Alphabet soup of auditors creates new world for CMs

Your department is the front line of defense

It's a new era for hospitals and for case managers as a multitude of auditors from the Centers for Medicare and Medicaid Services (CMS) and commercial payers scrutinize patient records looking for errors.

"It's a busy playing field," says Brian Flood, managing director for KPMG, the U.S. audit, tax and advisory firm with headquarters in New York City. "CMS has rolled out multiple programs with auditors that are looking beyond improper payments and seeking out incidents of fraud and abuse. It's within the realm of possibility that every record in the hospital eventually will be reviewed by one auditor or another."

Here are the programs looking at hospital reimbursement:

  • The Recovery Audit Contractor (RAC) program is underway nationwide after a three-year demonstration project.
  • Medicare Administrative Contractors (MACs) have taken over and expanded the audits previously performed by the state Fiscal Intermediaries (FIs).
  • The Comprehensive Error Rate Testing (CERT) program randomly reviews a small sample of Medicare fee-for-service claims from providers and suppliers for compliance with Medicare coverage, coding, and billing rules.
  • The Zoned Program Integrity Contractors (ZPICs) are mining data on Medicare claims and looking for fraud.
  • The Medicaid Integrity Contractors (MICs) have been selected by CMS to scrutinize Medicaid claims but are interacting with each individual state's integrity program.
  • CMS has directed the states to develop a Medicaid RAC program that will perform audits similar to the Medicare RAC program.
  • Commercial insurers are beginning their own audit programs. (For more details on the auditors and what they are looking for, see related articles beginning, below.)

"Regardless of what auditor is looking at the record, everything revolves around what happened to the patient while they were in the hospital and how was it documented," Flood says. "Case management is likely to be involved in the audit process, to answer questions about medical necessity, documentation, and coding."

The emphasis on audits is a game changer for case managers, Flood says. In the past, case managers worked with patients on the floor, ensuring that they received appropriate care, that the documentation in the record was accurate, and that the patient got out the door in a timely manner. Now, as hospital records are being audited, their expertise is likely to be needed by the finance department, the auditing department, and the legal department.

"The statistician, the lawyer, or the chief financial officer can't answer the auditors' questions without the expertise of the case management office," Flood says. "When they get a denial, they have to have someone medically qualified to look at Medicare guidelines, coding guidelines, and the patient condition to determine if the hospital was right and, if so, how to explain that it was right in the appeal."

Michael Taylor, MD, vice president of operations at Executive Health Resources, a Newton Square, PA healthcare consulting firm, says, "In many ways, case managers are the key players who keep the entire process running,"

They are in charge of ensuring that patients meet medical necessity and continuing stay criteria and have a key role in facilitating a second level physician review and coordinating between the attending, the physician advisor, and the hospital utilization review committee, he says. According to Taylor, this means they should have the skills they need to do their job and have ongoing education and inter-rater reliability testing to make sure they stay on the top of their game.

In the past, hospital staff didn't have to deal with multiple auditors and appeal denials. The game has changed, and the stakes are high. Deborah Hale, CCS, CCDS, president and chief executive officer of Administrative Consultant Service, a healthcare consulting firm based in Shawnee, OK, says, "Hospitals need to be diligent about preparing for the audits and responding to them to ensure that they don't lose money they're entitled to. Dealing with the various auditors is taking more time than most hospitals expected, and in many hospitals, the audits still are not getting the attention needed to ensure that the appeals are effectively prepared and submitted in a timely manner."

The significant increase in auditing activity is diverting attention from treating patients, to juggling audits, often from different entities who are reviewing the same claim. Elizabeth Baskett, MPA, senior associate director for policy at the American Hospital Association (AHA) says, "This means hospitals have to spend more resources on the administrative side to respond to all audits in a timely manner. The auditing process creates a tremendous burden on hospitals."

In the AHA's most recent survey of hospitals, 70% of respondents have reported that the RACs impacted their facility whether they had RAC activity or not. They reported creating RAC teams to deal with the audit and hiring additional staff. About half of the respondents reported an increase in administrative costs.

