Category Archives: Alleged Overpayment

Inconsequential Medicare Audits Could Morph into a Whopper of a Whale

Emergency room physicians or health care providers are a discrete breed – whales in a sea of fish. Emergency room doctors have – for the most part – been overlooked by the RAC auditors or TPE, ZPIC, or MAC auditors. Maybe it’s because, even RAC auditors have children or spouses that need ER services from time to time. Maybe it’s because ER doctors use so many different billers. Normally, an ER doctor doesn’t know which of his or her patients are Medicaid or Medicare. When someone is suffering from a a broken leg or heart attack, the ER doctor is not going to stop care to inquire whether the patient is insured and by whom. But should they? Should ER doctors have to ask patients their insurer? If the answer includes any sort of explanation that care differs depending on whether someone is covered by Medicare or Medicaid or has private insurance, then, sadly, the answer may be yes.

ER doctors travel to separate emergency rooms, which are owned by various and distinct entities, and rely on individual billing companies. They do not normally work at only one hospital. Thus, they do not always have the same billers. We all know that not all billers are created equal. Some are endowed with a higher understanding of billing idiosyncrasies than others.

For example, for CPT codes 99281-99285 – Hospital emergency department services are not payable for the same calendar date as critical care services when provided by the same physician or physician group with the same specialty to the same patient. 

We all know that all hospitals do not hire and implement the same billing computer software programs. The old adage – “you get what you pay for” – may be more true than we think. Recent articles purport that “the move to electronic health records may be contributing to billions of dollars in higher costs for Medicare, private insurers and patients by making it easier for hospitals and physicians to bill more for their services, whether or not they provide additional care.” – Think a comment like that would red-flag ER doctors services by RAC, MAC and ZPIC auditors? The white whale may as well shoot a water spray 30 feet into the air.

Will auditing entities begin to watch ER billing more closely? And what are the consequences? When non-emergency health care providers are terminated by Medicare, Medicaid, or a MAC or MCO’s network, there is no emergency – by definition. Juxtapose, the need for ER health care providers. ER rooms cannot function with a shortage of  physicians and health care providers. Even more disturbing is if the termination is unwarranted and seemingly inconsequential – only affecting under 4 surgeries per month – but acts as the catalyst for termination of Medicare, Medicaid, and private payors across the board.

I have a client named Dr. Ishmael. His big fish became the MAC Palmetto – very suddenly. Like many ER docs, he rotates ERs. He provides services for Medicare, Medicaid, private pay, uninsured – it doesn’t matter to him, he is an ER doctor. He gets a letter from one MAC. In this case, it was Palmetto. Interestingly enough, Palmetto is his smallest insurance payor. Maybe 2 surgeries a month are covered by Palmetto. 90% of his services are provided to Medicaid patients. Not by his choice, but by demographics and circumstance. The letter from Palmetto states that he is being excluded from Palmetto’s Medicare network, effective in 10 days. He will also be placed on the CMS preclusion list in 4 months.

We appeal through Palmetto, as required. But, in the meantime, four other MACs, State Medicaid and BCBS terminate Dr. Ishmael’s billing privileges for Medicare and Medicaid based on Palmetto’s decision. Remember, we are appealing Palmetto’s decision as we believe it is erroneous. But because of Palmetto’s possibly incorrect decision to terminate Dr. Ishmael’s Medicare billing privileges, all of a sudden, 100% of Dr. Ishmael’s services are nonbillable and nonreimburseable…without Dr. Ishmael or the hospital ever getting the opportunity to review and defend against the otherwise innocuous termination decision.

Here, the hospital executives, along with legal counsel, schedule meetings with Dr. Ishmael. “They need him,” they say. “He is important,” they say. But he is not on the next month’s rotation. Or the next.

They say: “Come and see if ye can swerve me. Swerve me? ye cannot swerve me, else ye swerve yourselves! man has ye there. Swerve me?”

Billing audits on ER docs for Medicare/caid compliance are distinctive processes, separate from other providers’ audits. Most providers know the insurance of the patient to whom they are rendering services. Most providers use one biller and practice at one site. ER docs have no control over the choice of their billers. Not to mention, the questions arises, who gets to appeal on behalf the ER provider? Doesn’t the hospital reap the benefit of the reimbursements?

But one seemingly paltry, almost, minnow-like, audit by a cameo auditor can disrupt an entire career for an ER doc. It is imperative to act fast to appeal in the case of an ER doc.  But balance speed of the appeal with the importance of preparing all legal arguments. Most MACs or other auditing entities inform other payors quickly of your exclusion or termination but require you to put forth all arguments in your appeal or you could waive those defenses. I argue against that, but the allegations can exist nonetheless.

The moral of the story is ER docs need to appeal and appeal fast when billing privileges are restricted, even if the particular payor only constitutes 4 surgeries a month. As Herman Melville said: “I know not all that may be coming, but be it what it will, I’ll go to it laughing.” 

Sometimes, however, it is not a laughing matter. It is an appealable matter.

State Agencies Must Follow the State Medicare Plan! Or Else!

Accused of an alleged overpayment? Scrutinize the Department’s procedure to determine that alleged overpayment. One step out of line (in violation of any pertinent rule) by the Department and the overpayment is dismissed.

Ask yourself: Did the State follow Medicare State Plan Agreement? (The Plan germane in your State).

In a Mississippi Supreme Court case, the Mississippi Department of Medicaid (“DOM”) alleged that a hospital owed $1.2226 million in overpayments. However, the Court found that DOM failed to follow proper procedure in assessing the alleged overpayment. Since the DOM failed to follow the rules, the $1.2226 million alleged overpayment was thrown out.

The Court determined that the DOM, the single state agency charged with managing Medicare and Medicaid, must follow all pertinent rules otherwise an alleged overpayment will be thrown out.

Two cases premised on the notion that the DOM must follow all pertinent rules were decided in MS – with polar opposite endings.

