Category Archives: Regulatory Audits

RAC Audits Expected During the COVID Pandemic

Even though the public health emergency (“PHE”) for the COVID pandemic is scheduled to expire July 24, 2020, all evidence indicates that the PHE will be renewed. I cannot imagine a scenario in which the PHE is not extended, especially with the sudden uptick of COVID.

Center for Medicare and Medicaid Services (CMS) has given guidance that the voluminous number of exceptions that CMS has granted during this period of the PHE may be extended to Dec. 1, 2020. However, there is no indication of the RAC, and MAC audits being suspended until December 2020. In fact, we expect the audits to begin again any day. There will be confusion when audits resume and COVID exceptions are revoked on a rolling basis.

Remember the emergency-room physician whom I spoke about on the June 29 on Monitor Mondays? The physician whose Medicare enrollment was revoked due to a computer error or an error on the part of CMS. What normally would have been an easy fix, because of COVID, became more difficult. Because of COVID, he was unable to work for three months. He is back up and running now. The point is that COVID really messed up so many aspects of our lives.

The extension of PHE, technically, has no bearing on RAC and MAC audits coming back. Word on the street is that RAC and MAC audits are returning August 2020.

This month, July 2020, CMS released, “Coronavirus Disease 2019 (COVID-19) Provider Burden Relief Frequently Asked Questions (FAQs).” (herein afterward referred as “CMS July 2020 FAQs”).

The question was posed to CMS: “Is CMS suspending most Medicare-Fee-for-Service (FFS) medical review during the PHE for the COVID-19 pandemic? The answer is, according to CMS, “As states reopen, and given the importance of medical review activities to CMS’ program integrity efforts, CMS expects to discontinue exercising enforcement discretion beginning on Aug. 3, 2020, regardless of the status of the public health emergency. If selected for review, providers should discuss with their contractor any COVID-19-related hardships they are experiencing that could affect audit response timeliness. CMS notes that all reviews will be conducted in accordance with statutory and regulatory provisions, as well as related billing and coding requirements. Waivers and flexibilities in place at the time of the dates of service of any claims potentially selected for review will also be applied.” See CMS July 2020 FAQs.

Monday, July 13, 2020, we began our fourth “COVID-virtual trial.” The Judges with whom I have had interaction have taken a hard stance to not “force” someone to appear in person. It appears, at least to me, that virtual trials are the wave of the future. This is the guidance that conveys to me that RAC and MAC audits will begin again in August. Virtual audits may even be the best thing that ever happened to RAC and MAC audits. Maybe now the auditors will actually read the documents that the provider gives them.

Another specific issue addressed in the CMS’ July 2020 FAQs is that given the nature of the pandemic and the inability to collect signatures during this time, CMS will not be enforcing the signature requirement. Typically, Part B drugs and certain Durable Medical Equipment (DME) covered by Medicare require proof of delivery and/or a beneficiary’s signature. Suppliers should document in the medical record the appropriate date of delivery and that a signature was not able to be obtained because of COVID-19. This exception may or may not extend until Dec. 31, 2020.

The upshot is that no one really knows how the next few months will unfold in the healthcare industry. Some hospitals and healthcare systems are going under due to COVID. Big and small hospital systems are in financial despair. A RAC or MAC audit hitting in the wake of the COVID pandemic could cripple most providers. I will reiterate my recommendation: In the re-arranged words of Roosevelt, “Speak loudly, and carry a big stick.”

Programming Note: Knicole Emanuel is a permanent panelist on Monitor Mondays. Listen to her live reporting every Monday at 10 a.m. EST.

Update on Medicare/Medicaid Audits in the Wake of COVID-19

Published in Today’s Wound Clinic:

When I was asked to draft an article for Today’s Wound Clinic, it was approximately two weeks ago. I was asked to write about the current state of Medicare and Medicaid audits. Specifically, I was asked to provide a legal analysis about CMS suspending audits un-related to COVID-19. In the month of April, we have seen the spike of COVID-19, which has overturned our everyday world. We have been instructed by President Trump to “stay home” and “social distance” to decrease the spread of the virus. This “stay at home” instruction is unprecedented and has uprooted many of our most reliable and commonplace businesses, such as hairdressers, bowling alleys, and tattoo parlors.

Here is the answer: The current state of Medicare/Medicaid audits, at the moment, is dictated by COVID-19.

We can divide the post-COVID-19 audit rules into 3 categories:

  1. Those exceptions published by CMS to apply to all health care providers
  2. Those special, verbal exceptions given directly to an individual provider that were not published by CMS
  3. Effective immediately, new guidelines that CMS will follow until CMS believes it no longer needs to follow (by its own choice, of course).