Hospitals have had to create a RAC team to deal with the audits, often hiring additional staff. About half of respondents said their administrative costs have increased as well. The audit processes produce an array of associated costs in addition to the cost of repaying the improper payments, Taylor points out. Among these are the cost of hiring professionals to manage the audit process, the cost of appeals, and the cost of proactive compliance programs to prevent these mistakes from happening.

Hospitals' RAC coordinators spend a lot of time addressing the RACs, but so does other staff in the hospital, Baskett points out. "The RAC audits require pulling clinicians, such as case managers, away from providing care to patients to deal with the audits," she adds. "The AHA has called on CMS to streamline the auditing function, so hospitals don't have to respond to multiple audits for the same claims and the same reasons. For instance, the RACs, the MACs, the ZPICs, and the CERT program all are looking at medical necessity issues, incorrect payment amounts, non-covered services, incorrectly coded services, and duplicate services."

Hospitals want to avoid improper payments. "We have no problem with that aim, but we do need to make sure that we're not dealing with duplicative audits," Baskett adds.

Flood says, "For at least the next four years, hospitals are going to incur higher administrative costs so they can develop programs that keep them safe in the long-run. Hospitals have to ensure that their records have appropriate documentation and proper coding, and that they submit claims and bill properly so they don't pop up on the fiscal radar."

To avoid anxiety when all the auditing programs are fully rolled out, Flood recommends that because of short timelines and increases in records requests, hospitals hire extra staff or develop contingency plans to hire staff when they get records requests.

Planning on how to handle the auditors' requests in advance will save a lot of anxiety when all of these programs are fully rolled out.

For example, some hospitals have received several hundred claims requests in the initial letter from an auditor. Others have received requests for as many as 300 files every 45 days from one auditor or another. "They have to respond to all of these requests accurately and in a timely manner," Flood says. "Deadlines are short and vary by auditors. Hospitals have to be prepared."

Laura Jaquin, RN, MBA, managing director for Huron Healthcare, a healthcare consulting firm with headquarters in Chicago suggests that hospitals need to spend time putting preliminary policies together, spelling out what happens when they get a request from an auditor. This means they need a comprehensive program that allows them to respond quickly when requests for chart reviews come in and to track the process from the time the request for records was received through the appeals process. (For a look at one hospital's process, see related article, below.)

"Hospitals need to be able to track the progress of the audits and institute reviews when denials occur," Jaquin says. "If the record indicates that the documentation supports the claim, it is imperative for hospitals to have a process in place to appeal."

Tracking the timing of the requests and appeals is crucial. "If hospitals miss deadlines, they will lose money even if the claim is valid," Jaquin adds.

Having a tracking system gives hospitals the opportunity to self-monitor, identify where problems are occurring, and correct them as quickly as possible, Flood says. "What happens inside the organization after denials occur is what will keep the organization from suffering a large loss in the future," he says.


For more information, contact:

Elizabeth Baskett, MPA, Senior Associate Director for American Hospital Association. E-mail:

Brian Flood, Managing Director for KPMG. E-mail:

Deborah Hale, CCS, CCDS, President and Chief Executive Officer of Administrative Consultant Services. E-mail:

Laura Jaquin, RN, MBA, Managing Director for Huron Healthcare. E-mail:

Michael Taylor, MD, Vice President of Operations at Executive Health Resources. E-mail:

The Medicare Learning Network Provider Compliance web page includes information about common billing errors and other compliance issues. Web:

The American Hospital Association provides information on Recovery Audit Contractor (RAC) activities at The AHA's RACTrac is available at

Multiple hospitals experience RAC activity

Short stays, medical necessity are audit targets

Deborah Hale, CCS, CCDS, keeps a spreadsheet identifying potential areas for improper payments that the Centers for Medicare and Medicaid Services (CMS) have approved for the Recovery Audit Contractors (RACs) to review.

"Before the RACs can focus on any particular issues, they have to demonstrate to CMS that it has the potential for overpayment. There's very little that's not on the list that CMS has approved," says Hale, president and chief executive officer of Administrative Consultant Service, a healthcare consulting firm based in Shawnee, OK.

The RAC program is in full swing across the country, and nearly four out of five participating hospitals have experienced RAC activity, according to the American Hospital Association (AHA). The AHA's RACTrac Survey collects data from hospitals to measure the impact of the RAC program. (For a look at what one hospital is doing to prepare for the RACs, see related article, below.)