  • Crossgates River Oaks Hosp. v. Mississippi Div. of Medicaid, 240 So. 3d 385, 388 (Miss. 2018); and
  • Cent. Mississippi Med. Ctr. v. Mississippi Div. of Medicaid, No. 2018-SA-01410-SCT, 2020 WL 728806, at *2–3 (Miss. Feb. 13, 2020).

In Crossgates, the hospitals prevailed because the DOM had failed to adhere to the Medicare State Plan Agreement. Applying the same legal principles in Cent. MS Med. Ctr, the DOM prevailed because the DOM adhered to the Medicaid State Plan.

It is as simple as the childhood game, “Simon Says.” Do what Simon (State Plan) says or you will be eliminated.

Crossgates

In the 2018 MS Supreme Court case, the Court found that the MS Department failed to follow the Medicare State Plan Agreement in determining an overpayment for a provider, which meant that the overpayment alleged was arbitrary. The thinking is as follows: had the Department followed the rules, then there may not be an overpayment or the alleged overpayment would be a different amount. Since the Department messed up procedurally, the provider got the whole alleged overpayment dismissed from Court. It is the “fruit of the poisonous tree” theory. See Crossgates River Oaks Hosp. v. Miss. Div. of Medicaid, 240 So. 3d 385 (Miss. 2018).

While Courts generally afford great deference to an agency’s interpretation of its regulations, once the agency violates a procedural rule, it is not entitled to that deference. The Court found that the DOM’s interpretation of Attachment 4.19–B of the State Plan was inconsistent with the relevant regulation. Crossgates River Oaks Hosp. v. Mississippi Div. of Medicaid, 240 So. 3d 385, 388 (Miss. 2018).

Throughout these proceedings, the DOM never articulated an explanation for its failure to exclude the radiology and laboratory charges or for its use of a blended rate in place of actual costs, absent altering or amending the State Plan. The clear language of the State Plan establishes that DOM’s choice to reduce payments to the Hospitals was arbitrary, capricious, and not supported by substantial evidence.

Central MS Medical Center

Juxtapose the Central Mississippi Medical Center case, which, by the way has not been released for publication. Atop the header for the case is the following warning:

“NOTICE: THIS OPINION HAS NOT BEEN RELEASED FOR PUBLICATION IN THE PERMANENT LAW REPORTS. UNTIL RELEASED, IT IS SUBJECT TO REVISION OR WITHDRAWAL.”

With that caveat, the MS Supreme Court held that Medicaid State Plans that are accepted by CMS reign supreme and must be followed. In this case, the MS State Plan required the DOM to use the Medicare Notice of Program Reimbursement (NPR) to establish the final reimbursement.

According to the Supreme Court, the agency followed the rules. Thus, the agency’s adverse determination was upheld. It does not matter what the adverse determination was – you can insert any adverse determination into the equation. But the equation remains stedfast. The State must follow the State Plan in order to validate any adverse decision.

Why Auditors Can’t be Unbiased

Last week on Monitor Mondays, Knicole Emanuel, Esq. reported on the case of Commonwealth v. Pediatric Specialist, PLLC, wherein the Recovery Audit Contractors’ (RACs’) experts were prohibited from testifying because they were paid on contingency. This means that the auditor (or the company for which they work) is paid some percentage of the overpayment findings it reports.

In this case, as in most nowadays, the overpayment estimate was based upon extrapolation, which means that the auditor extended the overpayment amount found in the sample to that of all claims within the universe from which the sample was drawn. I have written about this process before, but basically, it can turn a $1,500 overpayment on the sample into a $1.5 million overpayment demand.

The key to an effective extrapolation is that the statistical process is appropriate, proper, and accurate. In many audits, this is not the case, and so what happens is, if the provider believes that the extrapolation is not appropriate, they may choose to challenge the results in their appeal. Many times, this is when they will hire a statistician, like me, to review the statistical sampling and overpayment estimate (SSOE), including data and documentation to assist with the appeal. I have worked on hundreds of these post-audit extrapolation mitigation appeals over the years, and even though I am employed by the provider, I maintain a position as an independent fact-finder.  My reports are based on facts and figures, and my opinion is based on those findings. Period.

So, what is it that allows me to remain independent? To perform my job without undue influence or bias? Is it my incredibly high ethical standards? Check! My commitment to upholding the standards of my industry? Check!  Maybe my good looks? Well, not check! It is the fact that my fees are fixed, and are not contingent on the outcome. I mean, it would be great if I could do what the RACs do and cash in on the outcomes of a case, but alas, no such luck.

In one large class-action case in which I was the statistical expert, the defendant settled for $122 million. The law firm got something like a quarter or a third of that, and the class members all received some remuneration as well. Me? I got my hourly rate, and after the case was done, a bottle of Maker’s Mark whiskey as a thank you. And I’m not even sure that was appropriate, so I sent it back. I would love to be paid a percentage of what I am able to save a client in this type of appeal. I worked on a case a couple of years ago for which we were able to get the extrapolation thrown out, which reduced the payment demand from $5.9 million to $3,300. Imagine if I got paid even 2 percent of that; it would be nearly $120,000. But that can’t happen, because the moment my work product is tied to the results, I am no longer independent, nor unbiased. I don’t care how honest or ethical you are, contingency deals change the landscape – and that is as true for me, as an expert, as it is for the auditor.

In the pediatric case referenced above, the RAC that performed the audit is paid on a contingency, although I like to refer to it as a “bounty.” As such, the judge ruled, as Ms. Emanuel reported, that their experts could not testify on behalf of the RAC. Why not? Because the judge, unlike the RAC, is an independent arbiter, and having no skin in the game, is unbiased in their adjudication. But you can’t say that about the RAC. If they are being paid a “bounty” (something like 10 percent), then how in the world could they be considered independent and unbiased?

The short answer is, they can’t. And this isn’t just based on standards of statistical practice; it is steeped in common sense. Look at the appeal statistics; some 50 percent of all RAC findings are eventually reversed in favor of the provider. If that isn’t evidence of an overzealous, biased, bounty-hunting process, I don’t know what is. Basically, as Knicole reported, having their experts prohibited from testifying, the RAC was unable to contest the provider’s arguments, and the judge ruled in favor of the provider.