An example of an “effective immediately” guideline is our current state of Medicare/Medicaid audits in the wake of COVID-19. CMS has not suspended all Medicare/Medicaid regulatory audits. But CMS has suspended most audits.

Effective immediately, survey activity is limited to the following (in Priority Order):

  • All immediate jeopardy complaints (cases that represents a situation in which entity noncompliance has placed the health and safety of recipients in its care at risk for serious injury, serious harm, serious impairment or death or harm) and allegations of abuse and neglect;
  • Complaints alleging infection control concerns, including facilities with potential COVID-19 or other respiratory illnesses;
  • Statutorily required recertification surveys (Nursing Home, Home Health, Hospice, and ICF/IID facilities);
  • Any re-visits necessary to resolve current enforcement actions;
  • Initial certifications;
  • Surveys of facilities/hospitals that have a history of infection control deficiencies at the immediate jeopardy level in the last three years;
  • Surveys of facilities/hospitals/dialysis centers that have a history of infection control deficiencies at lower levels than immediate jeopardy.

See CMS QSO-20-12-ALL. You can see that these “effective immediately” guidelines are usually published on CMS letterhead. The “effective immediately” guidelines explain why CMS is taking the stated action, the stated action, and that the action is temporary and due to COVID-19.

Here are a few recent “effective immediately” guidelines due to COVID-19:

  • On April 27, 2020, CMS said it would no longer expedite Medicare payments to doctors and be more stringent about accelerating the payments to hospitals as Congressional relief aimed at providers reaches $175 billion.
  • The agency is not accepting any new applications for the loans from Part B suppliers, including doctors, non-physician practitioners and durable medical equipment suppliers. CMS will continue to process pending and new requests from Part A providers, including hospitals, but be stricter with application approvals.
  • CMS expanded the Accelerated and Advance Payment Programs in late March as the pandemic continued to gain strength in the U.S. Since then, the agency has approved over 21,000 applications making up $59.6 billion in accelerated payments to Part A providers and almost 24,000 applications making up $40.4 billion in payments for Part B suppliers.

The $2.2 trillion Coronavirus Aid, Relief, and Economic Security stimulus package passed by Congress in March benchmarked $100 billion in funds for hospitals. On Friday, President Donald Trump signed legislation with a second round of emergency funding, called the Paycheck Protection Program and Health Care Enhancement Act, that allocates another $75 billion for providers — roughly three-quarters of what major provider trade associations requested.

An initial $30 billion from the fund was distributed between April 10 and April 17 based on Medicare fee-for-service revenue, sparking criticism that put facilities with a smaller proportion of Medicare business, such as children’s and disproportionate share hospitals, at a disadvantage. HHS on Friday began releasing an additional $20 billion in CARES payments to providers based on their 2018 net patient revenue, with more funding to roll out “soon,” the agency said, including $10 billion for hard-hit areas like New York.

How RAC/MAC auditors are compensated dictates their actions and/or aggressiveness.

RAC Auditors are paid by contingency. They are usually compensated approximately 13%, depending on the State. Imagine what 13% is of 1 million. It is $130,000 – more than most people make in a year. If you do not believe that 13% contingency is enough to incentivize a company, which, in turn, incentivize the employees, then you are sorely mistaken.

RACs were established through a demonstration program under the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (“MMA”), piloted between 2005 and 2008, and were later made permanent under the Tax Relief and Health Care Act of 2006, which required CMS to establish Recovery Auditors for all states before 2010.

MACs are not compensated by contingency, per se. CMS decided to structure the MAC contracts with 1-year base performance periods and four, optional, 1-year performance periods at the time. The MMA required that these contracts be recompeted at least once every 5 years. The recent enactment of the Medicare Access and CHIP Reauthorization Act of 2015 amended this requirement to authorize a maximum 10-year performance period before MAC contracts must be recompeted. The amendment, which applies to MAC contracts in effect at the time of enactment or entered into on or after enactment, would permit CMS to modify existing MAC contracts or enter into future MAC contracts for 1-year base performance periods and nine optional 1-year performance periods. See Pub. L. No. 114-10, § 509(a)- (b) (April 16, 2015). Therefore, while MACs are not compensated on contingency, MACs are compensated on performance. The less a MAC spends, the more services a MAC allows, the strict oversight a MCA ensues on its providers…all these “performance-based” measures may not be a contingency compensation relationship, but it’s pretty close. Saved money becomes profit for MACs.

