Revenue Cycle

Reader response: Don't forget Condition Code 44

Recovery Auditor Report, December 24, 2008

By Barbara Aubry, RN, CPC, CHCQM, FAIHQ
As mentioned in the previous issue of the RAC Report Medicare recently released a RAC Q&A. However, on of the Q&A left me a bit puzzled, and I imagine I’m not the only one.
Here’s the original question and response from CMS:
Q: If I receive a demand letter from a RAC because a service didn't meet Medicare's medical necessity criteria for an inpatient level of service, can we re-bill all the services on an outpatient claim?
A: Providers can re-bill for Inpatient Part B services, also known as ancillary services, but only for the services on the list in the Benefit Policy Manual. That list can be found in chapter 6, section 10: Rebilling for any service will only be allowed if all claim processing rules and claim timeliness rules are met. There are no exceptions to the rules in the national program. The time limit for re-billing claims is 15–27 months from the date of service. These normal timely filing rules can be found in the Claims Processing Manual, chapter 1, section 70:
After reviewing the citation in the Medicare Benefit Policy Manual (chapter 6, section 10), I wonder why the policy manual citation in the CMS answer makes no mention of the Condition Code 44 requirements for converting inpatient services to outpatient (see Transmittal 299, CR 3444)? The conversion of an inpatient admission that has been determined to be medically unnecessary requires that the conversion take place while the patient is still in the hospital. Plus, the hospital is responsible to ensure that when there is a question regarding the medical necessity of an inpatient admission, the required utilization review (UR) review of that patient’s status is conducted as stated in 42 CFR 482.30. The UR committee's responsibilities and functions may be conducted by the hospital’s quality improvement organization (QIO) that has assumed binding UR review. However, the hospital is responsible to either have a UR committee or have a QIO that carries out the UR activities as described in 42 CFR 482.30, including the review for medical necessity of an inpatient admission and continued stay. 
Without this required UR review, it seems unlikely that the hospital's billing department can arbitrarily resubmit RAC inpatient denials as ‘billable’ outpatient services—especially if it can not substantiate the appropriateness of the previously denied services. I look forward to CMS’s clarification of their statement above to assist provider’s understanding of their existing medical necessity requirements.
Creating a process to accurately determine the medical necessity of services provided to outpatients can reduce their loss to a RAC for inappropriate inpatient admissions. Most of the problem admissions begin as unscreened outpatients (e.g., ED, clinics, observation) that result in medically unnecessary short stays. Proper management of outpatient medical necessity will significantly reduce ‘inpatient’ medical necessity losses. 

Editor’s note: Thanks to Barbara Aubry, RN, CPC, CHCQM, FAIHQ, regulatory analyst for 3M Health Information Systems, Inc, in Rockleigh, NJ, for providing this response.


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