David A. Halsey, MD (left), and Brian Parsley, MD, addressed members of the AAOS Board of Councilors and Board of Specialty Societies (right) during a symposium on the impact of MAC and RAC audits, particularly with regard to tighter requirements for documenting medical necessity of orthopaedic procedures.


Published 12/1/2012
Mary Ann Porucznik

Documenting Medical Necessity for TJR

“Painful DJD unresponsive to conservative treatment” is not enough

Although a total hip or total knee arthroplasty is frequently seen as an “elective” procedure, for most patients, it’s also the last step in a long effort to maintain quality of life. Most orthopaedic surgeons won’t recommend a total joint replacement (TJR) until after multiple other options to reduce pain and maintain function have been tried.

But many surgeons, including those with years of experience, have recently seen their claims for reimbursement on TJRs being denied as the result of audits conducted by the Medicare Administrative Contractors (MACs) and Recovery Audit Contractors (RACs). In some cases, the government has even reclaimed payments made, a process called “clawbacks.”

For the most part, the clawbacks are based on the fact that the medical record failed to show the medical necessity of the procedure—a claim that stuns many AAOS members. At the Fall Meeting of the AAOS Board of Councilors and Board of Specialty Societies, the question of how to document the medical necessity of TJRs was addressed during a panel discussion moderated by David A. Halsey, MD.

In 2010, President Obama issued a mandate to the Center for Medicare and Medicaid Services (CMS) to achieve the following three goals over the next 2 years:

  • To reduce the overall payment error bill by $50 billion
  • To cut the fee-for-service error rate in half
  • To recover $2 billion in improper payments

As a result, several high-profile, high-cost procedures—including TJR of the lower extremity—were identified as having high error rates. In many cases, these were not surgeries performed on the wrong people for the wrong reasons; instead, the errors are due to documentation errors, noted Dr. Halsey.

“Our goal is to familiarize you with this issue and provide information that will enable you to take steps in your offices, practices, and hospitals to comply with current regulations,” said Dr. Halsey, who also noted that the AAOS is working to change some practices by both MACs and RACs to protect patient interests.

In 2011, the AAOS and the American Association of Hip and Knee Surgeons (AAHKS) worked with James Corcoran, MD, the medical director of First Coast Service Options, Inc. (the MAC in Florida), to develop a local coverage determination (LCD) for TJR in Florida. According to Dr. Halsey, the original draft LCD included a requirement that multiple 12-week nonsurgical interventions be documented prior to authorizing coverage of a TJR.

“In a matter of days, a state orthopaedic society, a specialty society (AAHKS), individual practitioners, and the AAOS came together. Within a matter of weeks, we collectively presented good information to the local carrier medical director and changed the policy for the better of our patients and our practices. Important information, distributed appropriately, ethically, honestly, and transparently made a huge difference for our patients in that particular MAC jurisdiction,” he said.

Based on the audience’s response to several questions, the panel was both timely and appreciated. Nearly one third of those attending (or their practice partners) have been audited by Medicare and 10 percent had received a recoupment request.

Looking over your shoulder
According to James W. Cope, MD, one of two senior medical directors at the CMS Comprehensive Error Rate Testing (CERT) program, and Jennifer Dupee, RN, JD, senior staff at CMS in the area of provider integrity and compliance, individual providers have little to fear from a CERT audit. They explained that CERT audits are used to evaluate MACs in their claims administration capacity. Only about 50,000 individual claims are selected randomly from all claims submitted for payment during the reporting period.

Debra L. Patterson, MD

“When entities like ours (CERT) review medical records, we are not trying to deny the claims,” insisted Dr. Cope. “On the contrary, we look to pay. But if you don’t have enough information or some technical things are not there, it creates a problem. We are mandated and audited on a regular basis to make sure that these things are in the medical record before CMS pays.”

A friend to orthopaedics
Debra L. Patterson, MD, introduced herself as “a friend to orthopaedics, physicians, Medicare beneficiaries, and our government, which contracts with our company to process claims.” Dr. Patterson is vice president of clinical affairs and executive medical director for Novitas Solutions, Inc., which will soon serve as the MAC for 11 states and the District of Columbia.