Medicare RACs are private contractors who can review Medicare claims for the preceding three years to identify improper payments to providers. RACs are paid on a contingency basis and receive a percentage of the overpayments or underpayments they identify. CMS has divided the country into four RAC regions, each with a different contractor. (For a list of RAC regions and contractors, visit

RACs perform automated reviews, using proprietary software to mine Medicare data and detect duplicate payments, billing, and coding errors. In addition, they can perform complex reviews and send providers requests for medical records that are reviewed by nurse practitioners.

The RACs are looking at medical necessity, particularly for short stays, and at whether a physician's order to admit is dated, timed, and legibly signed, says Hale. Among the hospitals participating in the AHA's RACTrac, 57% with complex denials cited medical necessity as a reason for denials. "MS-DRGs 551 and 552, medical back problems, are one area where the RAC auditors are questioning the validity of an acute inpatient stay," says Laura Jaquin, RN, MBA, managing director for Huron Healthcare. "MS-DRG 640, nutritional and miscellaneous metabolic disorder is another area of focus by the RACs."

Michael Taylor, MD, vice president of operations at Executive Health Resources in Newton Square, PA, says "Short stays for chest pain and gastroenteritis are other frequent targets," Hale says that based on review findings from the Comprehensive Error Rate Testing (CERT) program, expect to see the RACs targeting medical necessity for procedures that are appropriate to be performed in the inpatient setting, but the documentation in the hospital records might not support the need for the procedure. For example, while it is appropriate and customary for patients receiving joint replacement surgery to be admitted as inpatients, the information provided to the hospital by the surgeon's office might not show the necessity for the procedure, she adds.

"The procedures may be medically necessary, but the documentation does not support that. Many times the documentation is in the physician office records but not the hospital's records," Hale says. When you encounter a problem with documentation, educate the physicians about the key elements of documentation to support the need for the procedure, she says. Medical necessity for implantable defibrillators and some kinds of pacemakers are other targets. Although hospitals were paid for these procedures in the past, now CMS will pay only if the documentation in the medical record supports to procedure. "This could mean a loss of millions of dollars for hospitals that perform a high volume of orthopedic and cardiovascular procedures," Hale says.

MACs review claims for payments

CERT program ensures MACs are accurate

The Medicare Administrative Contractors (MACs) conduct prepayment and post-payment audits to make sure that the payments are proper and the hospital is not making mistakes in billing.

According to Deborah Hale, CCS, CCDS, president and chief executive officer of Administrative Consultant Service, a healthcare consulting firm based in Shawnee, OK, the MACs have taken the place of the Fiscal Intermediaries (FIs) as the distributor of Medicare payments for hospitals and have taken on the responsibility of physician payments as well. Each MAC covers a large section of the country, rather than just one state, and is responsible for determining that the payments are appropriate and for preventing or reducing improper payments, MACs also are responsible for educating hospitals regarding billing accuracy.

The job of the MAC is to look at claims for the most common errors and catch them before the hospital is paid. In many cases, the MAC makes its determination by reviewing the bill, Hale points out. For example, if a hospital bills for multiple colonoscopies for one patient in the same day, the MAC would pay for only one.

However, if the MAC needs additional information, such as whether a stay was medically necessary, it can ask for the medical record. "The RACs can pick up anything a MAC misses. Once a MAC has identified a problem and reviewed a particular claim, the RACs can't touch it," Hale says.

Michael Taylor, MD, vice president of operations at Executive Health Resources, a healthcare consulting firm based in Newton Square, PA, points out that the MACs are focusing on prepayments and lowering hospital error rates. "In some ways, the MACs may have more impact on hospitals than the RACs," Taylor says. "If they uncover a high error rate on certain claims, they have the power to put hospitals on progressive corrective action, such as prepayment reviews. This means that for certain claims, the hospital has to send in the medical record for review by the MAC before the claim can be paid."

Some Medicare MAC contractors are issuing denials for procedures such as stents and defibrillators, Taylor adds. "Many clinicians believe that high risk patients should be admitted when they receive stents or defibrillators," he says. "To date, this dispute is playing out in the appeals process."

