Audits of Texas and Oklahoma Home Health Agencies are on the Rise — Is Your Compliance Plan Current and Effective?

(August 16, 2011):   

I.        Overview:  Over last few years, the government’s reliance on private contractors to both identify overpayments and potential instances of fraud has greatly increased.  Health Integrity is the Zone Program Integrity Contractor (ZPIC) awarded the contract for Zone 4 (Texas, Oklahoma, Colorado and New Mexico) by the  Centers for Medicare and Medicaid Services (CMS).

II.      Home Health Agencies are Currently Being Scrutinized:  As home health agencies in Texas and Oklahoma can readily attest, Health Integrity is carefully examining home health claims billed to Medicare.  Home health agencies may be subjected to the following actions by Health Integrity:

• Unannounced site visits – leading to probe samples, statistically relevant samples and other actions. Failure to cooperate can lead to revocation from the Medicare program.  Notably, there are no statutory restrictions preventing contractors from showing up unannounced and requesting to see documentation related to Medicare claims.  Should Health Integrity show up at your home health agency, you will likely find that Health Integrity’s auditors are both to-the-point and professional in their dealings you and your staff.  Our clients have generally found that Health Integrity’s reviewers have researched an agency’s billing practices before they arrive.  When they show up, they will already have a listing of the claims-related records to be pulled.   ZPICs have been known to show up with their own scanner or copier.  This has led to problems for providers later on because they failed to receive a copy from the contractor before they left.  Should a ZPIC ask you to make copies, the contractor will often identify a handful to take with them and ask that you forward the other within a set period.
• Unannounced interview of home health patients and their families – Health Integrity is actively conducting interview of home health patients and their families in an effort to determine whether a patient was truly “homebound” during the claim period(s) at issue.
• Pre-payment audit – the number of home health agencies and other providers placed on pre-payment  review appears to have significantly increased over the last six months
• Post-payment audit – Health Integrity is actively conducting post-payment audits of Texas and Oklahoma home health agencies and are extrapolating alleged damages identified in these post-payment audits.
• Suspension – exercise caution when using Electronic Medical Records EMR) software – some software programs are better than others.  Avoid any program which minimizes the need for individualization and the documentation of patient-specific observations.  As always, it is important that home health agencies properly document the medical necessity of skilled care.  In some instances, ZPICs have expressed concern that the patient records generated appeared to be “cloned.”
• Medicare number revocation – take care if your home health agency is subjected to a site visit.  As a participating provider, you have an obligation to cooperate with the ZPIC’s review. Should you fail to cooperate, a ZPIC can recommend to CMS that your Medicare number be revoked. This is a very real threat and should not be discounted.  This becomes even more complicated if the ZPIC’s representatives go beyond mere claims-related questions and appear to be seeking information which could subject you (in your individual capacity), to possible civil and / or criminal liability.   Remember your obligations as a participating provider but call your attorney.  
• Referral for criminal investigation and prosecution  – ZPICs are actively referring cases to HHS-OIG and DOJ for formal civil and criminal review.

III.        Primary Reasons of an Audit:  We currently represent a number of home health agencies around the country in connection with post-payment audits and the appeal of overpayment assessments levied by Health Integrity and other ZPICs.  Our clients often ask why their home health agency was targeted by the ZPIC for audit.  After handling many of these cases, the following reasons for targeting have been cited by the ZPIC or ultimately learned when handling the case:

• Predictive Modeling / Data Mining –  As Chapter 2, Sec. 2.3 of the MPIM details: “Claims date is the primary source of information to target abuse activities.”  Data mining may have been used to examine a home health agency’s “error rate.”  This would provide the provider’s history of repeated overpayments   or improperly filed claims.  
• Complaints –  These can include “complaints” filed by beneficiaries, physicians, other providers (such as competitors), disgruntled current and former employees.
• Referrals –  ZPIC audits may be generated based on referrals from other CMS contractors (other ZPICs, PSCs, RACs, MACs, QA Staff), State MFCUs, Offices of the U.S. Attorney, or other Federal agencies.  Notably, it appears that private payors are now also referring cases to the government.
• Reports –  HHS-OIG and GAO regularly issue reports addressing areas of concern.
• State Licensing Boards –State Medical Boards, Nursing Boards, Pharmacy Boards and other regulatory entities responsible for handling State licensing responsibilities regularly hear or learn of improper actions by providers.  This information may be shared with one or more Federal agencies and ultimately be referred to the ZPIC handling a certain zone.

IV.        Reducing Your Risk of Audit:  While many home health agencies believe that their Compliance Plan is satisfactory, it has been our observation that many of the plans currently in place are little more than copies taken from a sample off of the internet.  Unfortunately, many providers view Compliance Plans as mere paperwork, rather than as a useful “tool” to be used by the organization on an ongoing basis. When properly constructed, an effective Compliance Plan can both improve the quality of patient care rendered and assist a provider in its efforts to fully comply with applicable statutory and regulatory requirements.  Therefore, it is imperative that you take steps to ensure that your Compliance Plan takes into account each of the unique risks faced by your home health agency.

To be clear, although there are a number of steps you can take to reduce the likelihood of a ZPIC audit, there is no way to entirely eliminate the risk.  Nevertheless, the development, implementation and consistent application of an effective Compliance Plan can greatly reduce an organization’s potential liability.  In many respects, an effective Compliance Plan is similar to a flu shot.  Although a flu shot cannot prevent you from getting sick, it will hopefully reduce the severity of your illness should you catch the flu.  Similarly, if you have implemented and diligently adhered to an effective Compliance Plan, you could still be audited by a ZPIC, a Recovery Audit Contractor (RAC) or by a law enforcement agency, such as the Department of Health and Human Services, Office of Inspector General (HHS-OIG).  However, as a compliant home health agency, an auditor is much more likely to find that your billing practices comply with applicable coverage requirements.

Robert W. Liles is an attorney with Liles Parker, Attorneys & Counselors at Law.  Mr. Liles has extensive experience representing home health agencies and other providers in connection with the appeal of post-payment audits conducted by ZPICs, Program Safeguard Contractors (PSCs) and RACs.  Mr. Liles has conducted “gap analyses” of many provider organizations and has worked with these providers to implement effective Compliance Plans.  Should you find that your organization is being audited, feel free to call give him a call for a complimentary consultation.  He can be reached at: (202) 298-8750.  

HHS-OIG has Found that More than Half of All Power Wheelchairs Claims Paid by Medicare are Improper — Suppliers Need an Effective Compliance Plan Now More than Ever.

(July 16, 2011):  Despite continuing efforts by many Durable Medical Equipment, Prosthetics, Orthotics and Supplies (DMEPOS) companies to address and remedy long-standing compliance risks, the Department of Health and Human Services, Office of Inspector General (HHS-OIG), reported this month that more than one-half of the billings for power wheelchairs by Durable Medical Equipment (DME) suppliers were improper during the period audited. 

