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Spring 2010


The Anesthesia Community Must Be Prepared for Increased Audit Activity by RACS and Others

Abby Pendleton, Esq.
The Health Law Partners, P.C., Southfield, MI

Pursuant to Section 302 of the Tax Relief and Health Care Act of 2006, CMS’ Recovery Audit Contractor (RAC) Program was made permanent and was expanded nationwide. The RAC contractors are in place for all 50 states with regard to Medicare Part A and B claims. RACs are permitted to attempt to identify improper Medicare payments resulting from incorrect payments, non-covered services (including services denied as not medically necessary), incorrectly coded services, and duplicate services. RACs are prohibited from selecting claims at random to review. Instead, RACs are charged to use proprietary “data analysis techniques” to determine claims likely to contain overpayments, a process known as “targeted review.”

Although the RAC permanent program just got underway, the CMS RAC program soon may be expanding even more. In Section 6411 of H.R. 3590, the “Patient Protection and Affordable Care Act” (i.e., the health care reform bill), Congress has proposed to expand the RAC program, specifically the use of contingency-fee-based RAC contractors, to audit not only Part A and Part B Medicare claims, but also to review Medicare Advantage (Part C), Medicare Prescription Drug (Part D) and Medicaid claims. This bill is in line with a recent White House Memorandum which states President Obama’s support of the use of “high-tech bounty hunters” to help find health care fraud in government-run Medicare and Medicaid programs. It is uncertain at this point in time how a RAC expansion into Medicaid claims will impact the current Medicaid national auditing program that is underway pursuant to the Medicaid Integrity Program.

In an important development for the anesthesia community, in January of 2010, the RAC for Region D, HealthDataInsights, posted an anesthesia focus area on its website as one of the CMS approved areas for RAC review. The RAC for Region D covers 17 States and 3 territories as follows: Alaska; Arizona, California, Hawaii; Iowa; Idaho; Kansas; Missouri; Montana; North Dakota; Nebraska; Nevada; Oregon; South Dakota; Utah; Washington; Wyoming; Guam; American Samoa; and Northern Marianas. The focus area called for reviewing claims in connection with anesthesia care and evaluation and management services. In posting the issue for review, the RAC stated: “Under NCCI Edit rules, the anesthesia care package consists of preoperative evaluation, standard preparation and monitoring services, administration of anesthesia, and post-anesthesia recovery care. Anesthesia CPT codes 00100 to 01999 (except 01996) include Evaluation & Management (E&M) services rendered on the day before anesthesia (pre-operative day), the day of the anesthesia and all post-operative days. CPT code 01996 includes E&M services on the same day as the 01996 service only. Physicians can indicate that E&M services rendered during the anesthesia period are unrelated to the anesthesia procedure by submitting modifiers 24, 25, 57 and/or 59, depending on claim specific circumstances, on the E&M service. Only critical care E&M services are payable during the anesthesia post-operative period. The post-operative period is defined as the day immediately following the anesthesia service and any subsequent days during the same inpatient hospital admission as for the anesthesia service.”

Notably, during the week of March 22, 2010, although CMS initially approved the issue in November of 2009, CMS directed the RAC vendor to remove the anesthesia care package issue from the list of approved issues. CMS would not comment on the removal, however, anesthesia groups should continue to monitor this area for any future developments.

Although this anesthesia issue appears to be uncertain at this point in time with regard to RAC scrutiny, anesthesia and pain groups could face audits in other areas as the RAC program is further developed and as other payers increase auditing efforts. The historical data from the RAC demonstration program does not assist anesthesia or pain practices in determining any particular focus areas for RAC audit activity that could be forthcoming in the future. We do expect the RACs to study various resources such as the OIG work plan and other CMS guidance materials. For example, we know that the 2008 OIG Work Plan addressed interventional pain management procedures in connection with Section 1862(a)(1)(A) of the Social Security Act, which requires that services must be medically necessary. The OIG noted that interventional pain management was a growing specialty and that Medicare paid almost $2 billion for interventional procedures in 2005. The review was to focus on the appropriateness of payments for the procedures. In September of 2008, the OIG issued a report on “Medicare Payments for Facet Joint Injection Services” wherein they found that 63% of facet joint injection services allowed by Medicare in 2006 did not meet Medicare program requirements, resulting in $96 million in improper payments.

