Medicare-Medicaid Audit World

Will CMS Double Down on the Success of the Recovery Audit Program?

Published on: February 8, 2013 | by David S. Dessen, Esq.

According to CMS, between October 2010 and December 2012, the RACs collected $3.8 billion in overpayments. As the nearby chart makes clear, the volume of amount collected each quarter has continued to increase, the result of the ever increasing number of issues approved for review by CMS as well as the RAC’s increasing expertise in discovering alleged improper payments. There is little doubt that CMS considers the Recovery Audit Program to be a financial success or that it will continue to expand.

The Change to the Time in Which CMS Can Collect an Overpayment.

In May 2012, the HHS-OIG released a report entitled “Obstacles to Collection of Millions in Medicare Overpayments” detailing its findings on how well CMS and its contractors were doing in collecting previously identified overpayments. In response to the OIG’s contention that CMS was not doing a good enough job collecting identified overpayments, CMS claimed that part of the problem was that its collection activities were hampered by the limitation in 42 U.S.C. § 1395gg which restricted recoveries of overpayments from providers to those overpayments made within the last 3 years, even though 42 C.F.R. § 405.980(b) permits a CMS contractor to reopen a paid claim for any reason within 1 year of the date of the initial determination and within four (4) years of the date of the initial determination if there is good cause. The OIG report recommended that CMS ask Congress to change the recovery period in § 1395gg to a period greater than the reopening period set forth in § 405.980. In § 638 of the recently enacted American Taxpayer Relief Act of 2012, the law passed to avoid the “fiscal cliff,” Congress responded to the OIG recommendation by changing the recovery period in § 1395gg from 3 to 5 years, 1 year longer than the reopening period in § 405.980.

The current Scope of Work (SOW) for the Recovery Audit Contractors provides that:

The Recovery Auditor shall not attempt to identify any overpayment or underpayment more than 3 years past the date of the initial determination made on the claim.

Appeals of Recovery Audit Contractor Decisions are Overwhelming the Office of Medicare Hearings and Appeals

Published on: December 17, 2012 | by David S. Dessen, Esq.

If a Medicare provider’s claim for payment is denied or if a Recovery Audit Contractor (RAC) determines that a past payment was made improperly, the provider may appeal the denial. Medicare provides a 5-level appeal process that begins with a request that the Medicare Administrative Contractor (MAC) make a redetermination on the claim. If that is unsuccessful, the provider may seek reconsideration from a Qualified Independent Contractor (QIC). If the QIC agrees that the denial was proper, the provider may request a hearing before an Administrative Law Judge (ALJ) in the Office of Medicare Hearings and Appeals (OMHA).

OMHA was established by § 931of the Medicare Drug, Improvement and Modernization Act of 2003. In § 931(b)(2), Congress provided that:

The Secretary shall assure the independence of administrative law judges performing the administrative law judge functions … from the Centers for Medicare & Medicaid Services and its contractors. In order to assure such independence, the Secretary shall place such judges in an administrative office that is organizationally and functionally separate from such Centers.

There are currently 65 OMHA ALJs in 4 regional field offices. The ALJs are organized into teams and supported by OMHA attorneys, paralegals and legal assistants. While OMHA ALJs hear appeals involving, among other things, an individual’s eligibility for Medicare and coverage determinations under Parts C and D, the largest part of the ALJs workload comes from Part A and B provider appeals of pre and/or post payment denials by one of Medicare’s audit contractors.

The Effect of RAC Audits on the ALJ’s Caseload.

According to the latest appeal statistics from CMS, RACs issued payment denials for 903,372 claims in fiscal year 2011 and providers filed 56,620 appeals in fiscal year 2011. According to statistics maintained by OMHA, it received 132,446 appeals in fiscal year 2012. Out of the 132,446 appeals filed, 40,386 or 30.5% were filed from RAC denials by Part A hospitals. By comparison, Part A hospitals filed just 1,545 appeals in FY 2011.