But, in my opinion, it should not stop here. This is one of those cases that exemplifies the “fruit of the poisonous tree” defense, meaning that if this case passes muster, then every other case for which the RAC did testify and the extrapolation held should be challenged and overturned. Heck, I wouldn’t be surprised if there was a class-action lawsuit filed on behalf of all of those affected by RAC extrapolated audits. And if there is one, I would love to be the statistical expert – but for a flat fee, of course, and not contingent upon the outcome.

And that’s the world according to Frank.

Frank Cohen is a frequent panelist with me on RACMonitor. I love his perspective on expert statistician witnesses. He drafted based off a Monitor Monday report of mine. Do not miss both Frank and me on RACMonitor, every Monday.

Inconsequential Medicare Audits Could Morph into a Whopper of a Whale

Emergency room physicians or health care providers are a discrete breed – whales in a sea of fish. Emergency room doctors have – for the most part – been overlooked by the RAC auditors or TPE, ZPIC, or MAC auditors. Maybe it’s because, even RAC auditors have children or spouses that need ER services from time to time. Maybe it’s because ER doctors use so many different billers. Normally, an ER doctor doesn’t know which of his or her patients are Medicaid or Medicare. When someone is suffering from a a broken leg or heart attack, the ER doctor is not going to stop care to inquire whether the patient is insured and by whom. But should they? Should ER doctors have to ask patients their insurer? If the answer includes any sort of explanation that care differs depending on whether someone is covered by Medicare or Medicaid or has private insurance, then, sadly, the answer may be yes.

ER doctors travel to separate emergency rooms, which are owned by various and distinct entities, and rely on individual billing companies. They do not normally work at only one hospital. Thus, they do not always have the same billers. We all know that not all billers are created equal. Some are endowed with a higher understanding of billing idiosyncrasies than others.

For example, for CPT codes 99281-99285 – Hospital emergency department services are not payable for the same calendar date as critical care services when provided by the same physician or physician group with the same specialty to the same patient. 

We all know that all hospitals do not hire and implement the same billing computer software programs. The old adage – “you get what you pay for” – may be more true than we think. Recent articles purport that “the move to electronic health records may be contributing to billions of dollars in higher costs for Medicare, private insurers and patients by making it easier for hospitals and physicians to bill more for their services, whether or not they provide additional care.” – Think a comment like that would red-flag ER doctors services by RAC, MAC and ZPIC auditors? The white whale may as well shoot a water spray 30 feet into the air.

Will auditing entities begin to watch ER billing more closely? And what are the consequences? When non-emergency health care providers are terminated by Medicare, Medicaid, or a MAC or MCO’s network, there is no emergency – by definition. Juxtapose, the need for ER health care providers. ER rooms cannot function with a shortage of  physicians and health care providers. Even more disturbing is if the termination is unwarranted and seemingly inconsequential – only affecting under 4 surgeries per month – but acts as the catalyst for termination of Medicare, Medicaid, and private payors across the board.

I have a client named Dr. Ishmael. His big fish became the MAC Palmetto – very suddenly. Like many ER docs, he rotates ERs. He provides services for Medicare, Medicaid, private pay, uninsured – it doesn’t matter to him, he is an ER doctor. He gets a letter from one MAC. In this case, it was Palmetto. Interestingly enough, Palmetto is his smallest insurance payor. Maybe 2 surgeries a month are covered by Palmetto. 90% of his services are provided to Medicaid patients. Not by his choice, but by demographics and circumstance. The letter from Palmetto states that he is being excluded from Palmetto’s Medicare network, effective in 10 days. He will also be placed on the CMS preclusion list in 4 months.

We appeal through Palmetto, as required. But, in the meantime, four other MACs, State Medicaid and BCBS terminate Dr. Ishmael’s billing privileges for Medicare and Medicaid based on Palmetto’s decision. Remember, we are appealing Palmetto’s decision as we believe it is erroneous. But because of Palmetto’s possibly incorrect decision to terminate Dr. Ishmael’s Medicare billing privileges, all of a sudden, 100% of Dr. Ishmael’s services are nonbillable and nonreimburseable…without Dr. Ishmael or the hospital ever getting the opportunity to review and defend against the otherwise innocuous termination decision.

Here, the hospital executives, along with legal counsel, schedule meetings with Dr. Ishmael. “They need him,” they say. “He is important,” they say. But he is not on the next month’s rotation. Or the next.

They say: “Come and see if ye can swerve me. Swerve me? ye cannot swerve me, else ye swerve yourselves! man has ye there. Swerve me?”

Billing audits on ER docs for Medicare/caid compliance are distinctive processes, separate from other providers’ audits. Most providers know the insurance of the patient to whom they are rendering services. Most providers use one biller and practice at one site. ER docs have no control over the choice of their billers. Not to mention, the questions arises, who gets to appeal on behalf the ER provider? Doesn’t the hospital reap the benefit of the reimbursements?

But one seemingly paltry, almost, minnow-like, audit by a cameo auditor can disrupt an entire career for an ER doc. It is imperative to act fast to appeal in the case of an ER doc.  But balance speed of the appeal with the importance of preparing all legal arguments. Most MACs or other auditing entities inform other payors quickly of your exclusion or termination but require you to put forth all arguments in your appeal or you could waive those defenses. I argue against that, but the allegations can exist nonetheless.

The moral of the story is ER docs need to appeal and appeal fast when billing privileges are restricted, even if the particular payor only constitutes 4 surgeries a month. As Herman Melville said: “I know not all that may be coming, but be it what it will, I’ll go to it laughing.” 

Sometimes, however, it is not a laughing matter. It is an appealable matter.

New Mexico Settlement…Six Years Later!

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For the full press release.

This New Mexico settlement…What a long strange trip it’s been!

The litigation started in 2013 (six years ago). I was a partner at another Raleigh, NC law firm. Out of the blue, a woman called me from New Mexico and asked whether I would be willing to fly to New Mexico to testify before the General Assembly regarding Public Consulting Group (PCG) and the company’s extrapolation and audit history.

