Costs

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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Are the Costs Incurred in Appealing a Repayment Demand Recoverable? – Part 2

Published on: August 9, 2012 | by David S. Dessen, Esq.

Part 1 of this post provided information on the number of appeals being filed by providers from RAC repayment demands and, for those appeals already decided, the extraordinary success providers have had in getting RAC decisions overturned. In some cases, the Equal Access to Justice Act (EAJA) opens the door to the recovery of the fees and costs incurred by the provider in prosecuting the appeal if the provider prevailed in an “adversary adjudication” before an ALJ, and if the position of CMS was not “substantially justified.”

What is an “adversary adjudication?” – Handron v. Secretary Department of Health and Human Services

In 2003, Dr. Handron, a psychologist, received a demand to repay $604,038 from a Medicare contractor because his documentation did not support the services billed. The amount to be repaid was extrapolated from a nurse’s review of 2,500 of Dr. Handron’s claims. Dr. Handron retained counsel and after losing his initial appeal, appealed to an ALJ. The ALJ determined that of the 2,500 claims reviewed by the nurse, Dr. Handron had been overpaid only $5,434.48 and that because the statistical sampling procedure used by the contractor was unreliable, the extrapolation was invalid. Although the ALJ requested that a representative of the contractor or CMS appear as a non-party participant at the hearing, none did so. However, again at the ALJ’s request, CMS did provide the ALJ with documents related to the sampling procedure and extrapolation used by the contractor.

After prevailing on the vast majority of the claims in his appeal, Dr. Handron filed an application for fees and expenses under the EAJA. The ALJ, the Medicare Appeals Council and the District Court all denied Dr. Handron’s claim based upon a HHS regulation found at 45 CFR § 13.3 that defines an “adversary adjudication” as one in which CMS is represented by counsel at the ALJ hearing. The Third Circuit disregarded the regulation and held that:

[C]ongress chose language that left open the possibility that the government’s position could be represented in some other manner and by someone other than a lawyer. This indicates Congress’s recognition that the position of the United States can be represented in many ways and its desire to grant judges some discretion in determining whether particular action “represents” the government’s position. It does not suggest that the government’s position can only be represented at a hearing if a government representative physically stands before the decision-maker…
Accordingly, we have little doubt that some forms of written advocacy submitted to an ALJ can constitute a representation of the government’s position, so as to make an agency proceeding an “adversary adjudication” for purposes of the EAJA.

Although Dr. Handron won the attorney battle, he lost the war when the Court held that something more than the provision by CMS of the claim files and documents explaining the statistical sampling methodology was required to make his ALJ proceeding an “adversary adjudication.” The Court held that for an ALJ proceeding to be an adversary adjudication, the Government must engage in:

Are the Costs Incurred in Appealing a Repayment Demand Recoverable? – Part 1

Published on: August 6, 2012 | by David S. Dessen, Esq.

According to the latest statistics from CMS, between October 1, 2010 and September 30, 2011, Part A providers filed 27,158 appeals from RAC repayment demands while 20,406 appeals were filed by Part B providers and an additional 9,056 appeals were filed by DME companies. The FY 2011 budget of the Department of Health and Human Services estimated that in FY 2011, Medicare ALJs would receive 282,000 non-RAC appeals and an additional 54,000 RAC specific appeals. Because of delays in the nationwide implementation of the RAC program, the Department’s FY 2012 budget estimates that only 41,000 RAC specific appeals will be filed with the Office of Medicare Hearings and Appeals by September 30, 2012. In FY 2011, CMS reports that of the Part A appeals decided, 6,226 were favorable to the provider, 14,352 Part B appeals were decided favorably and 3,930 DME appeals were favorably decided. CMS did not, however, provide the total number of appeals decided in any category, so it is impossible to calculate the provider’s “win” percentage from the CMS data.

In addition to CMS, the American Hospital Association, through its RACTrac Initiative, has been compiling data on the impact of RAC audits on its members. In its 1st Quarter 2012 report, the AHA reports that its data shows that through the first quarter of 2012, reporting hospitals have appealed 61,729 RAC repayment demands. Of the appeals decided so far, the hospitals have won 75% of the appeals, but 71% of all the appeals are still awaiting a decision.