Published 5/1/2012

Considering ICD-10 in Light of RAC Audits

Rachel V. Rose, JD, MBA, and Michael R. Linkins, MBA, CPC, CMPE

The implementation of both the International Classification of Diseases, 10th Revision (ICD-10) coding and Recovery Audit Contractor (RAC) overpayment identification presents significant challenges for providers. Both initiatives rely on complete and accurate clinical documentation and can have a significant impact on the revenue cycle.

The transition to ICD-10
Until recently, Oct. 1, 2013, was the date set for the U.S. transition from ICD-9 to ICD-10. That implementation day would be pushed back one year—to October 1, 2014—under a proposal released by the Centers for Medicare & Medicaid Services in April.

ICD-10 has two distinct parts instead of the three volumes of ICD-9. ICD-10-CM is the clinical modification to report diagnosis data across all sites of service and ICD-10-PCS reports inpatient procedure data. ICD-10-CM replaces the first two volumes of ICD-9, while ICD-10-PCS replaces the third volume. This conversion expands the number of codes by approximately 800 percent—from 17,000 ICD-9 codes to nearly 155,000 ICD-10 codes.

An expanding RAC program
Fiscal Year (FY) 2012 represents the third year of the nationwide CMS RAC program. As the RAC program continues, the number of audit bodies is expanding and recoveries of overpayments are increasing. For instance, beginning in 2012, states are required to create and sustain a relationship with a RAC to identify improper payments and fraud within state-administered Medicaid programs.

Recently, CMS released the FY 2011 numbers for RAC collections. Total collections equaled $939.4 million, with $797.4 million in overpayments and $141.9 million in underpayments. This is approximately a 10-fold increase over FY 2010 collections, which amounted to just $92.3 million in combined over- and underpayments.

Orthopaedic practices should address ICD-10 and RAC audit preparedness in tandem. Greater specificity of clinical documentation is paramount in ICD-10 because the codes are more detailed. For example, a cage device that is used in spinal surgery is simply 84.52 for ICD-9, but the ICD-10 equivalent is OSG34NK with 27 other possible code combinations.

CMS has indicated that RAC “denials occurred because the submitted medical documentation did not contain sufficient, accurate information to: (1) support the diagnosis, (2) justify the treatment/procedures, (3) document the course of care, (4) identify treatment/diagnostic test results, and (5) promote continuity of care among health care providers.” Because ICD-10 codes are derived from medical documentation and RAC auditors review the medical record to substantiate the code, the main challenge for providers is to document specifically and appropriately.

The impact on orthopaedics
Although all medical specialties contribute to hospital bottom lines, orthopaedic surgeons, on average, have a substantial impact on hospital billings. Some sources have estimated that the average orthopaedic surgeon generates $2 million to $2.5 million of inpatient hospital billing. An examination of the ICD-10 character nuances illustrates how ICD-10 and RAC work in tandem with a high-producing specialty like orthopaedics.

Organized primarily by body system chapters, ICD-9-CM codes have a three-to five-digit numeric and alphanumeric structure. There is always a decimal point after the third digit. Occasionally, the ICD-9 system format requires the fifth digit, which might reference a digit (379.26: vitreous prolapse) or a table that gives each unique fifth digit a precise meaning. Diabetes is an excellent illustration of the second convention, because the fifth digit has a specific definition (eg, 250.13 stands for diabetes with ketoacidosis, type 1 uncontrolled).

Although ICD-10-CM mimics ICD-9-CM’s format, it has 21 chapters and uses anatomy as its primary axis for classification. In ICD-10-CM, the first character is always alpha whereas in ICD-9 the only codes that use an alpha character are the V and E codes used for supplemental classifications.

ICD-10 expands the format for diagnosis codes by making use of two more digits, resulting in codes that are three to seven digits. For example, the sixth digit can be specific (M71.451, Calcium deposit in bursa, right hip) or can make use of the placeholder x. In ICD-10, the seventh digit often makes use of specific tables for specific groups of codes, as shown in Table 1.

The seventh digit requires providers to document more specifically, so that the correct diagnosis information can be input for billing purposes. For example, the use of “0” (without tophus) and “1” (with tophus) for gout codes provides general additional information. Often, the seventh digit can place the specific instance of care coded during a specific encounter into a context, using alpha designations.

According to CMS, submitting incomplete or illegible medical records can result in denial of payment for the services billed. Claim payment decisions that result from a medical review of records are based on the documentation that Medicare contractors received. Because the specificity required by ICD-10 needs to be documented by the physician, incomplete medical records may result in payment denials when a RAC audit is conducted.

Regardless of the coding system used, physicians need to include specific documentation in the medical record to substantiate a claim. Whether a provider uses paper or electronic medical records, the onus remains on the physician to provide whatever information substantiates the diagnosis, and, ultimately, the billing claim. Using the seventh digit correctly under ICD-10 is one example of how specific documentation may avoid negative RAC audit findings.

ICD-10 requires more specific information in the medical record than ICD-9. Starting to include that specificity in the medical record now can reduce the learning curve and the adverse impact from RAC audits in 2013 and beyond.

Rachel V. Rose, JD, MBA, is an attorney and Michael R. Linkins, MBA, CPC, CMPE, is an ambulatory healthcare management and revenue cycle management consultant. Both are based in Houston, Texas.