A 360° Approach to Medical Necessity Compliance

Section Sponsored by:

Ever-changing healthcare rules and regulations can be a constant source of confusion for hospitals and their staff. It is critical that hospital decision-makers stay on top of the latest Medicare and Medicaid compliance requirements, especially as they relate to medical necessity. The challenges hospitals must address to comply with the Medicare Conditions of Participation (CoP) can be complicated and time consuming to say the least.

Becoming an expert in this area of regulatory compliance is not an option, as the financial ramifications and other risks associated with non-compliance related to misclassification of inpatient vs. observation status for admissions and readmissions can be severe.

Hospitals' compliance with the Centers for Medicare and Medicaid Services (CMS) regulations is being subjected to heightened scrutiny by a range of government program integrity contractors. Program integrity auditors include the Recovery Audit Contractors (RACs) and the Medicare Administrative Contractors (MACs). RACs are hired by Medicare to detect and correct improper payments and collect those overpayments from providers on a post-payment basis. These contractors can look back 3 years from the date that a claim was paid to correct past improper payments and implement actions that will prevent future improper payments. RACs specialize in the review of hospital inpatient and outpatient services and can also conduct medical record reviews.

MACs primarily process and pay Medicare claims on behalf of CMS. In addition however, MACs perform select program integrity functions, including medical review of claims, identifying and recovering improper payments, conducting provider audits, educating providers on appropriate billing practices, and screening beneficiary complaints related to alleged fraud.

Because of the complicated regulations and the increased scrutiny by CMS and government-related entities, it's not a matter of "if" a hospital will be audited, but rather "when." Therefore, every hospital must implement a robust, compliant Utilization Review (UR) process. The CoP mandate that the UR function must include at least two doctors of medicine, but they don't necessarily need to be on the hospital staff, as the UR committee may also delegate certain functions to third-party physician advisors.

The first obligation of the UR committee is to create a UR plan that addresses the utilization of services furnished by the hospital and its medical staff to Medicare and Medicaid patients. Optimally, the UR plan should define the roles and responsibilities of its members. Upon adoption of the plan, the UR committee is charged with verifying - through review of records and reports, and by interviews with the chair and members - that daily activities (Admission Review) and other functions are being performed in accordance with the UR plan. Upon collecting such data, the UR committee must verify that there is a consistent reporting and follow-up of accountabilities. It is not enough to just research the problem, but the issues must then be addressed in order to ensure compliance.

While the foregoing obligations define the basic requirements of a UR committee, it is essential to move beyond the basic requirements and truly utilize the expertise within the group. A strong data collection plan should be implemented to gather as much information as possible to achieve the ultimate goal of having a defensible medical necessity compliance process in place. Hospitals must go beyond regulatory requirements to peel back the layers within the organization and have the difficult conversations that will move the UR Committee from standard to efficient by setting priorities for action, and with the hospital staff, data and experience overtime, set realistic goals.

A best practice for a UR committee is to target outliers by day, cost and attending physician to identify opportunities to improve resource utilization and create focus work groups that report to the committee. Outliers are any procedures or practices that use much more or much less resources than hospitals of comparative size or within a similar region. These outliers have become a particular target for RACs and MACs, so it is important to identify these potential red flags early. Some of the causes for outliers could be unnecessary or delayed testing, delayed results reporting, delayed time of moving admissions from the emergency department to bed and discharge bed turn around.

The key to navigating the complicated topic of medical necessity compliance is a UR Committee comprised of a group of administrative and physician champions with access to constant education regarding the ever-changing government regulations, and the skills to keep the lines of communication open and ongoing.