Medicare and Medicaid auditors love rules. Even if the rules that auditors are instructed to follow really are not required by actual law. It goes without saying that auditors are not lawyers. Auditors are not trained to decipher whether statutes, regulations or policy are superseded by federal statutes and regulations. The fact is that, more times than one would hope, the auditors are wrong in their assessments that a claim should be denied, not out of malice, but because of a basic misunderstanding of what the law actually requires.

I have all kinds of stories about auditors claiming money is owed, when, really it was not owed because the RAC/MAC auditor failed to follow the actual, correct procedure or misconstrued a regulation. For example, I had a durable medical equipment provider, DME ABC, who was informed by the NSC Supplier Audit and Compliance Unit of Palmetto GBA that it owed $1,075,548.64. Palmetto is one of the MACs for Medicare – durable medical equipment. There was no demand letter. The alleged overpayment amount came to fruition in a telephone conference between the CEO of the company and an employee of Palmetto. Let’s call her Nancy. Nancy told CEO that company owed $1,075,548.64 based on an alleged violation of 42 C.F.R. § 424.58,

Even more disconcerting, was the fact that Palmetto claimed that its alleged, oral overpayment against DME ABC arose from a normal, reoccurring validation process pursuant to 42 C.F.R. §424.57, approved by CMS and in accordance with the requirements of 42 C.F.R. §424.58. No formal letter was necessary was Palmetto’s retort. Not correct; a formal demand letter is always required.

In this case, Palmetto began to backtrack once we pointed out that Palmetto nor Nancy ever sent a formal demand letter with any reconsideration review appeal rights or administrative appeal rights. We knew this was procedurally incorrect because federal law dictates that you receive a formal demand letter with appeal rights and notice of how many days you have to appeal. But out of fear of retribution, DME ABC was willing to write a check without pushing back. Obviously, we did not do so.

I tell this story as an example of how intimidating, scary, and overwhelming auditors can be. If someone off the street asked you for a million dollars, you would laugh them off your doorstep, right? After you tell them to don a mask and maintain social distancing.

But in the new-age world of COVID-19, rules have been broken. This behavior would not be acceptable pre-COVID-19. But this provider honestly was going to pay.

The Trump Administration is issuing an unprecedented array of temporary regulatory waivers and new rules to equip the American healthcare system with maximum flexibility to respond to the 2019 Novel Coronavirus (COVID-19) pandemic.

Pre-COVID-19 if you were to state “paperwork over patients,” everyone in the industry would agree. There would be snickers and eyes rolling, because no one wanted paperwork to be over patients. But it was. Now the mantra has flipped upside down – now the mantra is: Patients over Paperwork.

Post-COVID-19, if documents are lost or misplaced, or otherwise unusable, DME MACs have the flexibility to waive replacements requirements under Medicare such that the face-to-face requirement, a new physician’s order, and new medical necessity documentation are not required. Suppliers must still include a narrative description on the claim explaining the reason why the equipment must be replaced and are reminded to maintain documentation indicating that the DMEPOS was lost, destroyed, irreparably damaged or otherwise rendered unusable or unavailable as a result of the emergency.

Post-COVID-19, CMS is pausing the national Medicare Prior Authorization program for certain DMEPOS items. CMS is not requiring accreditation for newly enrolling DMEPOS and extending any expiring supplier accreditation for a 90-day time period. CMS is waiving signature and proof of delivery requirements for Part B drugs and Durable Medical Equipment when a signature cannot be obtained because of the inability to collect signatures. Suppliers should document in the medical record the appropriate date of delivery and that a signature was not able to be obtained because of COVID-19.

Post-COVID-19, in order to increase cash flow to providers impacted by COVID-19, CMS has expanded the current Accelerated and Advance Payment Program. An accelerated/advance payment is a payment intended to provide necessary funds when there is a disruption in claims submission and/or claims processing. CMS may provide accelerated or advance payments during the period of the public health emergency to any two Medicare providers/suppliers who submits a request to the appropriate MAC and meets the required qualifications. The process of obtaining the funds is a MAC-by-MAC process. Each MAC will work to review requests and issue payments within seven calendar days of receiving the request. Traditionally repayment of these advance/accelerated payments begins at 90 days, however for the purposes of the COVID-19 pandemic, CMS has extended the repayment of these accelerated/advance payments to begin 120 days after the date of issuance of the payment. Providers can get more information on this process here: www.cms.gov/files/document/Accelerated-and-Advanced-Payments-Fact-Sheet.pdf

The Future of Medicare/Medicaid Audits

The beauty of predicting the future is that no one can ever tell you that you are wrong. These are my predictions:

Auditors will deny claims for not having prior authorizations. Auditors will deny claims because the supplier accreditation expired after the 90-day time period. Auditors will deny claims because the percentage of face-to-face time was not met as described per CPT codes.