The increase in ALJ appeals is certainly not unexpected as a result of the nationwide expansion of the RAC program in 2010. The increased caseload has already impacted the ALJ’s ability to comply with the regulatory mandate set forth at 42 C.F.R. §405.1006 that appeals to the ALJ be decided within 90 days. There is little doubt that as more and more appeals reach the ALJs, providers will experience ever increasing delays in decisions by the ALJs. While some delay may be acceptable, a restrictive CMS policy regarding the payment of reasonable and necessary Part B services provided by a hospital to a beneficiary may cause such an increase in the level of ALJ appeals as to make timely decisions by an ALJ impossible and deprive a provider of the legally required prompt resolution of its appeal.

Appeals for Payment of Part B Outpatient Services Will Further Delay ALJ Decisions
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Is the Inspector General Biased Against Medicare Providers? – A Recent Report Says YES!

Published on: November 20, 2012 | by David S. Dessen, Esq.

In 1978, Congress passed the Inspector General Act “[t]o create independent and objective units to provide leadership and coordination and recommend policies for activities designed (A) to promote economy, efficiency, and effectiveness in the administration of, and (B) to prevent and detect fraud and abuse in, such [Government] programs and operations;…” A November 14, 2012 report issued by the Health and Human Services Inspector General arguing for “improvements” in the activities of Medicare Administrative Law Judges suggests that the Inspector General is anything but “independent and objective.”

The OIG’s report is based upon an analysis of appeals decided by ALJs between October 2009 and September 2010 (fiscal year 2010). The OIG found that providers filed 85% of the appeals decided, that the ALJs rendered fully favorable decisions in 56% of the appeals (62% of all Part A appeals but 72% of Part A appeals filed by hospitals). The OIG calculated that about two-thirds of the ALJs rendered fully favorable decisions in between 41 and 70 percent of the appeals they considered. The question raised by these statistics is why is there such a large discrepancy between the decisions reached by the QICs in their review of the claims and the ALJs, since presumably both groups had the same information and were interpreting the same regulations. The obvious answer is that either the QICs or the ALJs are not doing their job correctly.

One might suspect that the first step in finding out which group is incompetent would be to have an independent entity review a statistically valid sample of the appeal records and offer an opinion as to whether the decision of the QIC or the ALJ was correct. Surprisingly, the OIG did not do that. Instead, the OIG appears to have assumed that the decision of the QICs was correct and then makes suggestions as to how to “improve” the decision making of the ALJs so that it will be more in line with that of the QICs. The result of such improvements, of course, will be a savings to the Government and reduced payments to providers. In case it is ultimately determined that the ALJ’s decisions are in fact correct, another “improvement” suggested by the OIG is that CMS impose a fee only on providers who want to appeal to the ALJ with the hope that this will result in fewer providers filing fewer appeals.

Does Medicare Always Have To Pay A Hospital For Services Provided?

Published on: November 2, 2012 | by David S. Dessen, Esq.

Depending on a doctor’s opinion as to the severity of a patient’s medical condition, a hospital may either provide the patient with services after he or she is admitted to the hospital (inpatient services) or without the patient being admitted (outpatient services). Although many of the services are the same, the hospital is paid more if the patient is admitted than if the services are provided on an outpatient basis.

During the last few years, CMS’ Recovery Audit Contractors (RACs) have determined that millions of dollars paid to hospitals for inpatient treatment should be refunded to CMS because although the patient needed the medical services provided, the services should have been provided on an outpatient basis. Although most people might think that the result of the hospital’s mistaken classification would simply be for the hospital to repay Medicare the difference between the amount it was paid for inpatient services and the amount that it would have been paid for the services on an outpatient basis, CMS has a different view. According to CMS, because the hospital submitted a bill for what was later determined to be unnecessary inpatient services, the hospital is entitled to no payment for its services.

On November 1, 2012, the American Hospital Association and four individual hospitals filed a lawsuit in the United States District Court for the District of Columbia against Kathleen Sebelius, the Secretary of the Department of Health and Human Services, in an attempt to overturn this unreasonable policy and to force CMS to pay hospitals for the legitimate outpatient services provided. While the hospital’s position is undoubtedly fair and reasonable, their lawsuit may not succeed.

