Outpatient Facility Coding Alert

Published on Fri May 24, 2013 PDF

Experts concerned that RACs get paid extra for every claim they deny.

If you thought your therapy services went under enough scrutiny from Recovery Audit Contractors (RACs), get ready for one more item on the list. CMS has announced that for all outpatient therapy claims surpassing the $3,700 threshold, as of April 1, 2013, RACs will be conducting the manual medical reviews — not your Medicare Administrative Contractor (MAC).

Understand the Pros and Cons

RACs are paid on a contingency fee, which means they get a percentage of the dollars for denied claims.

“This could have a chilling effect on beneficiary access to care when providers are making decisions about surpassing the $3,700 threshold knowing that their reviewer is being paid on a contingency basis,” says Jennifer Hitchon, JD, MHA, counsel and director of regulatory affairs for the American Occupational Therapy Association. “We’re pretty discouraged that CMS chose to involve the RACs.”

The upside: Only four RACs across the country will be handling this process. “So there should be more uniformity because there were more [than four] MACs handling the process before,” Hitchon says.

“RACs have more automated systems,” adds Gayle Lee, JD, senior director of health finance and quality for the American Physical Therapy Association. For example, RACs will have electronic portals where you can see when the RAC receives your information, as well as the claim’s status (such as, approved or denied).

Determine Your State’s Review Status

All outpatient therapy claims for more than $3,700 will fall under manual medical review. You will not get a set number of approved therapy visits in advance as you did in 2012. “Each therapy visit will be reviewed to determine whether or not the services meet the medical necessity criteria under Medicare,” Lee explains.

Critical: Last February, CMS introduced a prepayment review process, but now, only states under the RAC prepayment review demonstration will undergo prepayment review for their claims. These states include California, Florida, Illinois, Louisiana, Michigan, Missouri, New York, North Carolina, Ohio, Pennsylvania, and Texas.

All other states will undergo post-payment reviews. In this process, when the therapy dollar amount exceeds $3,700, your MAC will flag the claim. Your MAC will pay the claim automatically but will send you an additional documentation request (ADR). You’ll send the documentation to your RAC, not your MAC, Lee explains. Then, “the RAC will conduct post-payment review and notify the MAC of its final decision.” 

“CMS is trying to eliminate the cash flow issue for providers [with post-payment review], but there is still certainly risk for the provider [to have their payment rescinded],” Hitchon points out.

Watch Your RAC’s Timeframes

Providers in post-payment review states get paid up front, but those in prepayment review states will wait longer. RACs, however, must conduct the prepayment review within 10 business days of receiving the ADR.

Concern: “In Q4 of 2012, when the MACs were doing this process, providers were not hearing back within 10 business days, and we don’t have any reason to suspect that the RACs will be better, so we’re watching this closely,” Hitchon says.

For post-payment reviews, CMS is giving RACs up to 45 days to make a determination.