Get ready for more headaches as Medicaid RACs are ramped up

Details are uncertain but challenges abound

If you thought the Medicare Recovery Audit (RA) program was problematic, just wait until the Medicaid Recovery Audit Contractor (RAC) program goes into high gear.

The Centers for Medicare and Medicaid Services (CMS) instructed state Medicaid agencies to develop a RAC program by Jan. 1 of this year but the program is not expected to be in full swing until well into 2013.

The Medicaid RAC program is likely to be more challenging than its Medicare counterpart because the final rule for the Medicaid program is not as detailed as the Medicare final rule and individual state Medicaid agencies have a lot of leeway in creating their own RAC process, says Elizabeth Lamkin, MHA, chief executive officer and partner in PACE Healthcare Consulting, LLC, based in Hilton Head Island, SC. "There was a steep learning curve for providers with the Medicare program and the Medicaid program may be more problematic because there are so many vendors and different state rules," she says. The only bright spot is that Medicaid HMO patients will not be subject to the Medicaid RAC, she adds.

Deborah Hale, CCS, CCDS, president and chief executive officer of Administrative Consultant Service, a healthcare consulting firm based in Shawnee, OK, adds that it's impossible to make a lot of general statements about the Medicaid RACs because each state Medicaid agency does things so differently. Hospitals are challenged because every state can have different rules for payment, and it's often difficult to know what the rules are, Hale says. "I have worked with clients in one state that has five different Medicaid HMOs and every one had different rules, and often they weren't very clear or detailed. Case managers were spending all their time trying to keep up with certification and recertification," she says.

CMS has given the states the leeway to use their current Medicaid appeals process or create a different one for the RACs. "If a hospital gets patients from multiple states, the staff will have to deal with multiple Medicaid RACs, different rules and appeals processes, and it can get very confusing," Hale says.

Children's hospitals and public safety net hospitals are likely to be hardest hit by the program, she says. The Medicaid RACs are likely to be particularly aggressive since Medicaid agencies throughout the country are perennially short of funds and are always looking for ways to recoup money, she adds.

Joanna Malcolm, RN, CCM, BSN, consulting manager, clinical advisory services for Pershing, Yoakley & Associates in Atlanta, advises case managers to give the same scrutiny to Medicare beneficiaries, Medicaid patients, and those who are self-pay, because they have the chance of becoming eligible for Medicaid. "Hospitals have a lot to lose if they don't pay attention to all of the government auditors and take steps to avoid having revenue taken back. It's important for case managers to treat all of these patients the same way and apply criteria in exactly the same way," she says.

Hale points out that the CMS Conditions of Participation rules for Utilization Review apply to Medicare and Medicaid patients. The CMS publication also states an expectation that case managers are to screen patients at the point of entry. "Case managers should review cases for medical necessity and time of admission and try to provide guidance for the medical staff," she says.

Lamkin asserts that admissions case managers, who review every admission for appropriate medical necessity, bed status, and place of service, must know the Medicaid billing rules. "The case manager needs to be well-versed in Medicaid regulations because hospitals must be extremely careful in documenting the approval for level of care for these patients," she says.

Case managers should work closely with the physician advisor and the clinical documentation specialist to make sure every admission meets medical necessity and that the bed status and place of services are appropriate, and that it is documented, she says. If there is any question, case managers and/or their physician advisors should contact the Medicaid RAC medical advisor for guidance and be very careful about documenting the conversation, she says. "Documentation is the only way to defend the services provided to the patients, and to bill appropriately," she says. (For more information about RAC and medical necessity, see story, below.)

If case managers are using evidence-based medical criteria and are consistent in the way they manage the episode of care and document thoroughly, the hospital is more likely to be in good shape when the RACs review the Medicaid records, Lamkin adds. "If the front end documentation is appropriate and based on criteria, you can appeal under whatever appeals process your state establishes," she says.

Hale adds that getting medical necessity and patient status right up front is crucial to avoiding take-backs from the Medicaid RACs. "In my experience, it's been much more difficult to get a Medicaid denial overturned than to successfully appeal a Medicare denial," she says.

Lamkin predicts that tracking Medicaid RAC records requests, denials, and appeals will be a nightmare for providers serving patients in multiple states. "We know the appeals process has been the most difficult area for providers in the Medicare program and we expect the same in the Medicaid program," she says.