Will CMS’ Broad Power to Administer the Medicare Program Defeat the Hospitals?

There is no doubt that Congress has given CMS broad powers to enact rules and regulations governing the operation of the Medicare Program. CMS has used that authority to promulgate thousands of regulations and policies to govern, among other things, who is eligible to participate in the Medicare program, what benefits the program will provide, the amounts to be paid for services and what hospitals and other providers must do to be paid. According to 42 C.F.R. § 424.32(a)(1), in order for a hospital or provider to be paid:

A claim must be filed with the appropriate intermediary or carrier on a form prescribed by CMS in accordance with CMS instructions.

Will Recovery Audits Drive Away Medicare Providers? – Part I

Published on: October 16, 2012 | by David S. Dessen, Esq.

Often overlooked in performance evaluations of the various contractors employed by the Medicare program to ensure program integrity, is the cost incurred by providers in responding to contractor requests for information related to billed claims and provider costs in appealing improper contractor denials. In light of the ongoing debate about whether reduced Medicare payments mandated by the Patient Protection and Affordable Care Act will drive providers from the Medicare program, an analysis of the administrative costs incurred by providers as the result of Medicare program integrity activity is in order.

With the exception of the data collected by the American Hospital Association (AHA) through its RAC Trac initiative, I am not aware of any other data tracking administrative costs incurred by providers in connection with Medicare program integrity activities. As far as I know there is no aggregate data of the costs incurred by any identified group of Medicare providers in connection with pre and post payment reviews conducted by the MACs or the costs incurred by Medicare providers in responding to document or other information requests by ZPICs or their PSC predecessors.

The RAC Trac Data

According to the American Hospital Directory, there are about 4,219 hospitals in the United States. About 2,200 of those hospitals provided data to the AHA during the first half of 2012 on the costs associated with RAC activities. About 75% of the hospitals reported that RAC activity had some impact on their operations, the single largest impact being increased administrative costs. Approximately 45% of the hospitals spent less than $3,300 per month because of RAC audits while about 8% of the hospitals spent over $33,300 per month on RAC activities. In terms of employee time, the hospitals reported that about 315 hours of employee time per month was devoted to RAC activities. In addition to internal costs, the hospitals reported that they spent about $33,000 per month on external resources required to address RAC issues. The AHA report on the RAC Trac survey data for the 1st quarter of 2012 is available here, and the 2nd quarter results are available here.
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What Concerns the OIG About MACs and RACs

Published on: October 8, 2012 | by David S. Dessen, Esq.

Last week the Department of Health and Human Services Office of Inspector General released its fiscal year 2013 Work Plan describing the issues it intends to investigate during the fiscal year beginning October 1, 2012. In the section of the Work Plan devoted to Parts A and B of Medicare, the OIG identified its concerns with the operation of the Medicare Administrative Contractors (MAC) and the Medicare Recovery Audit Contractors.

The OIG’s Concerns With the Performance of the MACs

In addition to being concerned about CMS’ ability to adequately monitor and assess the performance of the various MACs, the OIG is concerned with whether the MACs have consolidated all Part A and Part B edits within their jurisdiction, have developed and tested final edits, implemented and used initial, local system, and medical review edits and evaluated edit effectiveness. On a related subject, the OIG is also concerned about Part B claims that were suspended for manual prepayment review on the basis of system edits but on which the reviews were not conducted. According to the OIG, because manual review is more timely and costly to the contractor, some suspended claims might not be reviewed but paid inappropriately. In sum, the OIG believes that the MACs may be paying too many improper claims.

The OIG’s Concern With the Performance of the RACs

As opposed to its concern with the MACs’ performance in specific areas, the OIG Work Plan does not identify any specific concern with the performance of the RACs. Rather, the Work Plan states that the OIG intends to “review the extent that Recovery Audit Contractors (RAC) identified improper payments, identified vulnerabilities, and made potential fraud referrals in 2010 and 2011.” The OIG will also review CMS’ actions in resolving RAC-identified vulnerabilities, addressing potential fraud referrals, and in evaluating RAC performance in 2010 and 2011. Apparently the OIG does not believe that the problems with the RAC program identified by the American Hospital Association, the American Medical Association and other professional organizations as well as some members of Congress warrant investigation.