Given the current audit and enforcement environment, we encourage all physician practices to strengthen their compliance programs and documentation practices. For example, we would encourage anesthesia and pain practices to pay careful attention to oversee:

  1. that each provider is only capturing allowable anesthesia time for billing purposes and that appropriate documentation exists to support the recorded start and end times;
  2. compliance with the medical direction requirements including improving documentation practices to demonstrate such compliance;
  3. improvement in documentation practices with regard to separately payable services such as invasive monitoring lines and post-operative pain services;
  4. improvement in medical necessity documentation in connection with the performance of pain management procedures; and
  5. improvement of documentation practices relative to the provision of evaluation and management services.

With regard to medical direction documentation, it will be important to re-evaluate current documentation practices. As many are aware, in 1998, CMS specifically adopted a regulation to address medical documentation in connection with conditions for payment for medically directed anesthesia services. According to 42 CFR §415.110(b): The physician alone inclusively documents in the patient’s medical record that the conditions set forth in paragraph (a)(1) have been satisfied, specifically documenting that he or she performed the pre-anesthetic exam and evaluation, provided the indicated post-anesthesia care, and was present during the most demanding procedures, including induction and emergence where applicable.

Fortunately or unfortunately, depending on your perspective, CMS has yet to provide specific instruction on exactly how this documentation must be accomplished. From a practical standpoint, there are multiple ways in which medical direction could be documented. The reality is that the key to effectuating meaningful compliance with documentation requirements in your practice is to carefully select a method that will be followed and one that captures all necessary medical direction criteria. Per 42 CFR §415.110, medical direction requires that for each patient the anesthesiologist fulfill the following seven (7) specific responsibilities:

  • Performs the pre–anesthetic exam and evaluation
  • Prescribes the anesthesia plan
  • Participates in the most demanding procedures of the anesthesia plan including, if applicable, induction and emergence
  • Ensures that any procedures in the plan that he/she does not perform are performed by a qualifying individual
  • Monitors the course of anesthesia at frequent intervals
  • Remains physically present and available for immediate diagnosis and treatment of emergencies
  • Provides indicated post-anesthesia care

Absent instruction from your Medicare contractor directing a specific method, some potential documentation methods a practice may choose to consider include: individual attestation statements with a comment section; a combination of attestation statements and time line initialing; and handwritten notations with no formal attestations. Given what may be unprecedented levels of auditing, regardless of the documentation method selected, it is imperative that the documentation is robust and captures all elements to establish that medical direction was accomplished in the case. Moreover, it must accurately reflect the services rendered and accurately reflect the appropriate provider (s) who rendered the service.

For those practices that receive requests for records from a RAC or other payers, it is imperative that you timely respond to record requests and that you provide all relevant documentation to support the payment of the claim at issue. To the extent a RAC or other Medicare contractor reviews your records and denies the claim, the traditional Medicare appeals process would apply requiring you to file a redetermination request within 120 days of receipt of a denial. The Medicare appeals process has several stages including: (1) Redetermination- 120 day deadline; (2) Qualified Independent Contract Review- 180 day deadline; (3) Administrative Law Judge hearing stage- 60 day deadline; (4) Medicare Appeals Council- 60 day deadline; and (5) Federal Court.


Abby Pendleton, Esq. is a partner with the health care law firm of The Health Law Partners, P.C. in Southfield, Michigan. The firm represents hospitals, physicians, and other health care providers and suppliers with respect to their health care legal needs. Pendleton specializes in a number of areas, including but not limited to: Recovery Audit Contractor (RAC), Medicare, Medicaid and other payor audit appeals, healthcare regulatory matters, compliance matters, reimbursement and contracting matters, transactional and corporate matters, and licensing, staff privilege and payor de-participation matters. She can be reached at apendleton@thehlp.com.