Obviously, these would be erroneous denials if the denials are within the dates that the COVID-19 pandemic occurred. The problem will be that the auditors will not be able to keep up with all the exceptions, not because the auditors are acting out of malice or dislikes providers. They will be simply trying to do their job. They will simply not be able to take into consideration all the exceptions that were given during the virus. Because, while we do have many written exceptions, if you call CMS with a personal and individualized problem, CMS will, most likely, grant you a needed exception. As long as the exception has the best interest of the consumer at heart. However, this personalized exception will not be written on CMS’s website. In five years, when you undergo a MAC or RAC audit, you better have proof that you received that exception. It will not be enough proof for you to state that you were given the exception over the phone.

So how can you protect yourself from future, erroneous audits?

Write everything down. When you speak to CMS, document concurrently the date, time, name of the person to whom you are speaking, the summary of your conversation, the COVID-19 regulatory exception, sign it and date it.

It is a hearsay exception. Writing down everything does not magically transform your note into the truth. However, writing down everything concurrently does magically allow that note that you wrote to be allowed in a court of law as an exhibit. Had you not written the note contemporaneously with the conversation that you had with CMS, then the attorney on the other side of the case would move to exclude your handwritten or typed note as hearsay.

Hearsay is defined as a statement that (1) the declarant does not make while testifying at the current trial or hearing; and (2) a party offers in evidence to prove the truth of the matter asserted in a statement. There are too many hearsay exceptions to name in this article.

Just know, for purposes of this article, that any health care provider who is relying on an exception to a normally required regulatory mandate – regardless what it is – either be able to: (1) cite the written exception that was published by CMS to the public; or (2) produce the written or typed contemporaneously written note that you wrote to memorialize the conversation.

Suspension of Audits During the Coronavirus?

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Effective immediately, survey activity is limited to the following (in Priority Order):

  • All immediate jeopardy complaints (cases that represents a situation in which entity noncompliance has placed the health and safety of recipients in its care at risk for serious injury, serious harm, serious impairment or death or harm) and allegations of abuse and neglect;
  • Complaints alleging infection control concerns, including facilities with potential COVID-19 or other respiratory illnesses;
  • Statutorily required recertification surveys (Nursing Home, Home Health, Hospice, and ICF/IID facilities);
  • Any re-visits necessary to resolve current enforcement actions;
  • Initial certifications;
  • Surveys of facilities/hospitals that have a history of infection control deficiencies at the immediate jeopardy level in the last three years;
  • Surveys of facilities/hospitals/dialysis centers that have a history of infection control deficiencies at lower levels than immediate jeopardy.

See CMS QSO-20-12-ALL.

Obviously, there are so many questions. Providers across the country are asking whether they need to comply with document requests. Are TPE audits continuing? Do they need to comply with ongoing ADRs?

Every bulletin that CMS publishes instigates more detailed and complex questions. With all these relaxed guidelines, won’t RACs, etc. have a field day when this is all over? Of course they will.

General Recommendations:

  • Be proactive.
  • Document everything.
  • Deadlines will be extended.
  • Exceptions will be made.
  • Keep all email correspondence.
  • Maintain copies of everything that you submit. (Do not rely on electronic computer software programs).
  • Keep track of CMS updates.

Email me questions, and I will try to respond.

Also, feel free to reach out to the government: QSOG_EmergencyPrep@cms.hhs.gov.

Effective date: 30 days from the memo, which equals April 3, 2020.

 

 

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.

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.

New Revisions to the Additional Documentation Request (ADR) Process

The ADR rule went into effect Jan. 1, 2019. Original blog post published March 6, 2019, on RACMonitor.

The Centers for Medicare & Medicaid Services (CMS) has updated its criteria for additional document requests (ADRs). If your ADR “cycle” is less than 1, CMS will round it up to 1.

What is an ADR cycle?

When a claim is selected for medical review, an ADR is generated requesting medical documentation be submitted to ensure payment is appropriate. Documentation must be received by CGS (A Celerian Group Company)  within 45 calendar days for review and payment determination. Any selected and submitted claim can create an ADR. In other words, a provider is asked to prove that the service was rendered and that the billing was compliant.

It is imperative to understand that you, as the provider, check the Fiscal Intermediary Standard System (FISS) status/location S B6001. Providers are encouraged to use FISS Option 12 (Claim Inquiry) to check for ADRs at least once per week. You will not receive any other form of notification for an ADR.