The Concerns of Others With the Performance of the RACs

Since its inception, the structure of the RAC program has been the subject of considerable unfavorable comment by Medicare providers. In an April 3, 2012 letter, the leaders of 35 professional organizations representing doctors expressed their opposition to CMS’ plan to have RACs conduct prepayment reviews because “[t]he program’s contingency fee structure inappropriately incentivizes the Recovery Auditors to conduct “fishing expeditions” that are exceedingly burdensome for physician practices” and because “[t]hey [Recovery Auditors] are incapable of efficiently or accurately conducting prepayment review.”

Evaluation and Management Codes – The Newest Audit Target

Published on: October 1, 2012 | by David S. Dessen, Esq.

Over the past couple of weeks there has been considerable press attention to the fact that over the last 10 years bills submitted by doctors to CMS for evaluation and management services have increasingly used E/M Codes 99214 and 99215 in place of lower cost 99211 and 99212 codes, coupled with the possibility that the increased use by hospitals and doctors of Electronic Health Record (EHR) software as the result of the CMS EHR incentive program, has resulted in increased fraudulent billing by providers. Although press reports conflate the two issues, they do not appear to be related.

Reports on Evaluation and Management Billing

In May 2012, the HHS OIG released a report entitled “Coding Trends of Medicare Evaluation and Management Services” in which it analyzed Evaluation and Management coding for (1) established patient office visits, (2) subsequent inpatient hospital care, and (3) emergency department visits. It found that the use of codes 99214 and 99215 increased 17% between 2001 and 2010, the use of codes 99232 and 99233 increased 6 and 9 percent, respectively between 2001 and 2010, and the use of code 99285 rose 21 percent, increasing from 27 to 48 percent of billings during the same period.

On September 15, 2012, the Center for Public Integrity released a study entitled “How doctors and hospitals have collected billions in questionable Medicare fees.” This article purports to report on the Center’s analysis of data obtained from CMS on Evaluation and Management billing as well as how the widespread adoption of EHR may be contributing to fraudulent upcoding by hospitals and doctors.

On September 21, 2012, the New York Times published an article entitled “Medicare Bills Rise as Records Turn Electronic” referencing both the May OIG report and the Center for Public Integrity article. The Times’ article, which purported to analyze CMS data from the American Hospital Directory, pointed out the same trends as the earlier reports, but attributed the difference to hospitals converting from paper records to EHRs. The Times article apparently prompted a strong letter from the Secretary of Health and Human Services and the Attorney General to the CEO’s of five hospital trade associations. In their letter of September 24, 2012, the Secretary and Attorney General warned against the use EHR software to commit healthcare fraud and threatened prosecution for fraudulent billing. The American Hospital Association responded the same day as did the Association of Academic Health Centers.

Are All Providers Equal in the Eyes of the ZPICs?

Published on: September 21, 2012 | by David S. Dessen, Esq.

Zone Program Integrity Contractors (ZPICs) are charged with detecting fraud, waste and abuse in Medicare Parts A, B, C, D, Durable Medical Equipment, Prosthetics, and Orthotics Suppliers (DMEPOS), Home Health and Hospice agencies (HH+H), and Medi-Medi (a partnership between Medicaid and Medicare designed to enhance collaboration between the two programs to reduce fraud, waste and abuse). In conducting their work, ZPICs are not limited by time as to the claims they may review or the number of documents they may request “to identify cases of suspected fraud, develop them thoroughly and in a timely manner, and take immediate action to ensure that Medicare Trust Fund monies are not inappropriately paid out and that any mistaken payments are recouped.” In carrying out their responsibilities, ZPICs do not conduct random audits. Instead ZPICs rely on data analysis to detect high frequency of certain services as compared with local and national patterns, trends of billing, or other information that may suggest the provider is an outlier. ZPIC audits may also be triggered by employee or beneficiary complaints to the Office of Inspector General hotline, fraud alerts, or information received from a MAC or other contractor and law enforcement agencies.