Dr. Patterson explained that, to reach the goal of reducing the error rate, MACs must address hospital error rates, in particular the medical necessity of hospital admissions. “Most covered services have no medical necessity requirement,” she pointed out. “We operate under the simple belief that healthcare professionals are the best to understand what’s necessary for their patients; it’s largely an honor system.

“We require that healthcare professionals document their services so that any reasonable clinician can put together the story from when the patient first was seen to the point when the patient undergoes an invasive procedure,” she continued. “We believe that healthcare professionals will report for payment only those services that are safe and effective, that meet but do not exceed the patient’s medical need, and that are performed in accordance with accepted standards of medical and surgical practice.”

The initial audits of DRGs 470 (total knee arthroplasty and total hip arthroplasty) as well as the related Part B professional service claims generated astounding denial rates due to poor physician documentation of medical necessity for the primary procedure necessitating hospital admission, noted Dr. Patterson. “Orthopaedic surgeons got stuck in the very first foray into Parts A/B audits,” she said, “but make no mistake—you won’t be the only ones going through this.

“We need the kind of information a resident would give an attending physician when he or she is trying to get the attending physician out of bed in the middle of the night to come in and staff the case. You need to explain why this patient needs surgery now,” she counseled.

The hospital perspective
“Because many of these audits begin at the hospital level,” said Pamela E. Clarke, vice president of healthcare finance and managed care, Delaware Valley Healthcare Council, “physicians associated with hospitals may start to see an uptick in requests, as the auditors look for errors at the physician level and the facility level.”

Such reviews are costly, she noted. According to the American Hospital Association, more than half of all hospitals reported spending $10,000 or more managing the RAC process during the second quarter of 2012, a third spent more than $25,000, and 9 percent spent more than $100,000.

Despite the facts that two thirds of medical records reviewed by RACs did not contain an improper payment and that 75 percent of hospital appeals are successful, Ms. Clarke anticipates an upsurge in activity as CMS begins a prepayment review demonstration project. In this situation, the CMS conducts a prepayment review of the hospital claim—after the service has been rendered, but before the claim is paid. A postpayment review of the related physician claims is also conducted.

When it comes to total joint replacement, noted Ms. Clarke, “We have to demonstrate to the auditors that end-stage joint diseases exist and that prior conservative treatments have occurred. But we can’t just make those statements. Physicians can’t just say ‘failed outpatient therapies’ or ‘bone on bone’; that’s insufficient to support the indications for joint replacement.

“Details such as therapy from/to dates, specific treatments, therapies and/or drugs used, the patient’s use of medications, such as analgesics or anti-inflammatory agents, and participation in flexibility and muscle strength exercises, including supervised physical therapy, use of assistive devices or weight reduction, and use of joint injections including dates of administration and length of time effective must be included,” she counseled. (See “What Kind of Note Is Needed?” on page 22.)

David A. Halsey, MD (left), and Brian Parsley, MD, addressed members of the AAOS Board of Councilors and Board of Specialty Societies (right) during a symposium on the impact of MAC and RAC audits, particularly with regard to tighter requirements for documenting medical necessity of orthopaedic procedures.
“To avoid denials, records should contain enough detailed information to support the medical necessity of the procedure,” said Dr. Cope, who began his medical career as an emergency department physician. “You probably have this information in your office records, but it needs to be in the record that we see, which is the hospital record.” (See “What Must Be Included” at the bottom of this page.)

If you haven’t been, you will
Presenting the physician’s perspective, Brian S. Parsley, MD, AAHKS second vice president and clinical associate professor at the Baylor College of Medicine in Houston, Texas, urged audience members to take the information home and “implement it today. Because if you haven’t been audited, you will. The question is when.”

Dr. Parsley noted that the issue isn’t limited to TJR and lumbar spine procedures. “This is just the tip of the iceberg,” he said. He also pointed to the return to the government for expenditures on audits. In 2010, for example, the government spent $311 million on healthcare fraud and abuse control and the Medicare Integrity Program. These programs found more than $34 billion in improper payments.