See blog, blog, and blog.

I did. I testified before the NM General Assembly’s subcommittee for behavioral health care. Sitting next to me was a gentleman from PCG. He happened to be the team leader (not sure what his exact title was) for PCG’s audits in NM and NC. In his defense, he graciously sat there and testified against me while I told some horror stories of PCG audits. See blog.

I met the 15 behavioral health care providers’ CEOs who were accused of credible allegations of fraud. Their stories were so emotional and heart-tugging. These people had dedicated their lives and careers to New Mexico’s most needy population – those on Medicaid and suffering from mental health, substance abuse, and/or developmental disabilities – not for money, but because they cared. Then June 24, 2013, the State of New Mexico accused them all of credible allegations of fraud. NM’s proof? A PCG audit that found no credible allegations of fraud. But Human Services Department (HSD) instructed PCG to remove “no credible allegations of fraud,” and HSD referred the audits to the Attorney General (AG) claiming that credible allegations of fraud existed. Sound like a movie? It could be; it is a conspiracy theory story along the lines of Area 51. Is it a coincidence that Area 51 and the NM behavioral health care debacle both occurred in NM?

I’d like to get some sleep before I travel
But if you got a warrant, I guess you’re gonna come in.” – Grateful Dead

A timeline of the events, starting in 2013, has been memorialized by multiple news organizations. See Timeline.

“June 24 — An audit paid for by the New Mexico Human Services Department and conducted by Public Consulting Group (PCG) finds that nearly $33.8 million in Medicaid overpayments were made to 15 behavioral health providers in the state.

June 24 — New Mexico Human Services Department notifies the 15 behavioral health providers that there is a “credible allegation of fraud for which an investigation is pending,” and immediately suspends all Medicaid payments.

June 25 — Officials with the New Mexico Human Services Department send initial contracts to five Arizona companies: Agave Health Inc.Valle Del SolLa Frontera Inc.Southwest Network Inc., and Turqouise Health and Wellness, Inc., to temporarily take over New Mexico behavioral health organizations for a combined price tag of $17.85 million. It’s estimated the move will impact about 30,000 patients. From a July 18 email: “I am following up on the proposed contract between HSD and Open Skies Healthcare (affiliated with Southwest Network, located in Phoenix). On July 3, 2013, I responded to Larry’s [Heyeck, Deputy General Counsel for HSD] June 25 email concerning the contract…”

July 17 – Eight agencies go to U.S. District Court to restore funding.

July 25 – A memo generated by one of the 15 affected providers, TeamBuilders, indicates it will stop taking new clients.

July 25 – A state district judge turns the PCG audit over to New Mexico State Auditor Hector Balderas, and orders the audit protected from public disclosure.

Aug. 21 – In a 15-1 vote New Mexico’s Legislative Finance Committee objects to the Human Services Department moving $10 million from it’s budget to pay Arizona agencies to take over New Mexico providers due to concerns over secrecy surrounding the process.

Aug. 27 – New Mexico In Depth and the Las Cruces Sun-Newsfile a lawsuit demanding the public release of the PCG audit.

Aug. 28 – Federal officials hold conference call to hear about widespread disruptions to clients of behavioral health providers in transition.

Aug. 29 – An Inspection of Public Records Act request filed by KUNM reveals contract communications between New Mexico Human Services Department officials and Arizona providers as early as May 29, a full month before the audit was released by Public Consulting Group.

Sept. 3 – Public Consulting Group representative Thomas Aldridge tells the New Mexico Legislative Behavioral Health Subcommittee that he helped state officials vet at least one Arizona firm before it even began its audit of agencies in the state.

Sept. 3 — Lawyer Knicole Emanuel testifies to ongoing problems with PCG audits conducted in North Carolina as well as lawsuits triggered by PCG activities. “In some of the PCG audits that I have encountered, PCG has said the Medicaid provider owes $700,000, $800,000, $1.5 million, these exorbitant amounts, and at the end of the day when they look at all the documents, it goes down to like $200 or $300.”

Sept. 10 – The Santa Fe New Mexican reports that political ads defending Gov. Susana Martinez have begun rolling out, framing the behavioral health takeover as a crackdown on Medicaid fraud.”

I litigated 4 administrative appeals. Even after the NM AG came out and stated that there was no fraud, HSD accused the providers of owing alleged overpayments, some upwards of $12 million. These amounts were extrapolated.

In the very first administrative appeal, for The Counseling Center, the extrapolation expert was one of HSD’s attorneys. Upon questions regarding his extrapolation and statistical experience and the foundation for his expertise, he testified that took a class on statistics in college. I guess I could be a bowling expert.

PCG only testified in the first two administrative appeals. I guess after PCG testified that they were never given the opportunity to finish their audit due to HSD and that PCG found no fraud, but HSD removed that language from the report, HSD smartened up and stopped calling PCG as a witness. PCG certainly was not bolstering HSD’s position.

For three of the administrative appeals, we had the same administrative law judge (ALJ), who appeared to have some experience as an ALJ. For one of the appeals, we had a younger gentleman as the ALJ, who, according to LINKEDIN, was a professional photographer.

About 5 years after the accusations of fraud, the AG came out and exonerated all the providers. Apparently, there never was any fraud. Only accusations. These exonerations, however, did not stop the allegations of overpayments to HSD. The exonerations also did not stop these companies from going out of business, being tried as fraudsters in the eyes of the public, losing their companies, firing staff, closing their doors, and losing everything.

This was all done under the administration of Susana Martinez – not saying that politics played a huge role in the act of overthrowing these providers.

The providers all appealed their alleged overpayments and filed a lawsuit against HSD and the State for damages suffered from the original allegation of fraud that was found to be meritless.

After an election and a new administration took control, the State of New Mexico settled with the providers, as you can see from the above press release.

FYI building in Las Cruces, NM.

During the long journey over the past 6 years, one of the CEOs, Jose Frietz, passed away. He had started his company Families & Youth, Inc. in 1977. A month before he died on March 2, 2016, the AG exonerated FYI.