Nevertheless, hospitals should appeal their denials, and keep appealing, Lamkin says, pointing out that during the Medicare demonstration project, many denials were not overturned until the third level of the appeals process. Track the denials that are not appealable and use them as basis to educate the staff, including physicians.

Malcolm points out that unlike Medicare RACs that have focused on inpatient claims, Medicaid RACs are going to take a broader scope and identify inappropriate payments for outpatient services, as well as post-acute providers. Case managers should work closely with home health agencies, skilled nursing facilities, and other post-acute providers to develop plans for making sure Medicaid patients get the care they need, Malcolm says.

"Hospitals need to start early to develop relationships with these providers. Everybody wants the paying patients, but communities need to do something for patients who can't pay. The Medicaid RACs are going to be looking at providers at all levels of care so we all need to work together," she says.


For more information, contact:

  • Deborah Hale, CCS, CCDS, President and Chief Executive Officer of Administrative Consultant Services, LLC, Shawnee, OK. Email:
  • Elizabeth Lamkin, MHA, Chief Executive Officer and Partner, PACE Healthcare Consulting, Hilton Head, SC. Email:
  • Joanna Malcolm, RN, CCM, BSN, Senior Consultant, Pershing, Yoakley & Associates, Atlanta. Email:
  • Charleeda Redman, RN, MSN, ACM, Executive Director of Corporate Care Management, University of Pittsburgh Medical Center. Email:

Medical necessity likely RACs focus

Short stays likely to be denied

It's too early in the game to know exactly where the Medicaid Recovery Audit Contractors (RACs) are going to focus, but hospitals can take a lesson from their experiences with the Medicare Recovery Audit (RA) program, says Joanna Malcolm, RN, CCM, BSN, consulting manager, clinical advisory services for Pershing, Yoakley & Associates in Atlanta.

She predicts that the Medicaid RACs will start looking for medical necessity issues, following the lead of the Medicare RAs. "Medicare has recouped a lot of money from medical necessity review, and the RACs are going to look where the money is," she says.

Elizabeth Lamkin, MHA, chief executive officer and partner in PACE Healthcare Consulting, LLC, based in Hilton Head Island, SC, adds that the Medicaid RACs are likely to focus on many of the same issues as the Medicare RAs such as short length of stays, medical necessity for the inpatient setting for chest pain, syncope, transient ischemic attack, abdominal pain, back pain, and short stay surgery such as laparoscopic procedures, coronary artery stents and genitourinary procedures.

Since the RAC program began in January, Lamkin has received some anecdotal information from clients in Colorado that the Medicaid RAC's focuses for denials were very different from those of the Medicare RA. "When the Medicaid RACs have issued denials for medical necessity, they've been issuing them for different reasons that the Medicare RAs," she says.

Deborah Hale, CCS, CCDS, president and chief executive officer of Administrative Consultant Service, a healthcare consulting firm based in Shawnee, OK, adds that denials are likely to occur when the documentation does not support the DRG coding and when patients are readmitted after being prematurely discharged. Historically, Medicaid agencies have placed more focus on expected length of stay than on medical necessity, Hale says. If the expected length of stay is less than 24 hours, providers are not likely to get the admission approved even if it meets inpatient criteria, she says. If a patient is not listed on the midnight hospital census, an inpatient claim for that one-day stay is likely to be denied, she adds.

Charleeda Redman, RN, MSN, ACM, executive director of corporate care management for the University of Pittsburgh Medical Center, an integrated care delivery system with headquarters in Pittsburgh, PA, adds that the same vendor Pennsylvania Department of Public Welfare has chosen for the Medicaid RAC program, has been performing retrospective audits of the hospital's Medicaid records for five years. The auditor focuses on medical necessity for one-day stays for conditions such chronic obstructive pulmonary disorder, chest pain, and pediatric asthma, she says.

Hale adds that Medicaid agencies are very straightforward in what they will pay for and often deny payment for situations where social issues are involved, and a pediatric patient is at risk. "Case manager should document any social issues but it may have no bearing on the denial. I've seen some incredibly sad tales in medical records documentation when the admission still was turned down," she says.

Redman adds that when there are clinical issues that need to be addressed but the patient doesn't meet InterQual criteria, the physician contacts the Medicaid agency's physician advisor and presents additional information as to why the patient should be admitted.

"If we believe that patients need to be admitted because of a combination of clinical and social reasons, we initiate the peer-to-peer review," she says.