I.          Scope of the Problem:

            As HHS-OIG’s July 2011 report details, approximately 61% of the power wheelchairs billed to Medicare during the period reviewed were either medically unnecessary or lacked sufficient documentation for HHS-OIG to determine medical necessity.   Collectively, these improper billings accounted for $95 million of the $189 million paid by Medicare for power wheelchairs.

II.         Types of Problems Noted:

              In reviewing these Medicare power wheelchair claims, HHS-OIG conducted a random sample of 375 claims.  HHS-OIG’s review included both standard and complex wheelchairs.  Based on records submitted by DME suppliers, HHS-OIG found that:

• 9% of all power wheelchairs were medically unnecessary
• 52% had claims with insufficient documentation to determine medical necessity.

             A number of specific problems are outlined in HHS-OIG’s July 2001 report.  Two of the most significant concerns included:

• Some Medicare patients received power wheelchairs when only a manual wheelchair, cane, or walker was needed.
• Many of the claims were for power wheelchairs appeared to be justified and medically necessary based on suppliers’ records. However, when HHS-OIG examined the corresponding ordering physicians’ records, most of these same power wheelchairs were found to be either:
  • Medically unnecessary, or
  • Insufficiently documented, or
  • Undocumented.

              Essentially, the suppliers’ records were either unsupported, or, in some cases, were contradicted by the related ordering physicians’ medical documentation.

III.     Summary of HHS-OIG’s Findings:

              HHS-OIG’s July 2011 report is especially significant in light of the fact that the agency previously issued two prior reports based on the same sample of power wheelchairs.  While the earlier reports noted that there significant coding and documentation requirements, this recent report focuses on supplier compliance deficiencies.

             Summarizing its findings among the three reports, HHS-OIG noted that 80% of the power wheelchair claims sampled did not meet Medicare’s documentation and / or coverage requirements. HHS-OIG concluded its report by saying:

“Although CMS has taken steps since 2007 to decrease errors among suppliers of power wheelchairs and other DME, Medicare has paid significantly more in recent years for power wheelchairs than it did in 2007. These increases may indicate that CMS continues to pay for power wheelchairs that are not medically necessary and/or have claims that do not meet documentation requirements.”

IV.        Practical Impact of HHS-OIG’s Findings:

              As a participating provider, power wheelchair suppliers have an obligation to ensure that their claims fully comply with Medicare’s coverage and billing requirements.  Unfortunately, as HHS-OIG’s report reflects, most of the power wheelchair claims paid by Medicare have not met these requirements. 

              From a practical standpoint, HHS-OIG’s findings are not new – both physicians prescribing power wheelchairs and the suppliers of this equipment have repeatedly failed to either meet Medicare’s documentation requirements or show that this equipment is medical necessity for the care of the patient and that less expensive assistive devices (such as a cane, walker or manual wheelchair) are insufficient to meet the patients’ medical needs.  As a result, these claims have been regularly examined by various government law enforcement agencies (e.g. HHS-OIG, the Federal Bureau of Investigation and the U.S. Department of Justice) and CMS’ contractors (e.g. Zone Program Integrity Contractors (ZPICs), and DME Medicare Administrative Contractors (DME MACs)).  With the release of this report, suppliers will likely find their practices under yet additional scrutiny.

            Both physicians who prescribe power wheelchairs and DMEPOS suppliers who fill these prescriptions must ensure that their practices fully comply with applicable statutory and regulatory requirements.  As discussed below, the completion of a “gap” analysis is an essential element of an effective Compliance Plan.  

V.         Conducting a Gap Analysis:

             From a compliance standpoint, unless they have recently done so, all power wheelchair suppliers should immediately conduct a gap analysis to determine whether their practices fully comply with applicable statutory and regulatory requirements. Gap analyses are routinely used in practically every industry to assist Compliance Officers and others in identifying corrective actions that need to be taken in order to bring an entity’s practices to an acceptable baseline of compliant operations.  Gap analyses conducted by health care providers must analyze two aspects of their practices in order to ensure compliance.  These include:

Requirement #1:  A review of their documentation, coding and billing practices.  Additionally, the evidence must reflect that the power wheelchair billed was medically necessary and appropriate.

Requirement #2:   A review of the supplier’s business practices to ensure that the supplier is not committing violations of the Federal Anti-Kickback, Stark or other statutory enforcement requirements.

             This article focuses on the first set of requirements set out above.

            Every gap analysis begins with a review of applicable statutory and regulatory provisions.  Additionally, suppliers must assess Medicare’s latest guidance covering documentation, coding and billing requirements.  In addition to issuances by CMS, Local Coverage Determinations (LCD’s), Local Medical Review Policies (LMRP’s) must be reviewed so that specific regional directives are also identified. 

            Upon completing a complete analysis of the regulatory landscape, suppliers must next conduct a baseline assessment of its existing documentation, coding and billing practices. At this point in the process, a supplier can compare its practices with the government’s requirements. This process is often referred to as a “gap” analysis. In this fashion, a supplier is able to use this performance measurement tool to determine the extent to which action must be taken to bring the supplier’s practices up to the desired level of compliance.        

VI.        CMS’ Power Wheelchair Requirements:

             As an initial starting point, power wheelchair suppliers should examine the “Face-to-Face Examination Checklist” that has been issued by CMS in MLM Matters Number SE1112.  As the guidance reflects, Power Wheelchairs are one of several devices collectively classified as “Power Mobility Devices” (PMD) which qualify for coverage under Medicare Part B.

             CMS defines a PMD as a covered item of DME that includes a Power Wheelchair or a POV that a beneficiary uses in the home. Effective May 5, 2005, CMS revised its national coverage policy to create a new class of DME identified as Mobility Assistive Equipment (MAE), which includes a continuum of technology from canes to power wheelchairs.

            A.        Ordering / Treating Physician Requirements.

           Regardless of how they are described, prescribing or ordering physicians are the proverbial “front-line” in the claims process. These physicians are responsible for determining whether a PMD is medically necessary and appropriate.  If so, the physician must: 

• Provide the power wheelchair supplier with supporting documentation consisting of portions of the medical record essential for supporting the medical necessity for the PMD in the beneficiary’s home. In order to document the need for a PMD there are a few specific statutory requirements that must be met before the ordering physician can issue a written prescription for the equipment: 

“1. An in-person visit between the ordering physician and the beneficiary must occur. This visit must document the decision to prescribe a PMD.   

2. A medical evaluation must be performed by the ordering physician. The evaluation must clearly document the patient’s functional status with attention to conditions affecting the beneficiary’s mobility and their ability to perform activities of daily living within the home. This may be done all or in part by the ordering physician. If all or some of the medical examination is completed by another medical professional, the ordering physician must sign off on the report and incorporate it into their records.  