In 2013, Larry Heyeck was one of the attorneys for HSD. Multiple times during the witch hunt for Medicaid fraud, it appeared that Heyeck had some sort of personal vendetta against the 15 providers. According to one article, “Heyeck singled out Roque Garcia, former acting CEO of Southwest Counseling Services (Las Cruces), who was a recipient of the payments and asked legislators, “What does this mean? How can this money be accounted for to ensure that it isn’t used for private benefit?” Heyeck then asserted that Garcia had abused agency travel funds largely paid for by Medicaid through lavish travel to resort destinations in a private aircraft.”

Garcia wasn’t the only provider accused of misappropriating Medicaid funds. Shannon Freedle and his wife Lorraine were ostracized for having their abode in Hawaii.

Larry Heyeck, had an article published in the December 2012’s American Bar Association’s “The Health Lawyer” discussing the effect of 42 CFR 455.23 on Medicaid fraud and suspensions of Medicaid reimbursements. It was entitled, “Medicaid Payment Holds Due to Credible Allegations of Fraud.” Seem apropos?

By 2016, all 15 providers were cleared of allegations of fraud, but most were out of business.

Now – December 4, 2019 – a press release is disseminated to show that the last of the providers settled with the State of New Mexico. What the press release fails to express is the struggle, the financial and non-financial damages, the emotional turmoil, and the devastation these companies have endured over the past 6 years. No amount of money could ever right their catastrophic, past 6-years or the complete demise of their companies based on erroneous allegations of fraud.

Sometimes the light’s all shinin’ on me; Other times, I can barely see; Lately, it occurs to me; What a long, strange trip it’s been.” – Grateful Dead

RAC Audits Will Be Targeting Telehealth

Consults by telephone are becoming more and more prevalent. It only makes sense. In an age in which the population has surged, the ratio of physicians to patients has grown more disparate, and the aging and disabled community continues to increase, telehealth is a viable, logical, and convenient resource. I can tell you that when I have to go to a doctor appointment, my whole day is off-kilter. You have to get dressed, drive there, sit in the waiting room, wait for the doctor in the patient room, talk to your doctor, check-out, drive back to work/home and, usually, have a hour-long telephone call with your insurance company. Doctor visits can take up a whole day.

Enter telehealth.

Telehealth allows a patient who needs to see a health care provider to present to a health care provider over the telephone. No getting dressed, driving, or waiting.

According to a FAIR Health White Paper report, “the use of non-hospital-based provider-to-patient telehealth increased 1,393% from 2014 to 2018, from 0.007% to 0.104% of all medical claim lines. There was a 624% increase in claim lines related to any type of telehealth, from 0.0192% to 0.1394% of all medical claim lines. Non-hospital-based provider-to-patient telehealth accounted for 84% of all telehealth claim lines in 2018.”

According to the numbers in the report, the use of telehealth increased in urban areas, rather than rural areas, at a much greater percentage, which, personally, I found surprising, at first. But when you consider the number of people living in urban areas rather than rural areas, the disparate percentages make sense.

Not surprising, 82% of telehealth claims were associated with individuals aged 51+.

Private insurances are jumping on the band wagon, but, more importantly, government insurers are already on the wagon. And the wagon is gaining a wagon train; CMS is expanding the use of telehealth even as you read this.

On April 5, 2019, the Centers for Medicare & Medicaid Services (CMS) finalized policies that increased plan choices and benefits, including allowing Medicare Advantage plans to include additional telehealth benefits. Before this year, Medicare recipients could only receive certain telehealth services if they live in rural areas. Now Medicare will pay for telehealth across the country…all from your house.

On July 29, 2019, CMS took the first steps toward welcoming opioid treatment programs (OTPs) into the Medicare program and expanding Medicare coverage of opioid use disorder (OUD) treatment services provided by both OTPs and physician practices. CMS is proposing the use of telehealth for opioid services. More specifically, CMS is proposing telehealth substance abuse counseling, telehealth individual/group therapy.

Enter RAC, ZPIC, UPIC, TPE, MAC, and MFCU audits.

Where there is Medicare money to be made or fraud to be had there are the auditors. The alphabet soup.

In April 2019, one of the largest healthcare fraud rings in U.S. history, involving telemedicine companies was busted. At an alleged amount of $1.2 billion. Durable medical equipments (DME) were also targeted, but this blog focuses on telehealth.

Allegedly, the telehealth companies would inform Medicare beneficiaries that they, for example, qualified for a brace. Using telehealth, the physicians wrote prescriptions for braces. DME would file the claim and pay the telehealth provider and the physician.

The government argued that you have to be seen in-person to determine your need for a brace.

It is important to note that the above-referenced scheme was performed prior to the most recent expansion of telehealth.

With this most recent expansion of telehealth, expect the auditors to be drooling.

RAC Audits: Alternatives to Litigation

Understanding why there’s a need for auditing the auditors.

I frequently encounter complaints by healthcare providers that when they are undergoing Recovery Audit Contractor (RAC), Medicare Administrative Contractor (MAC), and, more recently, the Targeted Probe-and-Educate (TPE) audits, the auditors are getting it wrong. That’s as in, during a RAC audit, the auditor finds claims noncompliant, for example, for not having medical necessity – but the provider knows unequivocally that the determination is dead wrong. So the question that I get from the providers is whether they have any legal recourse against the RAC or MAC finding noncompliance, besides going through the tedious administrative action, which we all know can take upwards of 5-7 years before reaching the third administrative level.

To which, now, upon a recent discovery in one of my cases, I would have responded that the only other option for relief would be obtaining a preliminary injunction in federal court. To prove a preliminary injunction in federal court, you must prove: a) a likelihood of success on the merits; and b) that irreparable harm would be incurred without the injunction; i.e., that your company would be financially devastated, or even threatened with extinction.

The conundrum of being on the brink of financial ruin is that you cannot afford a legal defense if you are about to lose everything.

This past month, I had a completely different legal strategy, with a different result. I am not saying that this result would be reached by all healthcare providers that disagree with the results of their RAC or MAC or TPE audit, but I now believe that in certain extreme circumstances, this alternative route could work, as it did in my case.