To make matters even more confusing, there are two different types of ADRs: medical review (reason code 39700) and non-medical review (reason code 39701).

An ADR may be sent by CGS, Zone Program Integrity Contractors (ZPICs), Recovery Audit Contractors (RACs), Supplemental Medical Review Contractors (SMRCs), the Comprehensive Error Rate Testing (CERT) contractor, etc. When a claim is selected for review or when additional documentation is needed to complete the claim, an ADR letter is generated requesting that documentation and/or medical records be submitted.

The ADR process is essentially a type of prepayment review.

A baseline annual ADR limit is established for each provider based on the number of Medicare claims paid in the previous 12-month period that are associated with the provider’s six-digit CMS Certification Number (CCN) and the provider’s National Provider Identifier (NPI) number. Using the baseline annual ADR limit, an ADR cycle limit is also established.

After three 45-day ADR cycles, CMS will calculate (or recalculate) a provider’s denial rate, which will then be used to identify a provider’s corresponding “adjusted” ADR limit. Auditors may choose to either conduct reviews of a provider based on their adjusted ADR limit (with a shorter lookback period) or their baseline annual ADR limit (with a longer lookback period).

The baseline, annual ADR limit is one-half of one percent of the provider’s total number of paid Medicare service types for which the provider had reimbursed Medicare claims.

Effective Jan. 1, 2019, providers whose ADR cycle limit is less than 1, even though their annual ADR limit is greater than 1, will have their ADR cycle limit round up to 1 additional documentation request per 45 days, until their annual ADR limit has been reached.

For example, say Provider ABC billed and was paid for 400 Medicare claims in a previous 12-month period. The provider’s baseline annual ADR limit would be 400 multiplied by 0.005, which is two. The ADR cycle limit would be 2/8, which is less than one. Therefore, Provider ABC’s ADR cycle limit will be set at one additional documentation request per 45 days, until their annual ADR limit, which in this example is two, has been reached. In other words, Provider ABC can receive one additional documentation request for two of the eight ADR cycles, per year.

ADR letters are sent on a 45-day cycle. The baseline annual ADR limit is divided by eight to establish the ADR cycle limit, which is the maximum number of claims that can be included in a single 45-day period. Although auditors may go more than 45 days between record requests, in no case shall they make requests more frequently than every 45 days.

And that is the update on ADRs. Remember, the rule changed Jan. 1, 2019.

Medicare Audits: Huge Overhaul on Extrapolation Rules

Effective January 2, 2019, the Center for Medicare and Medicaid Services (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).

Extrapolation is the tsunami in Medicare/caid audits. The auditor collects a small sample of claims to review for compliance. She then determines the “error rate” of the sample. For example, if 50 claims are reviewed and 10 are found to be noncompliant, then the error rate is set at 20%. That error rate is applied to the universe, which is generally a three-year time period. It is assumed that the random sample is indicative of all your billings regardless of whether you changed your billing system during that time period of the universe or maybe hired a different biller.

With extrapolated results, auditors allege millions of dollars of overpayments against health care providers…sometimes more than the provider even made during that time period. It is an overwhelming wave that many times drowns the provider and the company.

Prior to this recent change to extrapolation procedure, the Program Integrity Manual (PIM) offered little guidance to the proper method for extrapolation.

Well, Change Request 10067 – overhauled extrapolation in a HUGE way.

The first modification to the extrapolation rules is that the PIM now dictates when extrapolation should be used.

Determining When a Statistical Sampling May Be Used. Under the new guidance, a contractor “shall use statistical sampling when it has been determined that a sustained or high level of payment error exists. The use of statistical sampling may be used after documented educational intervention has failed to correct the payment error.” This guidance now creates a three-tier structure:

  1. Extrapolation shall be used when a sustained or high level of payment error exists.
  2. Extrapolation may be used after documented educational intervention (such as in the Targeted Probe and Educate (TPE) program).
  3. It follows that extrapolation should not be used if there is not a sustained or high level of payment error or evidence that documented educational intervention has failed.

“High level of payment error” is defined as 50% or greater. The PIM also states that the contractor may review the provider’s past noncompliance for the same or similar billing issues, or a historical pattern of noncompliant billing practice. This is HUGE because so many times providers simply pay the alleged overpayment amount if the amount is low or moderate in order to avoid costly litigation. Now those past times that you simply pay the alleged amounts will be held against you.

