiotics or blood products, the chart entry should be crystal clear as to why.

Finally, all entries in the medical record must be dated, timed and authenticated by the health care provider ordering or delivering the service. This includes handwritten progress notes, dictations and orders, as well as documentation from nurses and allied health professionals (including physical therapists and dieticians).

And signatures need to be legible. Claims have been denied because of illegible signatures even when the rest of the picture was perfect.

Words to the wise
If youíve made it this far in our column, youíre either disgusted, fatigued or both. (Donít shoot the messenger!) How can a busy hospitalist possibly meet all of these requirements for every patient and still see a dozen or more patients per day?

The only answer is bigger, better progress notes. Although abbreviations (such as CP and SOB) and brief bullet points work well for review of systems and physical examination, medical decision-making is a different animal and should probably occur in prose form.

Because writing full sentences and paragraphs by hand is time-consuming (plus thereís that whole legibility thing), I dictate everything. Ditto for my partners. Our coding and compliance departments like this and we feel well-covered should an audit occur.

As dictated progress notes are probably new to many readers, here are paragraph headings that can be used to structure notes:

  • significant interval history;
  • review of systems;
  • physical examination;
  • summary of diagnostic studies;
  • impressions (diagnoses);
  • medical decision-making; and
  • plan.


Really pay attention to the section dealing with medical decision-making, which is the most important. In that section, you need to justify your major decisions for the day, including the need for continuing hospitalization, care setting, and your orders for tests, procedures, and various medications. Donít skimp: A little "dictorrhea" will reduce the chances of an unfavorable audit.

David Frenz, MD, is a hospitalist for HealthEast Care System in St. Paul, Minn., and is board certified in both family medicine and addiction medicine. He is system medical director for addiction medicine and can be reached at dafrenz@healtheast.org. Sue A. Lewis, RN, CPC, PCS, is a compliance consultant with HealthEast Care System.



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