When this particular client hired me, I quickly realized that the impact of the MAC’s decision to rescind the client’s Medicare contract was going to do more than the average catastrophic outcomes resulting from a rescission of a Medicare contract. First, this provider was the only provider in the area with the ability to perform certain surgeries. Secondly, his practice consisted of 90 percent of Medicare. An immediate suspension of Medicare would have been devastating to his practice. Thirdly, the consequence of these Medicaid patients not undergoing this particular and highly specialized surgery was dire. This trifecta sparked a situation in which, I believed, that even a Centers for Medicare & Medicaid Services (CMS) employee (who probably truly believed that the negative findings cited by the RAC or MAC were accurate) may be swayed by the exigent circumstances.

I contacted opposing counsel, who was the attorney for CMS. Prior to this situation, I had automatically assumed that non-litigious strategies would never work. Opposing counsel listened to the facts. She asked that I draft a detailed explanation as to the circumstances. Now, concurrently, I also drafted this provider’s Medicare appeal, because we did not want to lose the right to appeal. The letter was definitely detailed and took a lot of time to create.

In the end, CMS surprised me and we got the Medicare contract termination overturned within months, not years, and without expensive litigation.

(Originally published on RACMonitor)

Medicare TPE Audits: A Wolf in Sheep’s Clothing (Part II)

Let’s talk targeted probe-and-educate (“TPE”) audits – again.

I received quite a bit of feedback on my RACMonitor article regarding Medicare TPE audits being a “Wolf in Sheep’s Clothing.” So, I decided to delve into more depth by contacting providers who reached out to me to discuss specific issues. My intent is to shed the sheep’s clothing and show the big, pointy ears, big, round eyes, and big, sharp teeth that the MACs will hear, see, and eat you through the Medicare TPE audits. So, call the Woodsman, arm yourself with a hatchet, and get ready to be prepared for TPE audits. I cannot stress enough the importance of being proactive.

The very first way to rebut a TPE audit is to challenge the reason you were selected, which includes challenging the data supporting the reason that you were chosen. A poor TPE audit can easily result in termination of your Medicare contract, so it is imperative that you are prepared and appeal adverse results. 42 C.F.R. § 424.535, “Revocation of enrollment in the Medicare program” outlines the reasons for termination. Failing the audit process – even if the results are incorrect – can result in termination of your Medicare contract. Be prepared and appeal.

In 2014, the Center for Medicare and Medicaid Services (“CMS”) began the TPE program that combines a review of a sample of claims with “education” to allegedly reduce errors in the Medicare claims submission process; however, it took years to get the program off the ground. But off the ground it is. It seems, however, that CMS pushed the TPE program off the ground and then allowed the MACs to dictate the terms. CMS claims that the results of the TPE program are favorable, basing its determination of success on the decrease in the number of claim errors after providers receive education. But providers undergoing the TPE audit process face tedious and burdensome deadlines to submit documents and to undergo the “education” process. These 45-day deadlines to submit documents are not supported by federal law or regulation; they are arbitrary deadlines. Yet, these deadlines must be met by the providers or the MACs will aver a 0% accuracy. Private payors may create and enforce arbitrary deadlines; they don’t have to follow federal Medicare regulations. But Medicare and Medicaid auditors must obey federal regulations. A quick search on Westlaw confirms that no provider has challenged the MACs’ TPE rules, at least, litigiously.

The TPE process begins by the MAC selecting a CPT/HCPC code and a provider. This selection process is a mystery. How the MACs decide to audit sleep studies versus chemotherapy administration or a 93675 versus a 93674 remains to be seen. According to one health care provider, which has undergone multiple TPE audits and has Noridian Healthcare Solutions as its MAC informed me that, at times, they may have 4 -5 TPE audits ongoing at the same time. CMS has touted that TPE audits do not overlap claims or cause the providers to undergo redundant audits. But if a provider bills numerous CPT codes, the provider can undergo multiple TPE audits concurrently, which is clearly not the intent of the TPE audits, in general. The provider has questioned ad nauseam the data analysis that alerted Noridian to assign the TPE to them in the first place. Supposedly, MACs target providers with claim activity that contractors deem as unusual. The usual TPE notification letter contains a six-month comparison table purportedly demonstrating the paid amount and number of claims for a particular CPT/HCPC code, but its accuracy is questionable. See below.

2019-06-07 -- TPE

This particular provider ran its own internal reports, and regardless of how many different ways this provider re-calculated the numbers, the provider could not figure out the numbers the TPE letter was alleging they were billing. But, because of the short turnaround deadlines and harsh penalties for failing to adhere to these deadlines, this provider has been unable to challenge the MAC’s comparison table. The MACs have yet to share its algorithm or computer program used to govern (a) which provider to target; (b) what CPT code to target; and (c) how it determines the paid amount and number of claims.

Pushing back on the original data on which the MACs supposedly relied upon to initially target you is an important way to defend yourself against a TPE audit. Unmask the wolf from the beginning. If you can debunk the reason for the TPE audit in the first place, the rest of the findings of the TPE audit cannot be valid. It is the classic “fruit of the poisonous tree” argument. Yet according to a quick search on Westlaw, no provider has appealed the reason for selection yet. For example, in the above image, the MAC compared one CPT code (78452) for this particular provider for dates of services January 1, 2017, through June 30, 2017, and then compared those claims to dates July 1, 2017, through December 31, 2017. Why? How is a comparison of the first half of a year to a second end of a year even relevant to your billing compliance? Before an independent tribunal, this chart, as supposed evidence of wrongdoing, would be thrown out as ridiculous. The point is – the MACs are using similar, yet irrelevant charts as proof of alleged, aberrant billing practices.