Another monumental modification to RAC audits is that the RAC auditor must receive authorization from CMS to go forward in recovering from the provider if the alleged overpayment exceeds $500,000 or is an amount that is greater than 25% of the provider’s Medicare revenue received within the previous 12 months.

The identification of the claims universe was also re-defined. Even CMS admitted in the change request that, on occasion, “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: (1) Some claims/claim lines are discovered to have been subject to a prior review, (2) The definitions of the sample unit necessitate eliminating some claims/claim lines, or (3) Some claims/claim lines are attributed to sample units for which there was no payment.”

There are many more changes to discuss, but I have been asked to appear on RACMonitor to present the details on February 19, 2019. So sign up to listen!!!

Medicaid Incidents: To Report or Not To Report?

The answer resides in the injury, not the quality of the care.

A consumer trips and falls at your long term care facility. It is during her personal care services (PCS). Dorothy, a longtime LPN and one of your most trusted employees, is on duty. According to Dorothy, she was aiding Ms. Brown (the consumer who fell) from the restroom when Ms. Brown sneezed multiple times resulting in a need for a tissue. Dorothy goes to the restroom (only a few feet away) when Ms. Brown’s fourth sneeze sends her reeling backward and falling on her hip.

To report or not to report? That is the question. 

Whether ’tis nobler in the mind to suffer
The slings and arrows of outrageous fortune,
Or to take arms against a sea of troubles
And by opposing end them.

What is your answer?

Is Ms. Brown’s fall a Level I, Level II, or a Level III incident? What are your reporting duties?

  • If you answered Level II and no requirement to report – you would be correct.
  • If you answered Level III and that you must report the incident within 24 hours, you would be correct.

Wait, what? How could both answers be correct? Which is it? A Level II and no reporting it or a Level III and a report due within 24 hours?

It depends on Ms. Brown’s injuries, which is what I find fascinating and a little… how should I put it… wrong?! Think about it…the level of incident and the reporting requirement is not based on whether Dorothy properly provided services to Ms.Brown. No…the answer resides in Ms. Brown’s injuries. Whether Dorothy acted appropriately or not appropriately or rendered sub-par services has no bearing on the level of incident or reporting standards.

According to the Department of Health and Human Services’ (DHHS) Incident Response and Reporting Manual, Ms. Brown’s fall would fall (no pun intended) within a Level II of response if Ms. Brown’s injuries were not a permanent or psychological impairment. She bruised her hip, but there was no major injury.

However, if Ms. Brown’s fall led to a broken hip, surgery, and a replacement of her hip, then her fall would fall within a Level III response that needs to be reported within 24 hours. Furthermore, even at a Level III response, no reporting would be required except that, in my hypothetical, the fall occurred while Dorothy was rendering PCS, which is a billable Medicaid service. Assuming that Ms. Brown is on Medicaid and Medicare (and qualifies for PCS), Dorothy’s employer can be reimbursed for PCS; therefore, the reporting requirement within 24 hours is activated.

In each scenario, Dorothy’s actions remain the same. It is the extent of Ms. Brown’s injury that changes.

See the below tables for further explanation:

INCIDENT RESPONSE AND REPORTING MANUAL

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These tables are not exhaustive, so please click on the link above to review the entire Incident Response and Reporting Manual.

Other important points:

  • Use the federal Occupational Safety and Health Administration’s (OSHA) guidelines to distinguish between injuries requiring first aid and those requiring treatment by a health professional. 
  • A visit to an emergency room (in and of itself) is not considered an incident. 
  • Level I incidents of suspected or alleged cases of abuse, neglect or
    exploitation of a child (age 17 or under) or disabled adult must still be reported
    pursuant to G.S. 108A Article 6, G.S. 7B Article 3 and 10A NCAC 27G .0610.

Providing residential services to anyone is, inevitably, more highly regulated than providing outpatient services. The chance of injury, no matter the cause, is exponentially greater if the consumer is in your care 24-hours a day. That’s life. But if you do provide residential services, know your reporting mandates or you could suffer penalties, fines, and possible closure.

Lastly, understand that these penalties for not reporting can be subjective, not objective. If Ms. Brown’s fall led to a broken hip that repaired without surgery or without replacement of the hip, is that hip injury considered “permanent?” 

In cases of reporting guidelines, it is prudent to keep your attorney on speed dial.

 

The Courts Order Medicare to Stop Recouping Alleged Overpayments Without Due Process!

New case law supports due process for Medicare providers. As first seen on RACMonitor.