CERTs monitor payment accuracy

The Comprehensive Error Rate Testing (CERT) program was established by CMS to monitor the accuracy of claim payments in the Medicare fee-for-service programs.

Hale says, "The CERT program makes sure the MACs are denying payment when they should and are checking on the accuracy of opinions by the MACs."

The CERT Documentation Contractor randomly selects a small sample of Medicare fee-for-service claims, sends them to the provider, and requests specific documentation for the services billed. The contractor sends the documentation to the CERT reviewer contractor which analyzes them for compliance with Medicare coverage, coding, and billing rules.

When an error is determined, the claim is adjusted by the MAC, and the money paid by the provider is taken back. CMS calculates a national Medical paid claims error rate and publishes error reports on its web site at

ZPICs audit records looking for fraud

Targeted hospitals can face legal action

When a Zoned Program Integrity Contractor (ZPIC) shows up on a hospital's doorstep, it's not by accident. They aren't making a random audit request. Something has shown up on the radar to indicate that there might be patterns of fraud and abuse, according to Brian Flood, managing director for KPMG, the U.S. audit, tax and advisory firm.

Deborah Hale, CCS, CCDS, president and chief executive officer of Administrative Consultant Services, a healthcare consulting firm based in Shawnee, OK explains that ZPICs are different from the RACs because they can audit hospitals without warning. They can show up at the hospital, ask for copies of records, and turn over their findings to law enforcement if they find patterns of fraud and abuse, says

"They have a lot of teeth, and hospitals that are targeted can experience a lot of anxiety and grief," Hale says "This isn't just a matter of the hospital arguing to support medical necessity. If a hospital attracts the attention of a ZPIC, it can face legal action."

So far the ZPICs are primarily focusing on medical necessity of admission, high cost claims, and patterns of high rates of one-day and two-day stays.

High cost claims are defined in various ways but usually are claims with charges that substantially exceed the Medicare Severity-Diagnosis Related Group (MS-DRG) payment or the outpatient Ambulatory Payment Classification (APC) payment, Hale says. Medicare has a complex formula for calculating outpatient outlier payments and another formula for calculating outlier payments for inpatients. CMS expects that approximately 5% of all claims will achieve an outlier status, Hale adds.

A high rate of one-day stays are determined for each MS-DRG but those that are suspicious for unnecessary inpatient admission such as chest pain and syncope are frequent targets. Case managers can review their hospital's Short Term Acute Care Program for Evaluating Payment Patterns Electronic Report (ST-PEPPER) to determine how their facility compare with state, nation, and Medicare Administrative Contractor (MAC) jurisdiction for certain MS-DRGs with one or two day stays. "If a hospital has more than 11 cases in a category and ranks above the 80th percentile, they can expect greater audit risk than a hospital in the median range," Hale says, adding "not all one-day stays are unnecessary.

ZPICs are independent auditors hired by the Centers for Medicare and Medicaid Services (CMS) to look for patterns of waste, fraud, and abuse. The ZPICs are based on the Medicare Administrative Contractor jurisdictions. They are starting with hospitals, but eventually they will audit all providers of services to Medicare. Unlike the MACs and RACs, which concentrate on fee-for-service Medicare claims, the ZPICs will review all providers of Medicare and Medicaid services, including managed Medicare and Medicaid, Flood says. In addition to mining data, they investigate complaints from the public and look for patterns as well.

The ZPICs are looking beyond merely recouping money that was improperly paid to the hospital. "They are the working arm of law enforcement and serve as an integrated bridge between CMS and the FBI," Flood says. "The first question to ask when the ZPICs show up is: Why are they here? When hospitals get a records request, they should analyze them immediately to determine why the ZPICs selected those particular records, then analyze the records further when the ZPICs send a letter back saying you've done something potentially wrong."

If a hospital has a pattern that appears to be waste, abuse, or fraud, in addition to recouping the overpayment, the ZPIC program can assess penalties ranging from one to three times the amount of the overpayment. In addition, the situation will put the hospital on the ZPIC's radar, and it will be likely to be investigated again the next year, Flood says.