Another way to defend yourself is to contest the auditors/surveyors background knowledge. Challenging the knowledge of the nurse reviewer(s) and questioning the denial rate in relation to your TPE denials can also be successful. I had a dentist-client who was audited by a dental hygienist. Not to undermine the intelligence of a dental hygienist, but you can understand the awkwardness of a dental hygienist questioning a dentist’s opinion of the medical necessity of a service. If the auditor/surveyor lacks the same level of education of the health care provider, an independent tribunal will defer to the more educated and experienced decisions. This same provider kept a detailed timeline of their interactions with the hygienist reviewer(s), which included a summary of the conversations. Significantly, notes of conversations with the auditor/surveyor would normally not be allowed as evidence in a Court of law due to the hearsay rules. However, contemporaneous notes of conversations written in close time proximity of the conversation fall within a hearsay exception and can be admitted.

Pushing back on the MACs and/or formally appealing the MAC’s decisions are/is extremely important in getting the correct denial rate.  If your appeal is favorable, the MACs will take into your appeal results into account and will factor the appeal decision into the denial rate.

The upshot is – do not accept the sheep’s clothing. Understand that you are under target during this TPE “educational” audit. Understand how to defend yourself and do so. Call the Woodsman. Get the hatchet.

Medicare TPE Audits: A Wolf in Sheep’s Clothing

Let’s talk targeted probe-and-educate (TPE) audits. See on RACMonitor as well.

TPE audits have turned out to be “wolf audits” in sheep’s clothing. The Centers for Medicare & Medicaid Services (CMS) asserted that the intent of TPE audits is to reduce provider burden and appeals by combining medical review with provider education.

But the “education” portion is getting overlooked. Instead, the Medicare Administrative Contractors (MACs) resort to referring healthcare providers to other agencies or contractors for “other possible action,” including audit by a Recovery Audit Contractor (RAC), which can include extrapolation or referral to the U.S. Department of Health and Human Services (HHS) Office of Inspector General (OIG) for investigation of fraud. A TPE audit involves up to three rounds of review, conducted by a MAC. Once Congress was instructed that RAC audits are not fair, and providers complained that RAC auditors did not help with education, CMS came up with TPE audits – which, supposedly, had more of an educational aspect, and a more fair approach. But in reality, the TPE audits have created an expensive, burdensome, cyclical pattern that, again, can result in RAC audits. The implementation of TPE audits has been just as draconian and subjective as RAC audits. The penalties can be actually worse than those resulting from RAC audits, including termination from the Medicare program. In this article, I want to discuss the appeal process and why it is important to appeal at the first level of audit.

Chapter Three, Section 3.2.5 of the Medicare Program Integrity Manual (MPIM) outlines the requirements for the TPE process, which leaves much of the details within the discretion of the MAC conducting the review. The MACs are afforded too much discretion. Often, they make erroneous decisions, but providers are not pushing back. A recent one-time notification transmittal provides additional instructions to MACs on the TPE process: CMS Transmittal 2239 (Jan. 24, 2019).

Providers are selected for TPE audit based on data analysis, with CMS instructing MACs to target providers with high denial rates or claim activity that the contractor deems unusual, in comparison to peers. These audits are generally performed as a prepayment review of claims for a specific item or service, though relevant CMS instructions also allow for post-payment TPE audits.

A TPE round typically involves a review of a probe sample of between 20 and 40 claims. Providers first receive notice that they have been targeted by their MAC, followed by additional documentation requests (ADRs) for the specific claims included in the audit.

TPE Audits

The MACs have sole discretion as to which providers to target, whether claims meet coverage requirements, what error rate is considered compliant, and when a provider should be removed from TPE. Health care providers can be exposed to future audits and penalties based merely on the MAC’s resolve, and before the provider has received due process through their right to challenge claim denials in an independent appeals process. In this way, the MACs’ misinterpretation of the rules and misapplication of coverage requirements can lead to further audits or disciplinary actions, based on an erroneous determination that is later overturned. Similarly, while the educational activities are supposedly meant to assist providers in achieving compliance, in reality, this “education” can force providers to appear to acknowledge error findings with which they may disagree – and which may ultimately be determined to be wrong. Often times, the MACs – for “educational purposes” – require the provider to sign documentation that admits alleged wrongdoing, and the provider signs these documents without legal counsel, and without the understanding that these documents can adversely affect any appeal or future audits.

The MACs have the power, based on CMS directive, to revoke billing privileges based on a determination that “the provider or supplier has a pattern or practice of submitting claims that fail to meet Medicare requirements.” 42 C.F.R. § 424.535(a)(8)(ii). This language shows that TPE audit findings can be used as a basis for a finding of abuse of billing privileges, warranting removal from participation in the Medicare program. CMS guidance also gives the MACs authority to refer providers for potential fraud investigation, based on TPE review findings. It is therefore vital that providers submit documentation in a timely fashion and build a clear record to support their claims and compliance with Medicare requirements.

TPE audits promise further education and training for an unsuccessful audit (unsuccessful according to the MAC, which may constitute a flawed opinion), but most of the training is broad in nature and offered remotely – either over the phone, via web conference, or through the mail, with documentation shared on Google Docs. Only on atypical occasions is there an on-site visit.

Why appeal? It’s expensive, tedious, time-consuming, and emotionally draining. Not only that, but many providers are complaining that the MACs inform them that the TPE audit results are not appealable (TPE audits ARE appealable).

TPE reviews and TPE audit overpayment determinations may be appealed through the Medicare appeals process. The first stage of appeal will be to request a redetermination of the overpayment by the MAC. If the redetermination decision is unfavorable, Medicare providers and suppliers may request an independent review by filing a request for reconsideration with the applicable Qualified Independent Contractor (QIC). If the reconsideration decision is unfavorable, Medicare providers and suppliers are granted the opportunity to present their case in a hearing before an administrative law judge (ALJ). While providers or suppliers who disagree with an ALJ decision may appeal to the Medicare Appeals Council and then seek judicial review in federal district court, it is crucial to obtain experienced healthcare counsel to overturn the overpayment determination during the first three levels of review.