Being proactive is key, said Dr. Parsley. His hospital, for example, is requiring precertification and approval of TJR patients before they are scheduled for surgery and is screening the medical record for sufficient data to justify surgery on both Medicare and commercial insurance patients.

“We want to make sure that what’s done is appropriate, and well documented, and for the betterment of the patient, because we are all patient advocates,” he concluded.

For more information on MAC and RAC audits and to report audit activity, visit www.aaos.org/Medicare101

Presentations from the 2012 AAOS Fall Meeting

What kind of note is needed?
According to the Medicare Learning Network (MLN Matters, No. SE 1236), “Progress notes consisting of only conclusive statements should be avoided.” Thus, a note that reads as follows is likely to be denied:

“Mrs. Smith is a female, age 70, with chronic right knee pain. She states she is unable to walk without pain and pain meds do not work. Therefore, she needs a total right knee replacement.”

Instead, a more comprehensive note is required, such as the following:

Mrs. Smith, a 70-year-old female, has end-stage osteoarthritis (OA) of her right knee, which has gradually worsened over the past 10 years. Treatment with NSAIDs have not effectively relieved her pain/inflammation and have recently begun to cause her gastric distress. She has also participated in an exercise program/physical therapy for the past 3 months without functional improvement. Sometimes the pain keeps her awake at night. She is using a cane and is no longer able to climb the five steps to her front door. Personal safety is compromised; she has fallen three times in attempting the stairs to her home entrance. Her knee pain and stiffness limit her ability to perform ADLs. She cannot walk from her bedroom to her kitchen without stopping to rest.

Physical Examination:
BP: 140/90, HR: 78, RR: 18.

Physical exam: Bilateral varus knee deformity consistent with severe OA. Right knee extension reduced to –15° and flexion to > 100°. Unable to rise from chair unassisted. Full motion of the right hip, no calf tenderness or ankle edema. Antalgic gait noted.

X-ray (7/2/11): right knee shows joint space narrowing along with marginal osteophytes.

Total knee arthroplasty (TKA) indicated.

Discussed risks and benefits of total joint replacement with patient. Patient understands both. Admit to inpatient care for right TKA. Forward a copy of this note to include in patient’s chart along with a copy of the patient’s X-ray reports.

What Must Be Included
According to Dr. Cope and Ms. Clarke, the following information must be included in the hospital record to justify elective total joint replacement:

Patient History

  • Description of pain—what’s it like, what brings it on, level of pain, worsening of pain, increased with activity or weight bearing
  • Limitations to activities of daily living (ADL)
  • Safety (fall risk)
  • Contraindications to nonsurgical treatments
  • Failed conservative treatments, such as medications, including NSAIDs; weight loss, physical therapy, intra-articular injections, braces, orthotics or assistive devices, including the patient’s response to each

Physical Examination

  • Deformity
  • Range of Motion (ROM) including limits and pain with passive ROM
  • Crepitus
  • Effusions
  • Tenderness
  • Gait description (antalgic gait for hip)

Investigations (radiologic studies)

  • Results of applicable investigations must show at least two of the following:
  • Subchondral cysts
  • Subchondral sclerosis
  • Periarticular osteophytes
  • Joint subluxation
  • Joint space narrowing
  • Plain radiographs
  • Magnetic resonance imaging
  • Clinical judgment

Reasons for deviating from a stepped-care approach, such as “the patient cannot tolerate NSAIDs … refused injections … joint damage is too severe to respond to other treatment (eg, osteonecrosis of the femoral head)” must be clearly documented.

“Cases will be denied for lack of admission history and physical or for neglecting to include the physician order for inpatient treatment,” said Ms. Clarke.

Did you know…
Medicare receives over 1.2 billion claims per year. This equates to:

  • 4.6 million claims per work day
  • 575,000 claims per hour
  • 9,580 claims per minute
  • 160 claims per second