The World of Medicare Contractors

As the number of stand-alone health care providers continues to decrease, the number of corporate relationships between companies hired by CMS to ensure the integrity of the Medicare program and Medicare providers continues to increase. The result of this consolidation is the growing possibility that these relationships will not be detected or adequately addressed by CMS, with the result that complaints of wrongdoing against some providers will not be investigated as vigorously as complaints against other providers.

Palomar Medical Center v. Sebelius – Update

Published on: September 11, 2012 | by David S. Dessen, Esq.

In a July 21, 2012 post I discussed the case of Palomar Medical Center v. Sebelius which raised the question of whether the “good cause” requirement set forth in 42 CFR § 405.986(a) governing a RACs reopening of a claim paid more than one year earlier could be challenged by a provider during the administrative appeal process or in federal court. The answer, at least in the Ninth Circuit, is no.

In a unanimous decision filed on September 11, 2012, the Ninth Circuit held that CMS correctly interpreted its regulations that preclude an appeal of a RAC’s decision to reopen a paid claim, that the regulations were reasonable and that because the decision to reopen cannot be appealed, federal courts do not have jurisdiction to review a RAC’s decision to reopen a paid claim. In sum, the Court rejected every argument advanced by Palomar.

In my July 24th post I discussed the decision in St. Francis Hospital v. Sebelius in which a District Court in the Eastern District of New York came to a contrary result. According to the Ninth Circuit, the different result in St. Francis Hospital is based on the Constitutional due process argument advanced by St. Francis but abandoned by Palomar at an earlier stage of the litigation.

Is the “GOOD CAUSE” Fight Over?

As I suggested in my earlier post, I think the argument that the regulations permit a provider to litigate the question of good cause is extremely weak and expect that other Courts that consider the issue will come to the same conclusion as the Ninth Circuit. At this point, I believe that any hope of raising this issue is dependent upon a finding that by denying a provider the right to litigate the good cause requirement, the regulations deny the provider due process, a question not considered or decided by the Ninth Circuit.

Does SECRETARY = MAC – Who Authorizes Statistical Sampling?

Published on: September 5, 2012 | by David S. Dessen, Esq.

In 1991, in the case of Chaves County Home Health Service Inc. v. Sullivan, the Court of Appeals for the District of Columbia Circuit approved the use of statistical sampling and extrapolation by Medicare contractors, currently known as MACs or ZPICs, in conducting post payment reviews. Specifically, the Court held that the Secretary of HHS was authorized to employ statistical sampling and extrapolation as set forth in Health Care Financing Administration (HCFA, now known as CMS) Ruling 86-1 since the Medicare Act did not prohibit statistical sampling and such a procedure was consistent with the Secretary’s duty to prevent overpayments. On January 8, 2001, in Transmittal B-01-01, CMS updated the procedures a contractor was to follow in employing statistical sampling and extrapolation during a post payment review. As in Ruling 86-1, the new procedures imposed no limitation on when the contractor could determine the amount of an overpayment in a universe of claims by extrapolation from an analysis of a sample of the claims in that universe.

In § 935 of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003, Congress added a new subsection (f)(3) to 42 U.S.C/ § 1395ddd. This subsection states:

Limitation on use of extrapolation
A medicare contractor may not use extrapolation to determine overpayment amounts to be recovered by recoupment, offset, or otherwise unless the Secretary determines that–
(A) there is a sustained or high level of payment error; or (B) documented educational intervention has failed to correct the payment error.
There shall be no administrative or judicial review under section 1395ff of this title, section 1395oo of this title, or otherwise, of determinations by the Secretary of sustained or high levels of payment errors under this paragraph.

The meaning of this section became the central issue in the case of Gentiva Healthcare Corp. v. Sebelius.