Appealing unfavorable TPE audits results sends a message. Right now, the MACs hold the metaphoric conch shell. The Medicare appeals process allows the provider or supplier to overturn the TPE audit overpayment, and reduces the likelihood of future TPE reviews, other Medicare audits, and disciplinary actions such as suspension of Medicare payments, revocation of Medicare billing privileges, or exclusion from the Medicare program. In instances when a TPE audit identifies potential civil or criminal fraud, it is essential that the Medicare provider or supplier engage experienced healthcare counsel to appeal the Medicare overpayment as the first step in defending its billing practices, and thus mitigating the likelihood of fraud allegations (e.g., False Claims Act actions).

CMS and the MACs maintain that TPEs are in the providers’ best interest because education is included. In actuality, TPEs are wolves in sheep’s clothing, masking true repercussions in a cloak of “education.” The Medicare appeal process is a provider’s best weapon.

CMS Revises and Details Extrapolation Rules: Part II

Biggest RACs Changes Are Here: Learn to Avoid Denied Claims

See Part I: Medicare Audits: Huge Overhaul on Extrapolation Rules

Part II continues to explain the nuances in the changes made by CMS to its statistical sampling methodology. Originally published on RACMonitor.

The Centers for Medicare & Medicaid Services (CMS) recently made significant changes in its statistical sampling methodology for overpayment estimation. Effective Jan. 2, 2019, CMS radically changed its guidance on the use of extrapolation in audits by Recovery Audit Contractors (RACs), Medicare Administrative Contractors (MACs), Unified Program Integrity Contractors (UPICs), and the Supplemental Medical Review Contractor (SMRC).

The RAC program was created through the Medicare Modernization Act of 2003 (MMA) to identify and recover improper Medicare payments paid to healthcare providers under fee-for-service (FFS) Medicare plans. The RAC auditors review a small sample of claims, usually 150, and determine an error rate. That error rate is attributed to the universe, which is normally three years, and extrapolated to that universe. Extrapolation is similar to political polls – in that a Gallup poll will ask the opinions of 1-2 percent of the U.S. population, yet will extrapolate those opinions to the entire country.

First, I would like to address a listener’s question regarding the dollar amount’s factor in extrapolation cases. I recently wrote, “for example, if 500 claims are reviewed and one is found to be noncompliant for a total of $100, then the error rate is set at 20 percent.”

I need to explain that the math here is not “straight math.” The dollar amount of the alleged noncompliant claims factors into the extrapolation amount. If the dollar amount did not factor into the extrapolation, then a review of 500 claims with one non-compliant claim is 0.2 percent. The fact that, in my hypothetical, the one claim’s dollar amount equals $100 changes the error rate from 0.2 percent to 20 percent.

Secondly, the new rule includes provisions implementing the additional Medicare Advantage telehealth benefit added by the Bipartisan Budget Act of 2018. Prior to the new rule, audits were limited in the telehealth services they could include in their basic benefit packages because they could only cover the telehealth services available under the FFS Medicare program. Under the new rule, telehealth becomes more prominent in basic services. Telehealth is now able to be included in the basic benefit packages for any Part B benefit that the plan identifies as “clinically appropriate,” to be furnished electronically by a remote physician or practitioner.

The pre-Jan. 2, 2019 approach to extrapolation employed by RACs was inconsistent, and often statistically invalid. This often resulted in drastically overstated overpayment findings that could bankrupt a physician practice. The method of extrapolation is often a major issue in appeals, and the, new rules address many providers’ frustrations and complaints about the extrapolation process. This is not to say that the post-Jan. 2, 2019 extrapolation approach is perfect…far from it. But the more detailed guidance by CMS just provides more ways to defend against an extrapolation if the RAC auditor veers from instruction.

Thirdly, hiring an expert is a key component in debunking an extrapolation. Your attorney should have a relationship with a statistical expert. Keep in mind the following factors when choosing an expert:

  • Price (more expensive is not always better, but expect the hourly rate to increase for trial testimony).
  • Intelligence (his/her CV should tout a prestigious educational background).
  • Report (even though he/she drafts a report, the report is not a substitute for testimony).
  • Clusters (watch out for a sample that has a significant number of higher reimbursed claims. For example, if you generally use three CPT codes at an equal rate and the sample has an abnormal amount of the higher reimbursed claim, then you have an argument that the sample is an invalid example of your claims.
  • Sample (the sample must be random and must not contain claims not paid by Medicaid).
  • Oral skills (can he/she make statistics understandable to the average person?)

Fourthly, the new revised rule redefines the universe. In the past, suppliers have argued that some of the claims (or claim lines) included in the universe were improperly used for purposes of extrapolation. However, the pre-Jan. 2, 2019 Medicare Manual provided little to no additional guidance regarding the inclusion or exclusion of claims when conducting the statistical analysis. By contrast, the revised Medicare Manual specifically states:

“The universe includes all claim lines that meet the selection criteria. The sampling frame is the listing of sample units, derived from the universe, from which the sample is selected. However, in some cases, the universe may include items that are not utilized in the construction of the sample frame. This can happen for a number of reasons, including but not limited to:

  • Some claims/claim lines are discovered to have been subject to a prior review;
  • The definitions of the sample unit necessitate eliminating some claims/claim lines; or
  • Some claims/claim lines are attributed to sample units for which there was no payment.”

By providing detailed criteria with which contractors should exclude certain claims from the universe or sample frame, the revised Medicare Manual will also provide suppliers another means to argue against the validity of the extrapolation.

Lastly, the revised rules explicitly instruct the auditors to retain an expert statistician when changes occur due to appeals and legal arguments.

As a challenge to an extrapolated overpayment determination works its way through the administrative appeals process, often, a certain number of claims may be reversed from the initial claim determination. When this happens, the statistical extrapolation must be revised, and the extrapolated overpayment amount must be adjusted. This requirement remains unchanged in the revised PIM; however, the Medicare contractors will now be required to consult with a statistical expert in reviewing the methodology and adjusting the extrapolated overpayment amount.

Between my first article on extrapolation, “CMS Revises and Details Extrapolation Rules,” and this follow-up, you should have a decent understanding of the revised extrapolation rules that became effective Jan. 2, 2019. But my two articles are not exhaustive. Please, click here for Change Request 10067 for the full and comprehensive revisions.