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CMS Delays Recovery Audit Contractor (RAC) Medical Necessity Reviews

According to its most-recently published “Expansion Schedule,” the Centers for Medicare and Medicaid Services (CMS) planned to expand the Recovery Audit Contractor (RAC) program to 23 states by March 1, 2009, and the remaining states by August 1, 2009 or later. RAC automated reviews soon will begin, but medical necessity reviews have been delayed.

On Friday, June 12, 2009, HLP partner Jessica Gustafson spoke with Commander Marie Casey, the Deputy Director of the Division of Recovery Audit Operations at CMS. Pursuant to this conversation, Commander Casey indicated that CMS expects RAC “automated reviews” to begin this month or next month in the first 23 states. An “automated review” is a review of claims data without a review of the records supporting the claim. Generally speaking, RACs may conduct automated reviews only in situations where there exists both (a) a certainty that the service is not covered or is incorrectly coded, and (b) a written Medicare policy, article, or coding guideline applicable to the claim. RACs also may use automated review, even if there is no specific Medicare policy, article or coding guideline on point, in some “clinically unbelievable” situations or when identifying duplicate claims and/or pricing mistakes.

“Complex reviews,” i.e., reviews of medical or other records in situations where there is a high probability (but not a certainty) that a claim includes an overpayment, are anticipated to begin later this year. Specifically, coding and diagnosis-related group (“DRG”) claim reviews are anticipated to begin in September 2009. Medical necessity reviews are not expected to begin before January 2010.

Before the RACs begin conducting medical necessity reviews, they must receive approval of the areas planned for review by CMS’s “issue review team.” According to the June 12, 2009 conversation with Commander Casey, as of this date, CMS has not approved any medical necessity issues for review.

For more information regarding RACs, please call Abby Pendleton, Esq. or Jessica L. Gustafson, Esq. at (248) 996-8510, visit The HLP website’s RAC, Medicare and Other Payor Audits page, or visit The HLP website.

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