Medicaid audit programs rolled out by CMS

MICs, Medicaid RACs are on the way

Before the end of the year, your hospital's Medicaid records are likely to be under the same kind of scrutiny that Medicare records are receiving, as the Centers for Medicare and Medicaid Services (CMS) rolls out the Medicaid Integrity Contractor (MIC) Program and the Medicaid Recover Audit Contractor (RAC) program. It will be up to the individual states to develop the program, set parameters, and set timelines.

The MIC Program, which still is being rolled out across the country, will focus on issues that are continually problematic in Medicaid, according to Brian Flood, managing director for KPMG. The MICs will audit the medical records of Medicaid managed care patients as well as fee-for-service patients. The process is expanding beyond inpatient services and will include outpatient treatment as well, Flood adds.

Laura Jaquin, RN, MBA, managing director for Huron Healthcare, a healthcare consulting firm with headquarters in Chicago, says, "The MICs are very different from the RACs. The program concept came from the federal perspective, but the states ultimately are the drivers of the MICs." MICs must conform to state laws in terms of time for hospitals to respond to their requests for data, so the time providers will have to respond will differ from state to state. Generally, requirements are between 15 and 45 days.

"The RACs are limited to requesting data that goes back three years, but MICs base their length of time on regulations in the individual states or the allowed rules of evidence based on the continuing nature of the activity being reviewed," Flood says. MICs have no limits on the number of records they can request, while RACs are limited to 200 for most hospitals.

The MICs so far have been looking more at compliance with billing components and coding than medical necessity, Jaquin says. "They're definitely looking to see if claims are documented correctly and are verifying the appropriate procedure codes for covered items and services."

The Patient Protection and Affordable Care Act expanded the Medicare RAC Program into Medicaid, and CMS is working to implement the Medicaid RAC program. Like the Medicare RACs, the Medicaid RACs will be private contractors working on a contingency fee with a strong financial incentive to audit hospitals, according to Elizabeth Baskett, MPA, senior associate director for policy at the American Hospital Association (AHA). CMS originally had given the states an April 1 deadline to implement the Medicaid RAC program, but it postponed implementation until an undetermined date later in the year.

The Medicaid RAC process differs from the Medicare RACs in several ways. While CMS divided the country into four regions for the Medicare RAC program, the states may contract with one or more contractors to identify overpayments and underpayments.

The Medicare RAC program has one appeals process that is consistent throughout the country. CMS is allowing the state Medicaid programs to use their current administrative appeals process, if they desire, or to modify the process for Medicaid RAC-related appeals. This option makes it likely that there will be 50 distinct appeals processes.

'Get it right the first time' should be the mantra

Complete, accurate documentation is essential

It doesn't matter which auditor is looking at your hospital's records; having all the documentation to support the admission and the services the patient received is of utmost importance.

Deborah Hale, CCS, CCDS, president and chief executive officer of Administrative Consultant Service, a healthcare consulting firm based in Shawnee, OK, says "Hospitals have got to get it right the first time. They need a process for ensuring that the patient status is correct and that the admission order is complete and a utilization review process that includes physician input to address questions of medical necessity."

Laura Jaquin, RN, MBA, managing director for Huron Healthcare with headquarters in Chicago, says that to stay financially solvent in the changing healthcare environment, hospitals are going to have to review every single patient, regardless of payer, for medical necessity and continued stay criteria. Jaquin recommends that hospitals fine-tune what many case management departments are already doing: ensuring that every admission meets medical necessity criteria.

"Case managers in the emergency departments should work collaboratively with the medical staff to ensure that each admission is truly an acute situation and that the patient really requires an inpatient level of care," Jaquin says. "Hospitals need to make sure there is a rationale for an admission before it happens."

The scrutiny being applied to medical records, particularly the focus on short lengths of stay, makes it necessary for many hospitals to expand their case management coverage to include weekends and holidays, Jaquin says. "If patients are admitted over the weekend without someone making sure they meet medical necessity criteria, the hospital could be at risk for losing reimbursement," she says. "Case managers need to be at the hospital on weekends and holidays to make sure that all admissions are appropriate."

