The Centers for Medicare & Medicaid Services (CMS) has approved an initial set of issues for the first medical necessity reviews under the permanent recovery audit contractor (RAC) program. Under these reviews, RACs will request medical records from the provider to conduct a more in-depth review of the site of service and medical necessity of the services provided. At least one RAC, CGI Technologies and Solutions, Inc., already has posted to its website the eighteen types of CMS-approved inpatient hospital claims eligible for medical necessity review. The reviews will focus on the following:

  1. Atherosclerosis w/MCC MS-DRG 302 (Medical Necessity Review and MS-DRG Validation).
  2. Cardiac Arrhythmia & Conduction Disorders w/MCC or w/CC DRG 138, MS-DRG 308, 309 (Medical Necessity Excluded except for MS-DRG 308).
  3. Chest Pain MS-DRG 313 (Medical Necessity Review and MS-DRG Validation).
  4. Chronic Obstructive Pulmonary Disease DRG 88, MS-DRG 190, 191 (Medical Necessity Review and MS-DRG Validation).
  5. Esophagitis, Gastroenteritis & Misc. Digestive Disorders w/MCC DRG 182, MS-DRG 391 (Medical Necessity Review and MS-DRG Validation).
  6. GI Disorders 368-370, 374-376, 380-390 and 392-395 (Medical Necessity Excluded except for MS-DRG 393).
  7. Heart Failure & Shock w/MCC, w/CC and w/o CC/MCC DRG 127 MS-DRG 291, 292, 293 (Medical Necessity Review and MS-DRG Validation).
  8. Kidney & Urinary Tract Infections w/MCC DRG 320 MS-DRG 689 (Medical Necessity Review and MS-DRG Validation).
  9. Musculoskeletal Disorders 539-541, 545-558, and 564-566 (Medical Necessity Excluded except for MS-DRG 551 and 552).
  10. Nervous System Disorders MS-DRG 052-063, 067-074, 077-086, 088-093, 097-099, and 101-102 (Medical Necessity Excluded except for MS-DRG 056, 057 and 069).
  11. Nutritional and Metabolic Disorders DRG 296 MS-DRG 640 (Medical Necessity Review and MS-DRG Validation).
  12. Other Circulatory System Diagnoses w/MCC MS-DRG 314-316 (Medical Necessity Review and MS-DRG Validation).
  13. Other Vascular Procedures w/CC, w/o CC/MCC MS-DRG 253, 254 (Medical Necessity Review and MS-DRG Validation).
  14. Percutaneous Cardiovascular Procedures MS-DRG 247, 249, 251 (Medical Necessity Excluded except for MS-DRG 249).
  15. Red Blood Cell Disorders w/MCC MS-DRG 811 (Medical Necessity Review and MS-DRG Validation).
  16. Renal Failure DRG 316 MS-DRG 682, 683, 684 (Medical Necessity Review and MS-DRG Validation).
  17. Respiratory 175, 176, 180-188, 192, and 196-206 (Medical Necessity Excluded except for MS-DRG 192).
  18. Syncope & Collapse MS-DRG 312 (Medical Necessity Review and MS-DRG Validation).

Half of the issues posted relate to the addition of medical necessity reviews to existing DRG Validation issues. In a recently posted FAQ response, CMS addressed the question as to whether a RAC can perform a medical necessity review on a claim that it originally reviewed for DRG Validation:

if the RAC has already requested documentation and issued a review results letter to the provider for a DRG Validation, the RAC will not be allowed to re-review the claim again for medical necessity. However, if both issues are approved (DRG Validation and medical necessity) prior to the request of the additional documentation, the RAC may conduct both reviews simultaneously.

Due to the contingency nature of RAC audits, we expect other RACs nationwide soon will be posting similar lists and diligently pursuing medical necessity reviews. According to CMS, claims denied as "medically unnecessary services or setting" accounted for 62 percent of the amounts collected from inpatient hospitals during the demonstration project, resulting in approximately $513 million in overpayments. CMS anticipates that the permanent RAC program will adopt a similar strategy as the RAC demonstration project where claim reviews will focus on high-dollar improper payments, like inpatient hospital claims, which can yield the highest return in contingency fees.

Providers should prepare for additional documentation requests and the first round of potential denials. Accordingly, providers should concurrently review the medical records requested by the RAC in preparation for pursuing appeals as appropriate.