January 31, 2011

In the Tax Relief and Health Care Act of 2006, Congress required a permanent and national Recovery Audit Contractor (RAC) program to be in place by January 1, 2010. The goal of the RAC Program is to identify improper payments made on claims of health care services provided to Medicare beneficiaries.

The RACs are private corporations that have been awarded contracts to help the Centers for Medicare and Medicaid Services (CMS) with the mission of reducing “Medicare improper payments through efficient detection and collection of overpayments, the identification of underpayments, and the implementation of actions that will prevent future improper payments.”

There are four RACs, each covering a set of states and territories. They are compensated on a contingency fee basis based on the principal amount collected from and/or returned to the provider or supplier. This contingency fee is significant, ranging from 9 to 12.5 percent, depending upon the RAC contract. Thus, the RACs are highly incentivized to identify improper payments once a claim review is initiated.

The RACs conduct two types of search for improper payments made to physicians: (1) automated claims data reviews on “black/white issues” (a RAC can perform an automated review when there is a clear coverage policy such as a Local Coverage Determination or National Coverage Determination, or when the service is medically unbelievable or a provider doesn’t respond to a records request), and (2) complex reviews of coding practices and medical necessity issues, which require medical and/or other records. Audits– which are thus not random–can go back three years from the date the claim was paid.

“Improper payments,” in the meaning of the RAC program, result from:

• Incorrect payments;
• Non-covered services (including services that are not reasonable and necessary);
• Incorrectly Coded Services (including DRG miscoding);
• Duplicate services

All of the RACs have focused heavily on hospitals and, to date, have not conducted many audits of physicians. As we know, physicians account for less than 15 percent of Medicare spending so the RACs’ emphasis is quite reasonable. Section 6411 of the Patient Protection and Affordable Care Act expanded the RAC program to include Medicare Advantage (Part C), Medicare Prescription Drug (Part D) and Medicaid claims. Note that this expansion is in line with a recent White House Memorandum in which President Obama expressed his support for the use of “high-tech bounty hunters” to help find health care fraud in the Medicare and Medicaid programs. The expansion should prove lucrative if the activities of the Department of Justice in pursuing recoveries under the civil False Claims Act and the criminal investigations of the joint DOJ/HHS Strike Force are any guide. Last year the government recovered more than $4 billion in Medicare and Medicaid payments for fraudulent claims. See http://oig.hhs.gov/publications/hcfac.asp for more information on the results of the Health Care Fraud and Abuse Control Program.

The RAC for Region D. Health Data Insights (HDI), Inc. of Las Vegas, whose jurisdiction includes Alaska, Arizona, California, Hawaii, Iowa, Idaho, Kansas, Missouri, Montana, North Dakota, Nebraska, Nevada, Oregon, South Dakota, Utah, Washington and Wyoming, is the only RAC to have announced that it will review a specific anesthesia issue. HDI has posted the following issue on its website:

Anesthesia Care Package - E&M Services

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 include Evaluation & Management (E&M) services rendered on the day of the anesthesia procedure. If the only service provided is management of epidural/subarachnoid drug administration, then an E&M service should not be reported in addition to CPT code 01996.

HDI is seeking a refund of alleged overpayments for E&M services going back to November 1, 2007 from one large academic medical center that we know of; there may well be other anesthesia departments or groups that it is also reviewing. Since there has been no request for medical records, the academic department is assuming that this is an automated claims review. That would mean that HDI believes its position to be "black/white" and that it is supported by clear coverage policy. We would disagree, however, for several reasons:

1. Last April, CMS requested that the RAC for Region D remove an anesthesia care package it had posted to its website. (CMS must approve all issues proposed by the RACs.) There is no “anesthesia care package” encompassing any and all E&M services in the Medicare Claims Processing Manual or the Correct Coding Policy Manual, cited by HDI as the authority for its position.
2. The description that was removed differed from the one quoted above in that it included all E&M services “rendered on the day before anesthesia (pre-operative day), the day of the anesthesia and all post-operative days.” The new version, which was posted in August 2010, mentions only E&M services provided on the day of the anesthesia procedure, but it also claims that "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.” The old version also acknowledged that “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.” Does the omission of the latter sentence mean that HDI will disregard the modifiers? Are all pre-operative E&M services provided before the day before anesthesia appropriately billed, even though “the anesthesia care package consists of preoperative evaluation….”given that the new version states that “ Anesthesia CPT codes 00100 to 01999 include Evaluation & Management (E&M) services rendered on the day of the anesthesia procedure,” period? What about post-operative E&M services? In its old version, HDI had stated that only critical care services would be allowed in the post-anesthesia period. Whether or not the underlying Medicare rules are clear, certainly the HDI interpretation is not.

We would encourage anesthesia practices in HDI territory and indeed in any of the RAC jurisdictions, should the problem arise there, to question “issues” involving perioperative E&M services and to appeal adverse determinations. The separation of perioperative E&M services from the anesthesia service and its components, as defined by ASA and the CPT® system, is a subject that has long been gray rather than black and white. The simple fact that CMS approved the principles as written by HDI both before Health Care Fraud and Abuse Control Program tells us that even CMS staff lack a complete understanding of the rules.

We appreciate readers’ bringing developments such as HDI’s resurgent interest in anesthesiologists’ claims for E&M services to our attention. (Is anyone else reminded of the current television commercial for Travelers Insurance that features a dog so worried about his bone that he brings it to his bank safety deposit box?) We hope that our shining the light on such matters will help lead to their proper resolution.

With best wishes,

Tony Mira
President and CEO