Hospitals also need a robust clinical documentation improvement program in place with a separate dedicated staff. "We don't recommend making case managers responsible for clinical documentation improvement. They're much too busy already, but they need to work collaboratively with the clinical documentation staff to share information and work together on performance improvement," she says.

Hospitals have documentation that supports the medical necessity of all inpatient procedures and a policy outlining the steps to take if the available documentation does not meet national coverage determinations, says Michael Taylor, MD, vice president of operations at Executive Health Resources, a healthcare consulting firm in Newton Square, PA. "The old thinking has been that doctors are not going to perform these procedures if patients don't need them," Taylor says. "However, hospitals have a duty to make sure that procedures performed at their facilities are medically necessary. There's a big difference between a medically necessary procedure that is missing documentation versus a case in which the procedure wasn't justified."

To make sure they are paid, hospitals must make sure that procedures are medically necessary and that the documentation supports it. "Hospitals should make sure that documentation is complete and that procedures are medically necessary," Taylor says.

Analyze every denial and determine if mistakes were made and how, then improve your processes to avoid making the same mistake again, Taylor says. "My personal view is that every denial should teach a hospital a lesson. In some cases, appeals are appropriate. In other cases, hospitals should focus on improving documentation and utilization review processes," he says.

Hale believes that some hospitals are dropping the ball when it comes to appealing denials from RACs and other auditors, possibly because it's a significant intrusion on their daily work flow. "Hospitals spent a lot of time and energy to gear up and develop a RAC committee, but some aren't following through. They don't seem to recognize that they have the right of appeal and that they have cases that are appropriate for appeal. They could lose millions of dollars by failure to appeal," she says.

According to data provided to the American Hospital Association (AHA) by individual hospitals, about one in four RAC denials have been appealed. "This figure is probably low because it takes a long time for claims to go through the appeals process," says Elizabeth Baskett, MPA, senior associate director for policy. "We're in the early phases now, and the RACs are just beginning to focus on medical necessity reviews. As these reviews increase and more denials start to roll in, we're going to see the appeal rate go up."

The AHA's RACTrac Report shows that many hospitals have successfully appealed the RAC denials. "Hospitals often can be successful on appeals even though the RACs are required to employ nurse practitioners to make medical necessity determinations," Baskett says. "The nurse practitioners reviewing the cases for the RACs do not know the patient or the patient's condition and don't have the kind of medical expertise or understanding to make those kinds of decisions."

The American Hospital Association has called on the Centers for Medicare and Medicaid Services (CMS) to take the lessons learned from the RAC demonstration project and provide education to hospital staff and other providers on where the mistakes are being made and where the RAC vulnerabilities are. "If hospitals have information on what mistakes they are making, they can change their processes and make sure they avoid RAC audits," Baskett says.

She advises case managers to exchange information with their colleagues at other hospitals about their experiences with RACs. "Many state hospital associations have pulled together a RAC group to share information," Baskett adds. She advises hospital case managers to study the information that is being provided by CMS and look at the AHA RACTrac ( to determine where the RACs are focusing in their region.

Systemwide approach tracks audits

Requests are handled by one central process

The University of Pittsburgh (PA) Medical Center, an integrated care delivery system, takes a systemwide approach to managing third-party audits.

"As a system, we implemented a centralized process to manage some of the auditors. As more are identified, we plan to add them to the centralized process," says Charleeda Redman, RN, MSN, ACM, executive director of corporate care management for the healthcare system.

In addition to the various auditing programs implemented by the Centers for Medicare and Medicaid Services (CMS), the medical system has been undergoing retrospective audits of hospital records by the Pennsylvania Department of Public Welfare for more than five years. The state's quality improvement organization, Quality Insights of Pennsylvania, is conducting retrospective DRG validation and medical necessity audits.

"In addition, several large insurers have employed third-party auditors to review hospital records," Redman says. "Developing an operational process to track audits requests from multiple auditors that have varying time lines has been a very complicated process. Configuring the information technology piece was a big part of setting up the audit tracking process. One of the biggest challenges has been to identify the best way to get every case into the system."

The health system collaborated closely with the software vendor to work out all the bugs related to integration. One of the challenges was to develop a method to track number of pieces of paper involved in the audit process. The correspondence at each state of the audit is addressed to a different individual, and each has a different deadline.