3. Items 1 and 2 together are referred to as the face-to-face exam. Only after the face-to-face examination is completed may the prescribing physician write the prescription for a PMD. This prescription has seven required elements and is referred to as the seven-element order which must be entered on the prescription only by the physician.  

4. The records of the face-to-face examination and the seven-element order must be forwarded to the PMD supplier within 45 days of the completion of the face-to-face examination. 

5. CMS’ National Coverage Determination requires consideration as to what other items of mobility assistive equipment (MAE), e.g., canes, walkers, manual wheelchair, etc., might be used to resolve the beneficiaries mobility deficits. Information addressing MAE alternatives must be included in the face-to-face medical evaluation.”  (MLM SE 1112, page 2 of 7). 

• Once the above requirements have been met, an ordering physician can properly issue a prescription for a PMD.

             B.        Ordering / Treating Physician Requirements.

           As MLM SE 1112 reflects, the following checklist is not to be used as a substitute for a patient’s underlying medical records.  Having said that, the checklist serves as a helpful tool for verifying that an ordering physician’s documentation (as reflected by the patient’s medical records) are both complete and sufficient to meet Medicare’s coverage requirements.  The following information should be fully documented in the patient medical records:

Documentation of “History” Component

The medical record for the patient includes the following history:

_____ Signs/Symptoms that limit ambulation;

_____ Diagnoses that are responsible for these signs/symptoms;

_____ Medications or other treatment for these signs/symptoms;

_____ Progression of ambulation difficulty over time;

_____ Other diagnoses that may relate to ambulatory problems;

_____ How far the patient can ambulate without stopping and with what assistive device, such as a cane or walker;

_____ Pace of ambulation;

_____ History of falls, including frequency, circumstances leading to falls, what ambulatory assistance (cane, walker, wheelchair) is currently used and why it is not sufficient; 

_____ What has changed in the patient’s condition that now requires the use of a power mobility device;

_____ Reason for inability to use a manual wheelchair; such as assessment of upper body strength;

_____ Why does the patient need a power wheelchair rather than each level of mobility assistive equipment (a cane, walker, optimally configured manual wheelchair, scooter)?

_____ What are the reasons that the patient should not or could not use a cane, walker, optimally configured manual wheelchair or power operated vehicle (scooter) in the home to satisfy their needs? and

_____ Description of the home setting, including the ability to perform activities of daily living in the home, as well as the ability to utilize the PMD in the home.

Documentation of Examination Component

The physical examination is relevant to the patient’s mobility needs and the medical record for the patient contains:

_____ Weight and Height

_____ Musculoskeletal examination

• Arm and leg strength and range of motion;

_____ Neurological examination

• Gait

• Balance and coordination

• If the patient is capable of walking, the report should include a documented observation of ambulation (with use of cane or walker as appropriate).

VII.    Conclusion:

            DMEPOS suppliers have an obligation to ensure that power wheelchairs billed to Medicare fully meet the program’s documentation, coding and billing requirements. To that end, it important that suppliers carefully examine both their relationships with prescribing suppliers and the documentation of medical necessity associated with any claims billed to Medicare.  Importantly, this isn’t merely a paper-only exercise which requires that you “document” medical necessity – a patient must actually require this type of assistive device.  Therefore, the documentation must accurately reflect a patient’s diagnosis, signs / symptoms and clinical limitations which limit ambulation and necessitate the use of a power wheelchair.

Liles Parker attorneys have extensive experience representing health care providers in connection with ZPIC audits and advising providers on compliance issues.  Should you have questions, please call us for a complimentary initial consultation.  We can be reached at:  1 (800) 475-1906.

When it Rains, it Pours . . . DME Suppliers are Facing Even More Regulations — An Effective Compliance Program is Important Now, More than Ever Before.

(April 6, 2011):

I.          Background:

On September 15, 2010, the Inspector General of the Department of Health and Human Services (HHS-OIG), Daniel Levinson, testified before the House Committee on Energy and Commerce, Subcommittee on Health regarding waste, fraud, and abuse in the Medicare program, with a specific focus on durable medical equipment and supplies. Mr. Levinson noted that, over the last three decades, HHS-OIG has detected “significant levels” of fraud and abuse related to durable medical equipment, prosthetics, orthotics, and supplies (DMEPOS). These concerns have resulted in steadily increasing oversight of DMEPOS suppliers by HHS-OIG and Medicare contractors. Perhaps most significantly, these concerns have led to the passage and implementation of a host of new statutes and regulations designed to deter and punish DMEPOS-related waste, fraud, and abuse. For instance, the Affordable Care Act (“ACA,” also informally referred to as “Health Care Reform Act” ) was signed into law by President Obama on March 23, 2010.  ACA has dramatically expanded the regulatory authority of the Centers for Medicare and Medicaid Services (CMS) as it relates to DMEPOS suppliers. In his testimony before the Subcommittee on Health, Mr. Levinson remarked,

“The ACA provides the Secretary with new authorities and imposes new requirements consistent with OIG’s health care integrity strategy and recommendations. These include promoting data access and integrity; requiring actions to strengthen provider enrollment standards; promoting compliance with program requirements; and enhancing program oversight, including requiring greater reporting and transparency.” (emphasis added).

As set out below, each of these new regulatory measures (many of which have only recently become effective), will have a substantial impact on the way in which DMEPOS suppliers are reviewed and evaluated by Medicare contractors and by law enforcement authorities.

II.         Pre-Enrollment and Revalidation Screening Procedures:

The ACA empowered CMS to classify newly-enrolling or revalidating providers based on their perceived risk of fraud and then link those classifications to various types of screening procedures. This new rule, which went into effect on March 25, 2011, creates three categories of risk into which providers will be sorted: (1) Limited, (2) Moderate, and (3) High. The risk level with which a provider is designated is commensurate with the extent and nature of the pre-enrollment or revalidation screening procedures. Under the new rule, currently enrolled, revalidating DMEPOS suppliers have been assigned to the “Moderate Risk” category,[1] while newly-enrolling DMEPOS suppliers (including currently-enrolled DMEPOS suppliers who are adding another location) will be deemed “High Risk.”[2]

(a)        Overview of Available Screening Procedures.