Due process is one of the cornerstones of our society. Due process is the universal guarantee and found in the Fifth Amendment to the United States Constitution, which provides “No person shall…be deprived of life, liberty, or property, without due process of law,” and is applied to all states by the 14th Amendment. From this basic principle flows many legal decisions determining both procedural and substantive rights.

For Medicare and Medicaid providers, however, due process, in the past, has been nonexistent. Imagine that you are accused of owing $5 million to the government. Perhaps it was a CPT® code error. You disagree. You believe that your documentation was proper and that you filed for reimbursement correctly. You appeal the decision that you owe $5 million. You continue conducting business as normal. Suddenly, you realize the government is recouping the $5 million now. Prior to any hearing before a judge. You haven’t been found guilty. What happened to innocent until proven guilty? What happened to due process?

For Medicare appeals there is a five-step appeal process. The law requires the government not to recoup during the first and second levels of appeal. But the first and second levels are jumping through hoops and are not normally successful. It is at the third level – the appeal to an impartial administrative judge – that the alleged recoupments are overturned.

After the second level, according to the black letter of the law, the government can begin recouping the alleged overpayment.

Sadly, in the past, the courts have held that it is proper for the government to recoup reimbursements after the second level. Even though, no hearing has been held before an impartial judge and you haven’t been found guilty of owing the money.

On Sept. 27, 2018, another U.S. District Court in South Carolina has agreed with courts in Texas by granting a provider’s request for a Temporary Restraining Order (TRO) to prevent the Centers for Medicare and Medicaid Services (CMS) from recouping monies until after Administrative Law Judge (ALJ) hearings have been held (Accident, Injury and Rehabilitation, PC, c/a No. 4:18-cv-02173, September 27, 2018).

A new trend in favor of providers seems to be arising. This is fantastic news for providers across the country!

Accident, Injury & Rehab, PC found that the ALJ stage of the appellate process is the most important for providers, as it provides the first opportunity for plaintiff to cross examine defendant’s witnesses and examine the evidence used to formulate the statistical sample. According to the American Hospital Association (AHA), 66 percent of Recovery Audit Contractor (RAC) denials are reversed by an ALJ (I actually believe the percentage is higher). The court found that plaintiff’s procedural due process rights were violated by premature recoupment. The court granted Accident, Injury & Rehab, PC’s preliminary injunction restraining and enjoining the government from withholding Medicare payments during the appeal process.

When the government starts recouping filing a preliminary injunction has been shown it to be the best course.

In the past, most preliminary injunctions asking the court to order the government to stop recoupments until a hearing was held was dismissed based on jurisdiction. In other words, the courts held that the courts did not have the authority to render an opinion as to recoupments prior to a hearing. Now, however, the trend is turning, and courts are starting to rule in favor of the provider, finding a violation of procedural due process based on a collateral claim exception.

There are four criteria in order to win a preliminary injunction. A party seeking a preliminary injunction must establish all for the following criteria: (1) that the party is likely to succeed on the merits; (2) that the party is likely to suffer irreparable harm in the absence of preliminary injunction; (3) that the balance of the equity tips in the party’s favor; and (4) that injunction is in the public interest.

There is an esoteric legal theory called exhaustion of administrative remedies. So jurisdiction is the question. There are exceptions to the judicial bar. The Supreme Court of United States articulated a collateral claim exception. The Supreme Court permitted a plaintiff to bring a procedural due process claim requesting an evidentiary area hearing before the termination of disability benefits. There are nonwaivable and waivable jurisdictional elements the nonwaivable requirement is that a claim must be presented to the administrative agency. The waivable requirement is that administrative remedies be exhausted.

The Collateral claim exception is when a party brings a claim in federal court when that “constitutional challenge is entirely collateral to its substantive claim of entitlement.”

The new trend in case law is that the courts are finding that the provider’s right to not undergo recoupment during the appeal process is a collateral issue as to the substantive issue of whether the provider owes the money. Therefore, the courts have found jurisdiction as to the collateral issue.

The proverbial ship has sailed. According to courts in Texas and now South Carolina, CMS cannot recoup monies prior to hearings before ALJs. Providers facing large recoupments should file TROs to prevent premature recoupments and to obtain due process.

RAC Forecast: Increased RAC Audits with a High Likelihood of Recoupments

Data regarding the success of the Medicare RAC program does not lie, right? If the report shows success, then increase the RAC process!! And to anyone who reads the new report to Congress…a success the RAC process is!