"Given the size of an organization like ours, there's the possibility that the deadline will pass by the time the audit request is routed through the centralized process. Therefore, we are working with the auditors to send their requests to a centralized area rather than 20 different facilities," Redman says.

Just managing the correspondence at each stage of the audit process is a challenge, particularly the tremendous number of pieces that make up the management of correspondences.

It took collaboration between the health system and the software vendor to work out all the bugs related to integration, and the amount of paper involved in the audit process is huge. So many different pieces of paper come in that just management of correspondence at each stage is a huge challenge. The correspondence at each stage of the audit is addressed to a different individual, and each has a different deadline. The hospital has implemented an operational process so that all audit-related requests that come into any facility for audits are routed to a centralized department where the request is entered into a software application. This software application drives the work flow from the request for information until the department sends the records out the door.

Redman says that at present, all of the information has to be entered into the computer and the correspondence is scanned, but the health system is working to eliminate the paper and have the auditors submit requests and findings electronically. "Not only is the initial chart request needed when we send out information, if the finding is adverse, we need to know the timeline of the case," she says. "If we didn't have this internal process, we couldn't manage the complicated process of tracking hundreds of request for records and audit results. It has taken working with information technology and multiple vendors to centralize the tracking and billing systems to ensure that we can track everything through the life cycle of the audit."

When an audit finding is entered into the software application, the account is routed to the work list of the area responsible for analyzing the information to determine if an appeal is justified. The software tracks all the audits through all levels of appeal to the final outcome. The software is integrated with billing and finance, so those departments know the status when they manage accounts receivable. For example, if it is an adverse finding related to medical necessity issues, the account is sent to Redman's department where the appropriate staff members review it and decide if there are grounds for appeal. If the nurse who reviews the finding determines that a denial is worthy of appeal, the information is referred to an outside vendor who handles the hospital's appeals process. If the nurse review finds insufficient documentation to warrant an appeal, the case is closed.

"We are taking a phased approach to extending the process systemwide," she says. "We went live with the hospital division and then rolled it out to the post acute side for skilled nursing facilities, durable medical equipment, infusion, and home care services. Now we are looking at ways to track and trend audits related to the physician services division."

The physician division's audit process is not centralized at this point. "We are working to identify the best approach for the physician division," Redman says. "Given the variation of their auditors, processes for physician services are different, and we are trying to determine whether or not it is beneficial for their information to be part of our centralized system."


For more information, contact:

  • Charleeda Redman, RN, MSN, ACM, Executive Director of Corporate Care Management, University of Pittsburgh (PA) Medical Center. E-mail:

Proactive approach for appropriate admissions

CMs staff ED and admissions office

As a veteran of the Recovery Audit Contractors (RAC) demonstration project as well as the permanent RAC program, Emily Awkerman, RN, BSN, FAACM, advises hospitals to look beyond the diagnosis level when developing process improvement strategies.

"In the demonstration project, hospitals would hone in on a set of Medicare Severity Diagnosis Related Groups [MS-DRGs] included in one group of RAC requests, only to find an entire different set of diagnoses in the next batch of RAC requests. If hospitals don't look at system processes and fixing them, they will never keep ahead of the RACs," adds Awkerman, system director, hospital case management, for Sharp Healthcare in San Diego, CA.

After the demonstration project, a lot of people thought they had a handle on the focus of the RACs, but that hasn't been the case in California, Awkerman says. The Centers for Medicare and Medicaid Services (CMS) appointed a different contractor for the permanent RACs than the one employed in the demonstration project. In the demonstration project, the RAC concentrated on medical admissions, with little attention to surgical admissions, Awkerman says.

"The permanent RACs have also focused on surgical procedures," she adds. "The first round of permanent RAC reviews looked at the low-hanging fruit, with a big focus on surgical procedures that commonly are outpatient procedures, such as laparoscopic surgery, less complex gynecological surgery, and prostate cancer procedures."

The permanent RACs also are reviewing cases that involve cardiac stents, percutaneous catheterization, and some elective surgical procedures, such as arthroscopic joint surgery, Awkerman says. "In addition, the permanent RAC requests have not been the same from facility to facility, even within the Sharp healthcare system," she says. "When we started to analyze patterns, the RAC requests were all over the map. They were requesting different things at different facilities, and the requests did not seem to be connected with what the highest volume procedures are."