The following screening procedures are currently available to CMS:

• Licensure Requirements – DMEPOS suppliers are required to comply with all applicable licensing, certification, or accreditation requirements in the state where they are located. Medicare contractors are responsible for reviewing state licensing board data every month to ensure that DMEPOS suppliers remain licensed, certified, or accredited.
• Database Checks – Medicare contractors check various databases to ensure that current and prospective supplier information is accurate. CMS contractors check databases maintained by the Social Security Administration (used to verify an individual’s Social Security Number), the National Plan and Provider Enumeration System (NPPES) (used to verify the national provider identifier (NPI)), HHS-OIG’s “List of Excluded Individuals or Entities,” and the General Service Administration’s “Excluded Parties List System.”
• Site Visits – The Medicare Program Integrity Manual (MPIM) permits contractors to conduct site visits to determine if a DMEPOS supplier is “operational”[3] or to ascertain whether the supplier is meeting applicable regulatory standards or program requirements. Some examples of site visits include:  (1)  The National Supplier Clearinghouse (NSC) Medicare Administration Contractor (the Medicare contractor responsible for handling enrollment applications for DMEPOS suppliers) currently conducts pre-enrollment site visits of DMEPOS applicants that are not part of a chain supplier (a chain is a supplier with more than 25 locations), (2) The NSC also conducts post-enrollment site visits to DMEPOS suppliers if CMS or NSC believes that the supplier may be involved in fraudulent or abusive activities.  These post-enrollment site visits are intended to help ensure DMEPOS compliance with supplier standards, (3) A state survey agency or an approved national accreditation organization with “deeming authority” may also conduct pre-enrollment surveys of certified providers and suppliers to determine if they meet the Federal conditions of participation.
• Criminal Background Checks – CMS is now empowered to conduct criminal background checks of DMEPOS “owners” (e.g. those who maintain a 5% or more ownership interest in the supplier), authorized officials, or managing employees.
• Fingerprinting – the new fingerprinting requirement also applies to all owners, authorized officials, or managing employees of a DMEPOS supplier.

(b)          Currently-Enrolled, Revalidating DMEPOS Suppliers.

Currently enrolled, revalidating DMEPOS suppliers, which are deemed “Moderate Risk” under the new regulations, will be subject to the following screening measures:

• Verification that the provider meets applicable federal regulations and state requirements;
• Verification that the provider meets applicable licensure requirements;
• Ongoing database checks to ensure that the provider satisfies all applicable enrollment criteria; and
• Unannounced or unscheduled site visits prior to and following provider enrollment or revalidation.

CMS has elected to categorize currently-enrolled, revalidating DMEPOS suppliers as “Moderate Risk” because many of them are highly dependent on federal healthcare programs for revenue and because CMS believes that a number of these types of providers enter business without any substantial clinical or business experience.

(c)        Newly-Enrolling DMEPOS Suppliers.

Newly-enrolling DMEPOS suppliers will fall into the “High Risk” category and therefore must meet all of the foregoing requirements for “Moderate Risk” providers and undergo:

• Fingerprinting; and
• Criminal background checks.

CMS has classified newly-enrolling DMEPOS suppliers as “High Risk” because of the substantial number of such providers already enrolled in the Medicare program and the numerous government reports alleging waste, fraud, and abuse by DMEPOS suppliers in the Medicare program.

(d)       Adjustments to a Supplier’s Risk Category.

The new rule also permits CMS to increase a supplier’s risk level from “Limited” or “Moderate” to “High” in any of the following circumstances:

• CMS imposed a payment suspension on the supplier in the last 10 years;
• The supplier has been excluded from Medicare by HHS-OIG;
• The supplier’s billing privileges were revoked in the last 10 years and the supplier is attempting to establish new Medicare billing privileges by enrolling as a new supplier or registering a new practice location;
• The supplier is precluded from billing Medicaid;
• The supplier has been subject to any “final adverse action” in the last 10 years;
• The supplier has been excluded from any federal healthcare program; or
• CMS has lifted a temporary moratorium for a particular supplier type and a supplier that was prevented from enrolling due to the moratorium applies for enrollment within 6 months from the date the moratorium was lifted.

III.        Certification Standards:

There are currently 30 unique standards that DMEPOS suppliers must certify that they meet and remain compliant with in order to be eligible for payment by Medicare. Four of these “standards” recently took effect on September 27, 2010. Additionally, on April 4, 2011, CMS published a proposed rule revising four different, existing standards.

(a)        New Certification Standards.

The four recently enacted certification standards with which DMEPOS suppliers must comply include:

(1) Oxygen Procurement — All DMEPOS suppliers must obtain oxygen from a state-licensed oxygen supplier if the DMEPOS supplier is located in a state that requires oxygen suppliers to be licensed.  (42     C.F.R.  § 424.57(c)(27)).

(2) Records Maintenance — All DMEPOS suppliers must maintain ordering and referring documentation relating to written orders and requests for payments for medical equipment within 7 years of the date of service. (42 C.F.R. § 424.57(c)(28)).

(3) Facility Location — All DMEPOS suppliers are prohibited from sharing a practice location with any other Medicare supplier or provider, except where:

• The DEMPOS supplier is co-located with and wholly owned by a hospital, home health agency, skilled nursing facility, or other Medicare Part A provider and the DMEPOS supplier operates as a separate unit; or
• A physician, non-physician practitioner, or physical or occupational therapist furnishes items directly to his or her own patients as part of his or her own professional services. (42 C.F.R. § 424.57(c)(29)).

(4) Business Hours — All DMEPOS suppliers must be open to the public for a minimum of 30 hours per week, except where:

• A physician, non-physician practitioner, or physical or occupational therapist furnishes items directly to his or her own patients as part of his or her own professional services; or
• The DMEPOS supplier is working with custom made orthotics and prosthetics (42 C.F.R. § 424.57(c)(30)).

(b)       Proposed Revisions to Existing Certification Standards.

A Proposed Rule issued by CMS would alter four certification standards that are currently in force, including the following:

(1) Prohibition Against Direct Solicitation:

Current Rule: DMEPOS suppliers are prohibited from engaging in direct solicitations (e.g. by telephone, computer, e-mail, or in-person contact) of Medicare beneficiaries without their consent for the purpose of marketing a DMEPOS supplier’s products or services. (42 C.F.R. § 424.57(c)(11)).

Proposed Revision: The new rule would replace the phrase “direct solicitation” with a prohibition on contacting Medicare beneficiaries by telephone.

(2) State Licensure and Contractual Arrangements:

Current Rule: If a DMEPOS supplier is located in a State that requires a license to furnish items or services, the supplier must be licensed to provide those services and must employ any professionals so licensed on a full- or part-time basis. DMEPOS suppliers cannot contract with a third party to provide any such licensed services. (42 C.F.R. § 424.57(c)(1)(ii)).

Proposed Revision:A DMEPOS supplier may contract with a third party to provide a service that must be licensed under State law where such an arrangement is not expressly prohibited by State law.

(3) Compliance With Local Zoning Ordinances:

Current Rule: DMEPOS suppliers must comply with all local zoning requirements as a condition for payment by Medicare. (42 C.F.R. § 424.57(c)(1)(iii)).

Proposed Revision: CMS has proposed to eliminate this rule entirely.

(4) Physical Facility and Site Requirements:

Current Rule: DMEPOS suppliers must maintain a physical facility on an appropriate site, that meets certain requirements related to minimum square footage, visible signs, posted hours of operation, public accessibility, and adequate space for record storage, among others. (42 C.F.R. § 424.57(c)(7)).

Proposed Revision: The current rule exempts State-licensed professionals who provide custom fabricated orthotics or prosthetics in private practice. The proposed revision would extend this exemption to such professionals in States that do not offer such licenses.

In reviewing these proposed changes, most Suppliers believe that CMS’  contemplated regulatory changes merely represent additional “tightening” of the rules applied to DMEPOS Suppliers – effectively strengthening the government’s oversight over the industry.  In any event, these proposed changes clearly point to the need for an effective Compliance Program.

IV.        Conclusion:

Suppliers who are concerned about these new regulations should contact qualified counsel to assist with developing an effective compliance plan or, if need be, responding to an adverse action taken by CMS against the supplier.

Liles Parkers attorneys are experienced in representing DME suppliers and other Medicare participating providers in a wide range of audits, investigations and other enforcement actions by both contractors and by law enforcement.  Should you have any questions regarding this article or other regulatory requirements, please contact us.  Initial consultations are free.   We can be reached at:  1 (800) 475-1906.

HHS-OIG Alleges that 70% of the Medicare Claims Recently Audited for Home Blood-Glucose Test Strips and Lancets Were Improperly Paid by the MAC for Jurisdiction A

(September 6, 2010):  HHS-OIG recently issued its audit findings examining Home Blood-Glucose Test Strips and Lancets paid by the Durable Medical Equipment (DME) Medicare Administrative Contractor (MAC) responsible for claims in Jurisdiction A (Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, New Jersey, New York, Pennsylvania, Rhode Island, Vermont and Washington DC).  As the audit report reflects, 70 of the 100 sampled claims examined contained or more documentation deficiencies.  Specific problems identified include:

 

•  The quantity of blood-glucose strips and / or lancets utilized which exceeded utilization guidelines failed to properly document the reasons why additional supplies were needed. 
• There was no documentation supporting the need for refills.
• Physician orders for these DME supplies was “missing or incomplete.”
• “Proof-of-delivery” documentation was missing.

As a result of these findings, HHS-OIG alleged that the MAC had improperly paid $39.2 million in claims by DME suppliers for blood-glucose test strips and/or lancets.  Remedial steps recommended by HHS-OIG for the Jurisdiction A DME contractor include:

“[I]mplement system edits to identify high utilization claims for test strips and/or lancets and work with CMS to develop cost-effective ways of determining which claims should be further reviewed for compliance with Medicare documentation requirements;

 [I]mplement system edits to identify claims for test strips and/or lancets that have overlapping service dates; and

 [E]nforce Medicare documentation requirements for claims for test strips and/or lancets by (1) identifying DME suppliers with a high volume of high utilization claims, (2) performing prepayment reviews of those DME suppliers, and (3) referring them to the Office of Inspector General or CMS for further review or investigation when necessary.”

 As reflected by the report, DME suppliers and their claims to the Medicare program remain under considerable government scrutiny.  In consideration of the recent enforcement authorities passed under the Health Care Reform Act, DME suppliers must continue to take affirmative steps to ensure that claims are fully documented, consistent with applicable statutory and regulatory provisions.

Liles Parker attorneys represent DME suppliers and companies in connection with HHS-OIG and Medicare contractor (e.g. ZPIC, PSC and RAC) audits.  Should you have questions in this regard, please call for a free consultation.  We can be reached at 1 (800) 475-1906.

Providers Should Exercise Caution When Handling Overpayments — More than Likely, You Can’t Keep It, Even if the Payor Doesn’t Want it Back

(July 15, 2010):  Since the May 2009 passage of the Fraud Enforcement and Recovery Act (FERA) and subsequent enactment of the PPACA, we’ve heard a lot about how the government looks at Medicare overpayments and how providers should handle them.  Two major misconceptions seem to underlie the public response to provisions clarifying that failure to timely refund Medicare overpayments can result in False Claims Act (FCA) liability.

I.          Historical Overview of the “Overpayment” Issue

Prior to the clarification and statutory reinforcement of the “overpayment” issue provided by PPACA, a number of providers have mistakenly believed that in the absence of a direct demand for repayment, an identified overpayment would belong to the provider.  Notably, this issue is not new.  In fact, the recent enacted provisions have merely reinforced the government’s long-standing position that a provider has a responsibility to voluntarily refund Medicare overpayments without an overpayment determination being made by the government.

As you will recall, the agreement to return any overpayments is fundamental to a provider’s eligibility to participate in the Medicare program.  Section 1866(a)(1)(C) of the Social Security Act (42 U.S.C. § 1395cc) requires participating providers to furnish information about payments made to them and to refund any monies incorrectly paid.  Implemented in 2006, the Medicare Credit Balance Report (CMS-838) is designed to ensure timely compliance with this obligation.

Secondly, PPACA Section 6402 echoes the requirements of CMS’ 2002 proposed rule that providers “must, within 60 days of identifying or learning of the excess payment, return the overpayment to the appropriate intermediary and carrier, at the correct address, and notify the intermediary and carrier, in writing, of the reason for the overpayment.”  (67 Fed. Reg. 3662 (January 25, 2002)).  A conservative reading of that proposed rule arguably suggested that HHS-OIG’s voluntary disclosure protocol may not be “voluntary” after all but a mandatory repayment may be required.  Thus, the government has long sought to clarify when, not if, overpayment refunds would be required.

Despite the publicity resulting from PPACA and its FCA implications, it is important to remember that this issue was addressed over a decade ago.  As set out in the 1998 holding in United States v. Yale University School of Medicine, Civil Action No. 3:97CV02023 (D.Conn.), the government intervened in a qui tam and obtained $1.2 million settlement based on alleged FCA  violations for failing to return credit balances.  In summary, providers who fail to promptly (within 60 days of identification) return an overpayment to the government do so at their own peril.

II.         Handling Non-Federal Overpayments

As an aside, even if the overpayment at issue is not owed to a Federal payor (such as Medicare or Medicaid), it is imperative to remember that virtually no overpayments belong to a provider.  In the case of non-Federal payors (such as a private insurance company), we are aware of numerous instances where the non-Federal payor has notified the provider that due to the administrative burden of applying an overpayment to a beneficiary’s account (typically due to the complexity of the payment history), the non-Federal payor has chosen to either “waive” collection of an overpayment or not to cash a check sent by the provider.  This also regularly occurs when the identified overpayment is under a certain amount (such as $25.00).  When faced with such a situation, a provider must review applicable State law to ascertain how an overpayment must be handled.  For instance, in Texas, Title 6 of the Property Code requires businesses and other entities holding unclaimed property to turn the property over to the Texas Comptroller’s Office after the appropriate abandonment period has expired.  As in most States, violation of these escheat laws can subject a provider to various penalties.

III.        Conclusion

The lesson to be learned here is quite clear – regardless of who the payor is, an overpayment can rarely, if ever, properly be retained by a provider, regardless of the amount in controversy.  A provider must carefully examine both Federal and State statutes when faced with this issue.  The best practice is to return an overpayment to the payor (Federal, State, or private patient), regardless of the amount, upon identification.  Should a provider be unable to identify who is owed an overpayment or cannot locate a valid address to return the overpayment (due to a variety of factors), your State’s escheat law must be considered.

This can be a complicated issue, especially when a large overpayment has been identified and it is owed to a Federal payor.  While time is of the essence, it is strongly recommended that you contact your legal counsel as soon as it appears that a potential large or complicated Federal overpayment has been found.  Your attorney can help guide you through this complex process.

Should you have any questions regarding these issues, don’t hesitate to contact us.  For a complementary consultation, you may call Robert W. Liles or one of our other attorneys at 1 (800) 475-1906.

Look at RACs — Part III: What Should Physicians and other Medicare Providers Know about Appeals and Recoupment?

(July 2, 2010):  CMS’ Recovery Audit Contractor (RAC) program is now permanent and nationwide.  As we discussed in Part I of this series, while small providers were largely ignored during the demonstration program, physicians, home health, hospice, and durable medical equipment (DME) suppliers should be on the lookout for increased attention.  In Part II, we discussed some ways providers can prepare for and respond to an audit request.

In this Part III, we will discuss a provider’s appeal options in the event that a RAC identifies an alleged overpayment as a result of its audit.  It is important to remember that RACs are paid on a contingency fee basis and so are highly incentivized to seek out overpayment errors. 

CMS’ enthusiastic trumpeting of the RAC demonstration program results seems to ignore the RACs’ reputation for overly aggressive auditing.  Indeed, a June 2010 CMS program update reveals that, when providers chose to appeal a RAC determination, providers won 64.4% of the time.  CMS has since implemented a requirement that the RAC remit its contingency fee if its audit determination is overturned at any level of appeal, not just the first level.  Whether this will improve RACs dismal win rate on appeal remains to be seen.

I.          What Are the Options to Appeal a RAC Determination of Overpayment?

First, providers that want to challenge the determination should be aware they have a  very limited period of time to file for redetermination appeal if they wish to avoid recoupment.  While a provider has 120 days to file for redetermination appeal, if they wait past day 30, the Medicare contractor (not the RAC) will initiate recoupment.  Additional information regarding recoupment is discussed below.

Appealing a RAC claims denial follows the uniform Medicare Part A and Part B appeals process.    The following deadlines are strictly adhered to.

Medicare Appeal Deadlines

Level	Stage	Reviewing Entity	Filing Deadline
1st	Redetermination	Medicare Administrative Contractor (MAC)	120 days of receiving notice of initial determination
2nd	Reconsideration	Qualified Independent Contract (QIC)	180 days of receiving notice of redetermination decision
3rd	Hearing	Administrative Law Judge (ALJ)	60 days of receipt of the QIC’s decision
4th	Administrative Review (HHS)	Medicare Appeals Council (MAC)	60 days of receipt of the ALJ’s decision
5th	Judicial Review	Federal District Court	60 days of receipt of the MAC’s decision

 

Our experience has shown that ALJs are honest brokers who are the most willing to hear arguments from providers.  While they will follow the law and applicable coverage provisions, they tend to be much more thorough and consider the provider’s arguments in support of payment.  In many cases, this has been the first level that a fair and reasonable consideration of the evidence has occurred.

II.         What about Recoupment?

Notably, the deadlines above are filing deadlines only.  Medicare begins recouping funds well before the time frame for appeal has lapsed at each stage.  Medicare begins recouping funds only 30 days after the RAC’s initial determination and only 60 days after its redetermination decision.  This puts significant pressure on providers to file for first and second level appeals more rapidly than they otherwise might.  In later stages, recoupment cannot be stayed by filing the appeal.

Recoupment Timeframes
Day One – Initial Demand of a RAC Overpayment Determination	First Level Appeal	Second Level Appeal	Appeals to Administrative Law
The process begins when a Demand Letter, with appeal rights, is sent to Provider.  If there is no appeal and the provider does not remit the demanded amount, offset begins on day 41.	To avoid recoupment starting on day 41, the provider must request the 1st level appeal within 30 days from the date of the Demand Letter.  If an appeal is received after day 30 and recoupment started on day 41, the recoupment process will stop on the remaining balance.	To avoid recoupment beginning or resuming after a Redetermination, the provider must submit the 2nd level appeal request to the QIC within 60 days from the overpayment letter (if applicable) or from the decision letter.  If an appeal request is received after day 60, the recoupment process will stop on the remaining balance.	Limitation on recoupment ends after the 2nd level appeal. Recoupment shall begin 30 days from the appeal decision and will continue until debt is satisfied, whether or not the provider appeals to the ALJ or subsequent levels.

 

Separate from and prior to the appeals process, a provider may rebut any proposed recoupment action within 15 days of the notice of impending recoupment.  A provider may issue a statement to the claims processing contractor providing evidence as to why the overpayment action should not take place.  This process does NOT provide an opportunity to review the medical documentation or the audit determination itself.

Should you have any questions regarding these issues, don’t hesitate to contact us.  For a complementary consultation, you may call Robert W. Liles or one of our other attorneys at 1 (800) 475-1906.

What is Causing the Spike in Partial Hospitalization Overpayment Actions?

(June 30, 2010): Are Partial Hospitalization Programs (PHPs) and Community Mental Health Centers (CMHCs) being unfairly targeted in the Administration’s push to identify and recover allegedly improper Medicare payments?

In May 2010, the Office of the Inspector General of the HHS (HHS-OIG) published an assessment of the Program Safeguard Contractors (PSCs) overpayment collections that identified only 2 overpayment referrals for partial hospitalization claims in 2007.  These referrals accounted for only $403,935 of approximately $835 million in overpayment referrals — less than 0.1% of the total.  Yet, we are aware of far more overpayment cases involving CMHCs (many of which are in the Southern region) making their way through the administrative appeals process right now. 

After carefully reviewing the data, it is our belief that CMS has implemented HHS-OIG’s unimplemented recommendations regarding the agency’s concerns about partial hospitalization claims.   Dating as far back as 1998, HHS-OIG has pushed for stronger oversight of these programs.  For at least the last three years (2007, 2008, and 2009), HHS-OIG’s compendium of unimplemented recommendations has included dramatic findings as to the scope of supposed partial hospitalization program billings and the potential savings that could be derived from focusing on this area.  For instance, in 2007 and 2008, the agency reported:

“’Partial hospitalization’ services, which may be provided by both hospitals and community mental health centers, have been particularly troublesome…. We estimated that payment error rates for partial hospitalization in community mental health centers were as high as 92 percent.”  (Emphasis added).

HHS-OIG estimated that ensuring the appropriateness of Medicare payments for mental health services would yield $725 million in savings in 2007.  This figure increased to $1.44 billion in 2008 and 2009.

Again in 2009, HHS reiterated its findings, saying,

“We believe that CMS still needs to monitor partial hospitalization services provided by community mental health centers, which we consider particularly vulnerable.  We will continue to monitor CMS’s efforts to ensure that mental health services are medically necessary and reasonable and are accurately billed.”  (Emphasis added).

While neither CMS nor HHS-OIG have commented on the “spike” in cases brought against CMHCs, it appears clear that partial hospitalization claims are currently being reviewed by contractors around the country for possible overpayments. 

To be clear, we take exception with these findings.  After representing many CMHCs around the country, it has become apparent that many of the reviewers conducting reviews of partial hospitalization claims have little or no experience assessing these specialized services.  As a result, we are quite concerned that CMHCs are now being targeted.  We strongly recommend that CMHCs conduct periodic reviews of both applicable LCD provisions and their billing practices to ensure that partial hospitalization services are being appropriately ordered, documented and billed.

Should you have any questions regarding these issues, don’t hesitate to contact us.  For a complementary consultation, you may call Robert W. Liles or one of our other attorneys at 1 (800) 475-1906.

A Look at RACs — Part II: How Should Physicians and Other Providers Respond to a RAC Audit?

(June 29, 2010): In Part I of this series, we reacquainted you with the design and purpose of the now permanent Recovery Audit Contractor (RAC) Program.  Although RACs largely focused on inpatient care during CMS’ demonstration program, RACs are a real threat to small providers that don’t have the intensive compliance programs in place that most hospitals do.  In this Part II, we will look at how physicians, home health, hospice, and durable medical equipment (DME) suppliers can prepare for and respond to RAC audits.

Even if no demands are issued, the RAC audit process exposes providers to substantial risks and administrative costs.  Fortunately, both can be managed with thoughtful implementation of effective compliance measures and a well-planned response to an audit.

I.              How Should Physicians and Other Small Providers Prepare for a RAC Audit?

It is essential that the preparation for a RAC audit begins before the RAC ever knocks on the door.  Deadlines are tight and so physicians without effective compliance programs in place run the risk of claims being denied simply because they can’t show that they crossed all the “T’s” and dotted the “I’s” in time.

Physicians, home health, hospice, and DME suppliers can begin to target their compliance efforts by examining the reasons for denials issued during the recently concluded RAC demonstration program.  During the course of that program, of improper payments identified,

• 35% were the result of incorrect coding;
• 8% were the result of insufficient documentation (including failure to submit information on time or to submit enough information); and
• 17% were the result of other issues, such as basing claim payments on outdated fee schedules or duplicate claims.  Meanwhile,
• 40% were deemed medically unnecessary.

In other words, 60% of denied claims had nothing to do with patient care.  No one goes into health care to spend their time creating and perfecting paper trails but long experience with Medicare tells us that doing so cannot be avoided.

Thus, to prepare for a RAC audit, as a provider you can:

• Implement and continuously review your compliance plan;
• Review the documentation requirements for each item or service you provide;
• Maintain your files thoroughly and consistently;
• Do NOT rely on other suppliers or providers for record-keeping; and
• Make sure all your documentation is legible.

II.         How Should Physicians and Other Small Providers Respond to a RAC Audit?

The RAC audit process starts with a request for records, upon which the provider has a strictly enforced 45 days (plus mail time) to respond.  Upon receiving a request for records, providers can take several steps to protect yourselves: 

• Take care before conducting an internal review of the claims requested.  While an internal analysis can be invaluable, you want to avoid creating a non-privileged paper trail of identified problems that could later be referred to law enforcement if a RAC makes a fraud referral.
• Review past claims audits and evaluations to determine whether the requested claims have been previously evaluated.
• Remember that filing deadlines are strictly enforced so calculate early on when appeals must be filed and begin to gather supporting documentation.
• Consider retaining an expert in extrapolation.
• Do NOT assume the contractor’s arguments are meritorious.  Carefully review Medicare policy to see if the RAC cited it correctly.
• Retain duplicates of any information that you submit to the RAC.

III.        Is Anything Different in the Permanent Program?

Small providers with experience being audited in the demonstration program should be on the lookout for the several changes implemented under the permanent program that may help protect them.  For instance, 

• RACs’ Contractor Medical Directors are now required to speak with a provider regarding a claim denial, if requested, and a reviewer must provide credentials upon request.
• The reason for the review must be listed on a request for records letters and overpayment letters.
• The look-back period is reduced to 3 years from 4.
• CMS has set uniform limits on the number of records that can be requested in a 45 day period (sliding scale).

More details concerning these and other changes to the permanent program can be found in the CMS RAC Demonstration Evaluation Report, available at https://www.cms.gov/RAC/02_ExpansionStrategy.asp.

Should you have any questions regarding these issues, don’t hesitate to contact us.  For a complementary consultation, you may call Robert W. Liles or one of our other attorneys at 1 (800) 475-1906.

A Look at RACs — Part I: What Do Physicians, Home Health, Hospice, and DME Providers Need to Know?

(June 25, 2010): The purpose of this series of articles is to assess the Recovery Audit Contractor (RAC) Program from the perspective of physicians, home health, hospice, durable medical equipment (DME) providers, and other relatively small Medicare providers.  As many non-hospital providers will acknowledge, early cries of wolf by law firms and consultants did a fine job of initially publicizing the RAC threat.  Unfortunately, the threat of a RAC audit now appears to be largely ignored by non-hospital providers due to the seemingly widespread sense that RACs will likely continue to focus their efforts on large, institutional Medicare providers – the ultimate “low hanging fruit” in terms of potential Medicare overpayments. 

RACs are, in fact, a real threat to physicians and other small Medicare providers, despite the fact the contractors have passed over these providers in the past. 

Over the last six weeks, the Centers for Medicare and Medicaid Services (CMS) has sponsored nationwide conference calls titled “Nationwide RAC 101 Call” specifically aimed at physicians, home health, hospices, and DME providers. Further, CMS conducted two general nationwide conference calls discussing the RAC program that were open to all Medicare providers. 

These seemingly innocent informational calls were in fact extraordinarily significant, servicing almost as a “touchstone” for CMS and its RAC auditors.  With the completion of these nationwide teleconferences, outreach has now been completed and CMS can affirmatively state that these non-hospital providers have been given multiple opportunities to learn about the RAC program and prepare for a RAC audit.   All states are now eligible for review. 

While CMS must still approve “issues” prior to their widespread review by the RACs, the contractors now have the billing data that they need to analyze and identify possible targets.

As physicians and other non-hospital providers prepare for possible audit, it is helpful to review hospitals’ experiences when preparing for and responding to a RAC audit.  On June 22, 2010, the American Hospital Association (AHA) released its findings that the RAC program is having a widespread impact on almost all hospitals, even though many have not even been subjected yet to a RAC audit.[1]  In fact, for the first quarter of 2010 alone:

• 84% of responding hospitals reported that RACs impacted their organization;
• 49% of responding hospitals reported increased administrative costs; and
• 17% of the hospitals using external resources to address RACs hired consultants at an average cost of almost $92,000. 

 So, what do providers and non-hospital Medicare providers need to know about RACs?  This multi-part series will address the following:  First, the purpose and impact of RACs; Second, how to respond to RACs when they come calling; Third, some of the emerging issues for physicians and other small Medicare providers regarding RACs. 

I.              What’s a RAC?

The RAC program was created by Section 306 of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA).  Operating under the direction of the Department of Health and Human Services (HHS), RACs are independent third-party contractors tasked with identifying and correcting improper past Medicare payments.  Each of four RACs has jurisdiction over a separate region of the United States.

After a three year demonstration in which RACs identified $1.03 billion in improper Medicare fee-for-service payments, the program became permanent earlier this year.  RACs join scores of other Medicare audit contractors.  CMS created the following table to clarify the role RACs are supposed to play compared to other contractors.[2]  However, as we will see later in this series, these roles are not clearly delineated and the overlap in the review process can create substantial confusion and waste.

Role of Medicare Review Contractors
Improper Payment Function	Contractor Performing Function
Preventing future improper payments through pre-pay review and provider education	Medicare claims processing contractors
Detecting past improper payments	RACs
Measuring improper payments	CERT [Comprehensive Error Rate Testing]
Performing higher-weighted DRG [diagnosis related group] reviews and expedited coverage reviews	QIOs [Quality Improvement Organization]

 

RACs are highly incentivized to hunt for evidence of overpayments in high-cost categories of service and to needle out errors that have nothing to do with actual patient care.  RACs are paid on a contingency basis so it stands to reason that, during the initial program demonstration, only 4% of improper payments identified were underpayments.  This “bounty hunter” approach also helps to explain why prior audits have focused almost exclusively on high-cost inpatient care services. Recent GAO testimony shed light on this situation and may cause RACs or other contractors to shift their focus to entities that do not have hospitals’ long history of review and compliance, namely physicians and other relatively small Medicare providers.  Finally, a substantial percentage of overpayments collected by RACs during the demonstration program resulted from preventable coding errors, countering the myth that CMS is primarily focused on weeding out unnecessary service claims.

Providers in Region C may want to consider that the AHA found hospitals in that region, encompassing nearly 40% of all U.S. hospitals including those in Texas, Florida, and Virginia, reported the highest number of medical records requested, the highest amount of dollars targeted in medical record requests, and the highest number of denied claims (47% of the $2.47 million in denied claims reported in the first quarter of 2010). 

II.            Are There Any Safeguards to Protect Physicians and Other Small Group Providers?

Based on the demonstration program, numerous providers and others have expressed concern that RACs are overly aggressive auditors.  Despite some improvements, concerns about the RAC process are likely to persist.  As recent testimony by the GAO Health Care Director pointed out, the oversight of RACs leaves something to be desired.

Changes have been made to reduce the RACs unintended incentive to drive up fees (through the improper denial of claims). RACs are now required to pay back their contingency fee if the claim is overturned at any level of appeal, rather than just the first level as in the demonstration program.

Additionally, there are some limitations in place regarding the RACs ability to overwhelm providers with record requests.  RACs may not request records more frequently than every 45 days and, for institutional providers, their requests are limited to 1% of all claims submitted for the previous calendar year.  This is an overall limit, however, meaning that a RAC may determine the composition of the records in an additional document request.  They can – and do – request categories of records up to the limit even if the request is disproportionate the provider’s business.

Finally, none of these improvements address the concern that the first several levels of the appeals process do not provide meaningful recourse for the overly aggressive auditing.

Should you have any questions regarding these issues, don’t hesitate to contact us.  For a complementary consultation, you may call Robert W. Liles or one of our other attorneys at 1 (800) 475-1906.

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[1] Available at http://www.aha.org/aha/content/2010/pdf/Q1RACTracResults.pdf

[2] Available at http://www.racaudits.com/uploads/RAC_Demonstration_Evaluation_Report.pdf.

You’ve got to be kidding . . . . . more Medicare audits on the way?

(March 12, 2010): Earlier this week, President Obama announced that he intends to back efforts to expand audit efforts identify and recover alleged  improper payments to Medicare and Medicaid.  The White House estimates that these efforts could double taxpayer savings over the next three years to approximately $2 billion.

“We cannot afford nor should we tolerate this waste of taxpayer dollars,” the White House said.  Notably, the White House believes that approximately $54 billion was lost last year through as a result of improper billing and payments. 

President Obama is seeking to crack down on waste and fraud as his administration strives to secure an overhaul of the $2.5 trillion healthcare system to contain costs and expand coverage to tens of millions of more Americans.  The action endorses Republican-backed proposals on alleged health care wrongdoers.

The plan will offer private auditors a share of the money that they recoup in order to encourage them to work harder to uncover improper payments under Medicare and Medicaid.   President Obama is also expected to back bipartisan legislation to expand the ability of government agencies to undertake these so-called payment recapture audits by providing more funds.

As many health care providers will readily attest, over the past year, it appears that there has been a marked increase in PSC and ZPIC audits, almost all of which are accompanied by demands for extrapolated damages.  Once again, this points to the importance of self-assessment and an effective compliance strategy.  Asked to comment on this new “risk” to health care providers, Robert W. Liles, Esq., Managing Partner at Liles Parker, Attorneys and Counselors at Law, responded:

”Our firm has represented a number of health care proviers around the country.  We have aggressively fought to have improper claims denial overturned.  This new risk will increase the likelihood that providers who have not been subjected to RAC audits in the past may now find themselves being examined by RAC-like auditors in the future.  Coupled with existing PSC and ZPIC audits, sole practitioners, small practice groups and clinics will find their coding and billing practice under the spotlight.  Unfortunately, based on recent cases we have handled, it appears that PSCs and ZPICs are increasingly imposing their own views regarding what is required, well beyond the four corners of CMS-authorized provisions set out under LCDs and LMRPs covering the services at issue.  Fortunately, when faced with the facts, ALJs have applied a reasonable approach and most of the claims at issue have been found to be payable.  We recommend that health care proviers carefully review their documentation practices to lessen the likelihood that ZPICs, PSCs, RACs and these new third-party reviewers can successfully argue that the claims don’t qualify for coverage.”

Liles Parker represents health care providers around the country in connection with Medicare contractor audits.  Should your practice or clinic be audited, call 1 (800) 476-1906 for a free consultation.