The Centers for Medicare and Medicaid Services (CMS) recently published its 2016 results of the Medicare Recovery Audit Contractor (RAC) program. And CMS was not shy in reporting high rates of returns due to the RAC program. With results as amazing as the report touts, it is clear that the Medicare RACs are hoping that this new report on the hundreds of millions they’ve recovered for Medicare will cause the CMS to reverse course on its decision to limit the number of claims they can review. After reviewing the report to CMS, I will be shocked if Congress does not loosen the limitations placed on RACs in the last couple years. The report acts as marketing propaganda to Congress.

My forecast: increased RAC audits with a high likelihood of recoupments.

The RAC program is divided into 5 regions (currently):

2018-09-26 -- RACMapImage.png

In 2016, the RAC regions were arranged a bit differently:

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The mission of the RAC program is to identify and correct overpayments made on claims for health care services provided to beneficiaries, to identify underpayments to providers, and to provide information that allows the CMS to implement corrective actions that will prevent future improper payments. As most of my readers are well aware, I have been critical of the RAC program in the past for being overzealous and hyper (overly) – technical, in an erroneous kind of way. See blog. And blog.

The Social Security Act (SSA), which allows for RAC programs, also requires that the CMS publish and submit a yearly “self-audit” on the RAC program. Even though we are almost in October 2018, the recent report released to Congress covers 2016 – apparently CMS’ data gathering lags a bit (lot). If I have to get my 2018 taxes to the IRS by April 15, 2019, shouldn’t CMS have a similar deadline? Instead of submitting information for 2016 when it’s almost 2019…

RACs are paid on a contingency fee basis, which incentivize the RACs to discover billing irregularities. The amount of the contingency fee is a percentage of the improper payment recovered from, or reimbursed to, providers. The RACs negotiate their contingency fees at the time of the contract award. The base contingency fees range from 10.4 – 14.4% for all claim types, except durable medical equipment (DME). The contingency fees for DME claims range from 15.4 – 18.9%. The RAC must return the contingency fee if an improper payment determination is overturned at any level of appeal although I am unaware whether the RAC has to return the interested gained on holding that amount as well, which cannot be a minute amount given that the Medicare appeal backlog causes Medicare appeals to last upwards of 5 – 9 years.

Beginning in 2017, the RAC contracts had an amendment not previously found in past contracts. Now the RACs are to wait 30-days before reporting the alleged overpayment to the Medicare Administrative Contractors (MACs). The thought process behind this revision to the RAC contracts is that the 30-day wait period allows the providers to informally discuss the findings with the RACs to determine the provider has additional records germane to the audit that could change the outcome of the audit. Theoretically, going forward, providers should receive notification of an alleged overpayment from the RACs rather than the MACs.

And the 2016 results are (drum roll, please):

RACs uncovered $404.46 million in overpayments and $69.46 million in underpayments in fiscal year 2016, for a total of $473.92 million in improper payments being corrected. This represents a 7.5% increase from program corrections in FY 2015, which were $440.69 million.

63% of overpayments identified in 2016 (more than $278 million) were from inpatient hospital claims, including coding validation reviews.

RACs received $39.12 million in contingency fees.

After factoring in contingency fees, administrative costs, and amounts overturned on appeal, the RAC program returned $214.09 million to the Medicare trust funds in 2016.

CMS has implemented several elements to verify RAC accuracy in identifying improper payments. The Recovery Audit Validation Contractor (RVC) establishes an annual accuracy score for each RAC. Supposedly, if we are to take the CMS report as accurate and unbiased, in FY 2016, each RAC had an overall accuracy score of 91% or higher for claims adjusted from August 2015 through July 2016. I am always amazed at the government’s ability to warp percentages. I had a client given a 1.2% accuracy rating during a prepayment review that would rival J.K. Rowling any day of the year. Robert Galbraith, as well.

To address the backlog of Medicare appeals, CMS offered a settlement process that paid hospitals 68% of what they claimed they were owed for short-term inpatient stays. – I am not confident that this money was accounted for in the overall results of the RAC program in the recent report.

135,492 claims were appealed by healthcare providers. But the RAC report to Congress notes: “appealed claims may be counted multiple times if the claim had appeal decisions rendered at multiple levels during 2016.” Undeniably, if this number is close to accurate, there was a significant down swing of appeals by providers in 2016. (I wonder whether the hospital settlement numbers were included).

Of the total appealed claims, 56,724, or 41.9%, were overturned with decisions in the provider’s favor. (Fact check, please!). In my experience as a Medicare and Medicaid regulatory compliance litigator, the success rate for Medicare and Medicaid alleged overpayments is remarkably higher (but maybe my clients just hired a better attorney (wink, wink!).

With results this good, who needs more RAC auditing? We do!! If the report shows success, then increase the RAC process!!