In preparation for the RAC project, Sharp beefed up its admission process and created a centralized process to review all admissions to ensure that only appropriate patients are admitted. Sharp's goal is to have patients screened for medical necessity criteria as soon as the decision is made to admit them.

Case managers in the emergency department (ED) review all patients slated for admission and work with the physicians to ensure that the patient status is correct before the patients are moved to a unit. Case managers in the admissions office screen admissions from all other sources, including transfers from other hospitals, direct admissions from physician offices, and scheduled surgical admissions. "The case managers who screen patients before admission have a huge role to play in the initial determination of inpatient versus observation status," Awkerman says.

Some hospitals in the system have case managers covering the house 24 hours a day, seven days a week. At other hospitals, the administrative lead for nursing signs off on the admission in the absence of a case manager. "They don't conduct a thorough review, but they do understand the basic admissions criteria," Awkerman says. "If there is a question, patients start out in observation and can be bumped up to inpatient status when the case manager completes the review."

All admissions, regardless of payers, are reviewed by case managers in the emergency department and the admissions department, and then they are double checked by the case managers on the unit within 48 hours. "The staff in the ED and admission are making their determination based on what is going to be done. Sometimes when the patient gets to the unit and the orders are implemented, the patient may not meet admission criteria, but it was something that couldn't be determined on the front end," Awkerman says. After the initial review, the unit case managers review the patients every other day.

Case managers review observation patients every day to make sure the hospital doesn't miss an opportunity for an inpatient admission. Sharp is implementing a process to prevent inappropriate admissions that might occur when post-surgical patients leave the recovery room. "In some cases, physicians routinely admit patients rather than keeping them as outpatients with observation services," Awkerman says. "Physicians like to use pre-designated order sets with defaults, but if the case manager doesn't review the case and the patient defaults to admission when his condition isn't appropriate for inpatient status, we stand to lose reimbursement," she says.

The health system leaders are working to make sure that the computer system doesn't allow default admissions whenever possible. "We have educated the surgeons in problem areas such as prostate and gynecological surgical procedures," Awkerman says. "We are working with the physicians to help them understand that the order for inpatient versus observation doesn't change the care, but if patients are admitted in inpatient status when they shouldn't be, the hospital loses reimbursement."

Another project is to develop a back-end response that works concurrently with the hospital's response to audit requests. "When we get a demand letter or a request for a chart, we are developing a standard, consistent process for reviewing it," Awkerman says. "As soon as we get a chart request, even before we know whether the contractor is denying it for medical necessity, we put that case through our aggressive screening process, just like we had to appeal it tomorrow."

If the review shows the case might be in question, the case managers have time to conduct a literature search to justify the admission or to obtain supporting documentation from the physician office. "We aren't waiting for a denial. If it occurs, we are already prepped and ready to go with the information we need to appeal," Awkerman says. The hospital is attempting to obtain the information from the physicians' offices as soon as the request for records is made so it can be included with the initial submission. "We aren't sure we're going to be able to pull off the timing to do this," she says.

The hospital system is screening cases at multiple steps before the bill gets dropped. "We're checking and double checking to make sure our billing is accurate and that we didn't miss any opportunities," Awkerman says. Each facility has identified one person in case management that the business office can go to if there are questions. The coders in health information management review each case before it goes to billing.

At each facility in the Sharp system, pre-billing staff review the case before the bill goes to the central billing office and make sure the accommodation code looks correct. If there is a question, they put a hold on the bill and forward it to the case management department for review. For example, if there is an accommodation code for an inpatient stay, but the patient was in the hospital less than 24 hours, the pre-billing staff sends the case back to the case management department for a final review. Awkerman says. "The central billing office staff reviews the case again before signing off on the bill," she says. "This all happens very quickly after discharge. We want to take care of our accounts receivables as quickly as possible."


For more information, contact Emily Awkerman, RN, BSN, FAACM, System Director, Hospital Case Management for Sharp Healthcare, San Diego, CA. E-mail: