Category Archives: UPICs
E/M Codes and When You Should NOT Fire Your Attorney!
Lately, I have been inundated with Medicare and Medicaid health care providers getting audited for E/M codes. I know Dr. Hirsh has spoken often about the perils of e/m codes. The thing about e/m codes is that everyone uses them. Hospitals, family physicians, urgent care centers, specialists, like cardiologists. Obviously, for a specialist, like cardiology, the higher level codes will be more common. A 99214 will be common compared to a generalist like a primary care physician, where a 99213 may be more common.
Here’s a little secret: the difference between a 99214 and 99213 is subjective. It’s so subjective that I have seen auditors who are hired by private companies to audit on behalf of CMS and are financially incentivized to find fault find 100% error rates. Who finds a 100% error rate? Not one claim out of 150 was compliant. Then, I come in and hire the best independent auditors or coders. There are generally two companies that I always use. The independent auditors are so good. Most importantly, they come in and find a much more probable error rate of almost zero.
Hiring an independent, expert coder to ensure that the RAC, MAC, UPIC, or TPE audits accurately is always part of my defense.
Recently, I learned what I should have known a long time ago, but is essential for our listeners to know. If your medical malpractice is with The Doctors Company, for free, you get $25k of – what TDC calls – Medi-Guard or regulatory compliance protection. In other words, you get audited by a UPIC and are informed that you owe an alleged $5 million, extrapolated, of course, you get $25k to pay an attorney for defense. Sadly, $25k will not come close to paying your whole defense, but it’s a start. No one scoffs at “free” money.
When accused of an alleged overpayment, placed on prepayment review, or accused of a credible allegation of fraud, your reimbursements could be in imminent danger of being suspended or recouped. It is imperative for the health care provider to stay apprised of what penalties they are facing. You want to know: “best case scenario and worst case scenario.”
And, providers, be cognizant of the gravity of your situation. Infringement of the false claims act can result in high penalties or jail, depending on the circumstances and the provider’s attorney. I had a client, who is an M.D. psychiatrist. She asked me what is the worst penalty possible. I am blunt and honest, apparently to a fault. I didn’t miss a beat. “Jail,” I said. She was horrified, called her insurance company, and requested a new attorney. TDC refused to fire me, so the doctor said that she will draft the self-disclosure herself. She also said that she submitted the falsified documents to the UPIC, so she was confident that the UPIC would not notice, but see below, time stamps are a bitch.
When I told the doctor that we needed to self-disclose to OIG because she had some Medicare claims, she screamed, “No! No! NO!” It was a video call and my sound wasn’t up loud, and I just watch her on the screen with her face all contorted and her mouth getting really big, then contract, then get really big, then contract, then get really big and then even bigger. The expert certified coder was present for the call, and he called me afterward asking me: “What was that?” And his wife, who overheard, said, “OMG. I would have lashed out.” I kept my cool. Honestly, I just felt bad for her because I can see the writing on the wall.
Obviously, a new attorney is not going to change the outcome. She falsified 17 dates of service because she wanted the service notes to be “perfect.” Well, providers, there is no such thing as perfect and changing diagnoses and CPT codes and adding details to the notes that, supposedly, you remember from a month ago is not ok.
I did feel bad for her for leaving me. I could have gotten her off without any penalties.
You see, English is not her first language. She misinterpreted an email from the UPIC and thought it said that you can fix any errors before submitting the documents. She fabricated 17 claims before I was hired instructed her to stop. I had a solid defense prepared. I was going to hire an independent auditor to audit her 147 claims with the 17 falsified claims. I would have hoped for a low error rate. Then, I would have conducted a self-audit and self-disclosed the fabrications to the UPIC with the explanation that it was a nonintentional harmless error that we are admitting. Self-disclosure can, sometimes, save you from penalties! However, if she doesn’t self-disclose, she will be caught. Unbeknownst to her, on page 6 of the service notes, it is time and date stamped. It revealed on what day she changed the data and what data she changed. Those of you who would also terminate your attorney because you think you can get by with the fraud without anyone noticing, think hard about whether you would like to suffer the worst penalty – jail – or have your attorney be honest and upfront and get you off without penalties by following the rules and self-disclosing any problems uncovered.
I have no idea what will happen to the doctor, but had she stayed with me, she would have escaped without penalty. When not to fire your attorney!
Medicare Extrapolation Under 50% Error Rate? No Extrapolation ALLOWED!
Earlier this year, I reported on the new extrapolation rules for all audits, including RAC, UPIC, TPE, CERT, etc. You know, that alphabet soup. The biggest change was that no extrapolation may be run if the error rate is under 50%. This was an exciting and unexpected new protection for health care providers. Now I have seen it in action and want to tell you about it.
A client of mine, an internal medicine facility in Alabama, received a notice of overpayment for over $3 million. This is the first case in which I saw the 50% error rate rule in action. Normally, I always tell clients that the first two levels of appeals are rubber-stamps. In other words, don’t expect to win. The QIC and the entity that conducted the audit saying you owe money are not going to overturn themselves. However, in this case, we were “partially favorable” at the QIC level. “Partially favorable” normally means mostly unfavorable. However, the partially favorable decision took the error rate from over 50% to under 50%. We re-grouped. Obviously, we were going to appeal because the new extrapolation was still over $1 million. However, before our ALJ hearing, we received correspondence from Palmetto that said our overpayment was $0. Confused, we wrote to the ALJ pointing out that Palmetto said our balance was zero. The Judge wrote back saying that, certainly, the money has already been recouped and the practice would get a refund if he reversed the denials.” “Ok,” we said and attended a telephonic hearing. We were unsuccessful at the hearing, and the ALJ upheld an alleged overpayment of over $1 million. We argued that the extrapolation should be thrown out due to the error rate being under 50%. The Judge still ruled against us, saying that CMS has the right to extrapolate, and the courts have upheld CMS’ ability to extrapolate. Ok, but what about the NEW RULE?
Later, we contacted Palmetto to confirm what the zero-balance meant. The letter read as if we did not owe anything, yet we had an ALJ decision mandating us to pay over a $1million. There was serious juxtaposition. After many hours of chasing answers on hold with multiple telephone answerers of Palmetto, we learned that, apparently, because the error rate dropped below 50% after the QIC level, Palmetto “wrote off” the nominal balance. Since an extrapolation was no longer allowed, the miniscule amount that Palmetto thought we owed wasn’t enough to pursue. However, the letter sent to us from Palmetto did not explain, “hey, we are writing off your overpayment because the error rate fell below 50%.” No, it was vague. We didn’t even know if it were true.
It took us reaching out to Palmetto and getting an email confirmation that Palmetto had written off the alleged overpayment due to the error rate dropping. Even the ALJ misinterpreted the letter, which tells me that Palmetto should revise its notices of write offs.
If Palmetto unilaterally dismisses or writes off any balance that is allegedly owed, the letter should explicitly explain this. Because providers and attorneys are not accustomed to receiving correspondence from a MAC, CMS, Palmetto, or any other auditing entity with GOOD NEWS. If we get GOOD NEWS from an auditing entity, that correspondence should be explicit.
Regardless, this was a huge win for me and my client, who was positively ecstatic with the outcome. Tune in next week, during which I will tell a story of how we battled successfully a qui tam action against a facility of 9 specialists due to a disgruntled employee who tried to blow the whistle on my specialists and their facility…falsely!
Preparing for Post-PHE Medicare and Medicaid Audits
Hello and happy RACMonitor Monday! As the nation forges ahead in the wake of the COVID-19 pandemic, the audits continue after that brief hiatus in March 2020. Recovery Audit Contractors (RACs), UPICs, and other auditors are dutifully reviewing claims on a post-payment basis. However, since COVID, there is a staffing shortage, which have many provider facilities scrambling on a normal basis. Throw in an audit of 150 claims and you’ve got serious souff-laying.
Yes, audit preparation has changed since COVID. Now you have more to do to prepare. Audits create more work when you have less staff. Well, suck it up sippy-cup because post-PHE audits are here.
The most important pre-audit preparation is knowing the COVID exceptions germane to your health care services. During PHE over the last two years, there has been a firehose of regulatory exceptions. You need to use these exceptions to your advantage because, let’s face it, the exceptions made regulatory compliance easier. For the period of time during which the exceptions applied, you didn’t have to get some signatures, meet face-to-face, have supervision, or what not. The dates during which these exceptions apply is also pertinent. I suggest creating a folder for all the COVID exceptions that apply to your facility. While I would like to assume that whatever lawyer that you hire, because, yes, you need to hire a lawyer, would know all the COVID exceptions – or, at least, know to research them, you never know. It only benefits you to be prepared.
Any medical provider that submits claims to a government program may be subject to a Medicare or Medicaid audit. Just because you have been audited in the past, doesn’t change the fact that you may be audited again in the future. RAC audits are not one-time or intermittent reviews and can be triggered by anything from an innocent documentation error to outright fraud. I get that questions a lot: This is my 3rd audit. At what point is this harassment. I’ve never researched the answer to that question, but I would venture that auditors get tons of latitude. So, don’t be that provider that is low-hanging fruit and simply pays post-payment reviews.
While reduced staff, high patient loads or other challenges may be bogging down your team, it’s important to remember that timeliness is crucial for CMS audit responses.
Locating the corresponding medical records and information can be a hassle at the best of times, but there are a few key things your organization can do to better prepare for a RAC Audit:
According to CMS, 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 will also be applied if they were in place on the dates of service for any claims potentially selected for review.
Ensure that the auditor has the appropriate contact information for requesting audit-related documentation. With so many changes to hospitals teams, it’s important to make sure that auditors’ requests for medical records are actually making it to the correct person or team in a timely manner.
Provide your internal audit review teams with proper access to data and other software tools like those used to ensure timely electronic audit responses. With a mix of teams working from home and in the office, it’s a good idea to make sure that teams handling Additional Documentation Requests (ADRs) and audit responses have the necessary access to the data they will need to respond to requests.
Review and document any changes to your audit review team processes.
Meet with your teams to ensure they fully understand the processes and are poised to respond within the required timeframes.
Successfully completing these audits in a timely manner is made much easier when the above processes and steps are in place.
Medicare Auditors Fail to Follow the Jimmo Settlement
Auditors are not lawyers. Some auditors do not even possess the clinical background of the services they are auditing. In this blog, I am concentrating on the lack of legal licenses. Because the standards to which auditors need to hold providers to are not only found in the Medicare Provider Manuals, regulations, NCDs and LCDs. Oh, no… To add even more spice to the spice cabinet, common law court cases also create and amend Medicare and Medicaid policies.
For example, the Jimmo v. Selebius settlement agreement dictates the standards for skilled nursing and skilled therapy in skilled nursing facilities, home health, and outpatient therapy settings and importantly holds that coverage does not turn on the presence or absence of a beneficiary’s potential for improvement.
The Jimmo settlement dictates that:
“Specifically, in accordance with the settlement agreement, the manual revisions clarify that coverage of skilled nursing and skilled therapy services in the skilled nursing facility (SNF), home health (HH), and outpatient therapy (OPT) settings “…does not turn on the presence or absence of a beneficiary’s potential for improvement, but rather on the beneficiary’s need for skilled care.” Skilled care may be necessary to improve a patient’s current condition, to maintain the patient’s current condition, or to prevent or slow further deterioration of the patient’s condition.”
This Jimmo standard – not requiring a potential for improvement – is essential for diseases that are lifelong and debilitating, like Multiple Sclerosis (“MS”). For beneficiaries suffering from MS, skilled therapy is essential to prevent regression.
I have reviewed numerous audits by UPICs, in particular, which have failed to follow the Jimmo settlement standard and denied 100% of my provider-client’s claims. 100%. All for failure to demonstrate potential for improvement for MS patients. It’s ludicrous until you stop and remember that auditors are not lawyers. This Jimmo standard is found in a settlement agreement from January 2013. While we will win on appeal, it costs providers money valuable money when auditors apply the wrong standards.
The amounts in controversy are generally high due to extrapolations, which is when the UPIC samples a low number of claims, determines an error rate and extrapolates that error rate across the universe. When the error rate is falsely 100%, the extrapolation tends to be high.
While an expectation of improvement could be a reasonable criterion to consider when evaluating, for example, a claim in which the goal of treatment is restoring a prior capability, Medicare policy has long recognized that there may also be specific instances where no improvement is expected but skilled care is, nevertheless, required in order to prevent or slow deterioration and maintain a beneficiary at the maximum practicable level of function. For example, in the regulations at 42 CFR 409.32(c), the level of care criteria for SNF coverage specify that the “. . . restoration potential of a patient is not the deciding factor in determining whether skilled services are needed. Even if full recovery or medical improvement is not possible, a patient may need skilled services to prevent further deterioration or preserve current capabilities.” The auditors should understand this and be trained on the proper standards. The Medicare statute and regulations have never supported the imposition of an “Improvement Standard” rule-of-thumb in determining whether skilled care is required to prevent or slow deterioration in a patient’s condition.
When you are audited by an auditor whether it be a RAC, MAC or UPIC, make sure the auditors are applying the correct standards. Remember, the auditors aren’t attorneys or doctors.
The Importance of the Differences in SMRCs, RACs, and QIOs
The Centers for Medicare & Medicaid Services (“CMS”) has modified the additional documentation request (“ADR”) limits for the Medicare Fee-for-Service Recovery Audit Contractor (“RAC”) program for suppliers. Yet, one of our listeners informed me that CMS has found a “work around” from the RAC ADR limits. She said, “There is the nationwide Supplemental Medical Review Contractor (“SMRC”) audits and now nationwide Quality Improvement Organizations (“QIO”) contract audits. These contracts came about after the Congressional limits on number of audits by the RAC.” Dr. Hirsh retorted, “But SMRC and QIO are not paid contingency fee. So, they are “different” audits. RACs are evil; SMRC and QIO have a few redeeming qualities.” I completely agree with Dr. Hirsh. But her point is well taken – SMRCs and QIOs follow different rules than RACs, so of course the SMRCs and QIOs have distinct ADR limits.
This is similar to the lookback periods. The lookback period varies depending on the acronym: RAC, MAC, or UPIC. RACs’ lookback period is 3 years, yet other acronyms get longer periods. I think what Dr. Hirsh is saying is right, because RACs are paid by contingency instead of a contracted rate, we have to limit the RACs authority because they are already incentivized the find problems., plus they are allowed to extrapolate. The RACs already have too much leash.
So, what are the RAC ADR limits?
Well, interestingly they just changed in April 2022. These limits will be set by CMS on a regular basis to establish the maximum number of medical records that may be requested by a RAC, per 45-day period. Each limit will be based on a given supplier’s volume of Medicare claims paid within a previous 12-month period, in a particular Healthcare Common Procedure Coding System (HCPCS) policy group. The policy groups are available on the pricing, coding analysis, and coding (PDAC), website. Limits will be based on the supplier’s Tax Identification Number (TIN). Limits will be set at 10% of all paid claims, by policy group, paid within a previous 12-month period, divided into eight periods (45 days). Although a RAC may go more than 45 days between record requests, in no case shall a RAC make requests more frequently than every 45 days. Limits are based on paid claims, irrespective of individual lines, although credit/replacement pairs shall be considered a single claim.
I wanted to go into the SMRCs and QIOs’ ADR limits to see whether they are are following THEIR rules, but I’m out of time for today. I’ll research the SMRCs and QIOs ADR limits for next week and I will have an answer for you.
Medicare Appeals: When It Comes To Appealing, Beneficiaries May Be Key!
Today I want to discuss the Medicare appeal process and its faults. Upon undergoing a Medicare audit by Safeguard or whichever auditor contracted by CMS, a provider usually receives a notice of overpayment. The 5-level appeal process is flawed as the first two levels rubber-stamp the findings. After the second level of appeal – the QIC level to the ALJ – recoupment occurs unless the provider set up an extended repayment schedule (ERS) or files for an injunction in federal court based on a taking of a property right; i.e., the right to reimbursement for services rendered.
Everyone deserves to be paid for medically necessary services rendered. The conundrum here is that the circuit courts are split as to the protections a provider deserves.
Whenever a federal injunction is filed, the Defendant auditor files a Motion to Dismiss based on (1) failure to exhaust administrative remedies and that the Medicare Act requires the administrative process; therefore, the federal court has no jurisdiction. The provider will argue that the federal action is ancillary to the substantive issue of whether the overpayment was in error and that its protected property right is being taken without due process.
A new case rendered October 1, 2021, Integrity Social Work Services, LCSW, LLC. V. Azar, 2021 WL 4502620 (E.D.N.Y 2021) straddles the fence on the issues. The EDNY falls within the 2nd circuit, which is undecidedly split. The 5th Circuit is, as well, split. District courts across the country are split on whether Medicare providers have a protected property interest in Medicare payments subject to recoupment. Several courts have found that the Medicare Act does create such a property right, including NC, 4th Circuit, Texas, Florida, Ohio, and Illinois, to name a few.
This provider was accused of an alleged overpayment of about 1 million. It argued that because it will not receive a prompt ALJ hearing that it will be driven out of business. This is a harsh and unacceptable outcome that readily occurs in about half the states. Providers should be aware of which State in which it resides and whether that State upholds a providers’ property interest in reimbursements for services rendered.
The Integrity Social Work Court found that, yes, jurisdiction in federal court was proper because the claims were ancillary to the substantive claims that would be heard by the ALJ. The provider was asking for a temporary stay of the recoupments until an ALJ hearing was concluded. As you read the case, you get false hope on the ruling. In the end, Judge Peggy Kuo found “Nor is the process to contest an overpayment or a recoupment decision arbitrary, outrageous, or even inadequate.”
Respectfully, I disagree. As does half the other courts. See, e.g., Accident, Injury & Rehab., PC v. Azar, No. 4:18-CV-2173 (DCC), 2018 WL 4625791, at *7 (D.S.C. Sept. 27, 2018); Adams EMS, Inc. v. Azar, No. H-18-1443, 2018 WL 3377787, at *4 (S.D. Tex. July 11, 2018); Family Rehab., Inc. v. Azar, No. 3:17-CV-3008-K, 2018 WL 3155911, at *4-5 (N.D. Tex. June 28, 2018). Juxtapose other courts have found that no such property interest exists. See, e.g., Alpha Home Health Solutions, LLC v. Sec’y of United States Dep’t of Health & Human Servs., 340 F. Supp. 3d 1291, 1303 (M.D. Fla. 2018); Sahara Health Care, Inc. v. Azar, 349 F. Supp. 3d 555, 572 (S.D. Tex. 2018); PHHC, LLC v. Azar, No. 1:18-CV-1824, 2018 WL 5754393, at *10 (N.D. Ohio Nov. 2, 2018); In Touch Home Health Agency, Inc. v. Azar, 414 F. Supp. 3d 1177, 1189-90 (N.D. Ill. 2019).
Providers – If you bring a claim to cease the recoupment, also sue on behalf of your Medicare beneficiaries’ property rights to freedom of choice of provider and access to care. Their rights are even stronger than the providers’ rights. I did this in Bader in Indiana and won based on the recipients’ rights.
Medicare Auditors Fail to Follow the Jimmo Settlement
Auditors are not lawyers. Some auditors do not even possess the clinical background of the services they are auditing. In this blog, I am concentrating on the lack of legal licenses. Because the standards to which auditors need to hold providers to are not only found in the Medicare Provider Manuals, regulations, NCDs and LCDs. Oh, no… To add even more spice to the spice cabinet, common law court cases also create and amend Medicare and Medicaid policies.
For example, the Jimmo v. Selebius settlement agreement dictates the standards for skilled nursing and skilled therapy in skilled nursing facilities, home health, and outpatient therapy settings and importantly holds that coverage does not turn on the presence or absence of a beneficiary’s potential for improvement.
The Jimmo settlement dictates that:
“Specifically, in accordance with the settlement agreement, the manual revisions clarify that coverage of skilled nursing and skilled therapy services in the skilled nursing facility (SNF), home health (HH), and outpatient therapy (OPT) settings “…does not turn on the presence or absence of a beneficiary’s potential for improvement, but rather on the beneficiary’s need for skilled care.” Skilled care may be necessary to improve a patient’s current condition, to maintain the patient’s current condition, or to prevent or slow further deterioration of the patient’s condition.”
This Jimmo standard – not requiring a potential for improvement – is essential for diseases that are lifelong and debilitating, like Multiple Sclerosis (“MS”). For beneficiaries suffering from MS, skilled therapy is essential to prevent regression.
I have reviewed numerous audits by UPICs, in particular, which have failed to follow the Jimmo settlement standard and denied 100% of my provider-client’s claims. 100%. All for failure to demonstrate potential for improvement for MS patients. It’s ludicrous until you stop and remember that auditors are not lawyers. This Jimmo standard is found in a settlement agreement from January 2013. While we will win on appeal, it costs providers money valuable money when auditors apply the wrong standards.
The amounts in controversy are generally high due to extrapolations, which is when the UPIC samples a low number of claims, determines an error rate and extrapolates that error rate across the universe. When the error rate is falsely 100%, the extrapolation tends to be high.
While an expectation of improvement could be a reasonable criterion to consider when evaluating, for example, a claim in which the goal of treatment is restoring a prior capability, Medicare policy has long recognized that there may also be specific instances where no improvement is expected but skilled care is, nevertheless, required in order to prevent or slow deterioration and maintain a beneficiary at the maximum practicable level of function. For example, in the regulations at 42 CFR 409.32(c), the level of care criteria for SNF coverage specify that the “. . . restoration potential of a patient is not the deciding factor in determining whether skilled services are needed. Even if full recovery or medical improvement is not possible, a patient may need skilled services to prevent further deterioration or preserve current capabilities.” The auditors should understand this and be trained on the proper standards. The Medicare statute and regulations have never supported the imposition of an “Improvement Standard” rule-of-thumb in determining whether skilled care is required to prevent or slow deterioration in a patient’s condition.
When you are audited by an auditor whether it be a RAC, MAC or UPIC, make sure the auditors are applying the correct standards. Remember, the auditors aren’t attorneys or doctors.
A Study of Contractor Consistency in Reviewing Extrapolated Overpayments
By Frank Cohen, MPA, MBB – my colleague from RACMonitor. He wrote a great article and has permitted me to share it with you. See below.
CMS levies billions of dollars in overpayments a year against healthcare providers, based on the use of extrapolation audits.
The use of extrapolation in Medicare and private payer audits has been around for quite some time now. And lest you be of the opinion that extrapolation is not appropriate for claims-based audits, there are many, many court cases that have supported its use, both specifically and in general. Arguing that extrapolation should not have been used in a given audit, unless that argument is supported by specific statistical challenges, is mostly a waste of time.
For background purposes, extrapolation, as it is used in statistics, is a “statistical technique aimed at inferring the unknown from the known. It attempts to predict future data by relying on historical data, such as estimating the size of a population a few years in the future on the basis of the current population size and its rate of growth,” according to a definition created by Eurostat, a component of the European Union. For our purposes, extrapolation is used to estimate what the actual overpayment amount might likely be for a population of claims, based on auditing a smaller sample of that population. For example, say a Uniform Program Integrity Contractor (UPIC) pulls 30 claims from a medical practice from a population of 10,000 claims. The audit finds that 10 of those claims had some type of coding error, resulting in an overpayment of $500. To extrapolate this to the entire population of claims, one might take the average overpayment, which is the $500 divided by the 30 claims ($16.67 per claim) and multiply this by the total number of claims in the population. In this case, we would multiply the $16.67 per claim by 10,000 for an extrapolated overpayment estimate of $166,667.
The big question that normally crops up around extrapolation is this: how accurate are the estimates? And the answer is (wait for it …), it depends. It depends on just how well the sample was created, meaning: was the sample size appropriate, were the units pulled properly from the population, was the sample truly random, and was it representative of the population? The last point is particularly important, because if the sample is not representative of the population (in other words, if the sample data does not look like the population data), then it is likely that the extrapolated estimate will be anything but accurate.
To account for this issue, referred to as “sample error,” statisticians will calculate something called a confidence interval (CI), which is a range within which there is some acceptable amount of error. The higher the confidence value, the larger the potential range of error. For example, in the hypothetical audit outlined above, maybe the real average for a 90-percent confidence interval is somewhere between $15 and $18, while, for a 95-percent confidence interval, the true average is somewhere between $14 and $19. And if we were to calculate for a 99-percent confidence interval, the range might be somewhere between $12 and $21. So, the greater the range, the more confident I feel about my average estimate. Some express the confidence interval as a sense of true confidence, like “I am 90 percent confident the real average is somewhere between $15 and $18,” and while this is not necessarily wrong, per se, it does not communicate the real value of the CI. I have found that the best way to define it would be more like “if I were to pull 100 random samples of 30 claims and audit all of them, 90 percent would have a true average of somewhere between $15 and $18,” meaning that the true average for some 1 out of 10 would fall outside of that range – either below the lower boundary or above the upper boundary. The main reason that auditors use this technique is to avoid challenges based on sample error.
To the crux of the issue, the Centers for Medicare & Medicaid Services (CMS) levies billions of dollars in overpayments a year against healthcare providers, based on the use of extrapolation audits. And while the use of extrapolation is well-established and well-accepted, its use in an audit is not an automatic, and depends upon the creation of a statistically valid and representative sample. Thousands of extrapolation audits are completed each year, and for many of these, the targeted provider or organization will appeal the use of extrapolation. In most cases, the appeal is focused on one or more flaws in the methodology used to create the sample and calculate the extrapolated overpayment estimate. For government audits, such as with UPICs, there is a specific appeal process, as outlined in their Medical Learning Network booklet, titled “Medicare Parts A & B Appeals Process.”
On Aug. 20, 2020, the U.S. Department of Health and Human Services Office of Inspector General (HHS OIG) released a report titled “Medicare Contractors Were Not Consistent in How They Reviewed Extrapolated Overpayments in the Provider Appeals Process.” This report opens with the following statement: “although MACs (Medicare Administrative Contractors) and QICs (Qualified Independent Contractors) generally reviewed appealed extrapolated overpayments in a manner that conforms with existing CMS requirements, CMS did not always provide sufficient guidance and oversight to ensure that these reviews were performed in a consistent manner.” These inconsistencies were associated with $42 million in extrapolated payments from fiscal years 2017 and 2018 that were overturned in favor of the provider. It’s important to note that at this point, we are only talking about appeal determinations at the first and second level, known as redetermination and reconsideration, respectively.
Redetermination is the first level of appeal, and is adjudicated by the MAC. And while the staff that review the appeals at this level are supposed to have not been involved in the initial claim determination, I believe that most would agree that this step is mostly a rubber stamp of approval for the extrapolation results. In fact, of the hundreds of post-audit extrapolation mitigation cases in which I have been the statistical expert, not a single one was ever overturned at redetermination.
The second level of appeal, reconsideration, is handled by a QIC. In theory, the QIC is supposed to independently review the administrative records, including the appeal results of redetermination. Continuing with the prior paragraph, I have to date had only several extrapolation appeals reversed at reconsideration; however, all were due to the fact that the auditor failed to provide the practice with the requisite data, and not due to any specific issues with the statistical methodology. In two of those cases, the QIC notified the auditor that if they were to get the required information to them, they would reconsider their decision. And in two other cases, the auditor appealed the decision, and it was reversed again. Only the fifth case held without objection and was adjudicated in favor of the provider.
Maybe this is a good place to note that the entire process for conducting extrapolations in government audits is covered under Chapter 8 of the Medicare Program Integrity Manual (PIM). Altogether, there are only 12 pages within the entire Manual that actually deal with the statistical methodology behind sampling and extrapolation; this is certainly not enough to provide the degree of guidance required to ensure consistency among the different government contractors that perform such audits. And this is what the OIG report is talking about.
Back to the $42 million that was overturned at either redetermination or reconsideration: the OIG report found that this was due to a “type of simulation testing that was performed only by a subset of contractors.” The report goes on to say that “CMS did not intend that the contractors use this procedure, (so) these extrapolations should not have been overturned. Conversely, if CMS intended that contractors use this procedure, it is possible that other extrapolations should have been overturned but were not.” This was quite confusing for me at first, because this “simulation” testing was not well-defined, and also because it seemed to say that if this procedure was appropriate to use, then more contractors should have used it, which would have resulted in more reversals in favor of the provider.
Interestingly, CMS seems to have written itself an out in Chapter 8, section 8.4.1.1 of the PIM, which states that “[f]ailure by a contractor to follow one or more of the requirements contained herein does not necessarily affect the validity of the statistical sampling that was conducted or the projection of the overpayment.” The use of the term “does not necessarily” leaves wide open the fact that the failure by a contractor to follow one or more of the requirements may affect the validity of the statistical sample, which will affect the validity of the extrapolated overpayment estimate.
Regarding the simulation testing, the report stated that “one MAC performed this type of simulation testing for all extrapolation reviews, and two MACs recently changed their policies to include simulation testing for sample designs that are not well-supported by the program integrity contractor. In contrast, both QICs and three MACs did not perform simulation testing and had no plans to start using it in the future.” And even though it was referenced some 20 times, with the exception of an example given as Figure 2 on page 10, the report never did describe in any detail the type of simulation testing that went on. From the example, it was evident to me that the MACs and QICs involved were using what is known as a Monte Carlo simulation. In statistics, simulation is used to assess the performance of a method, typically when there is a lack of theoretical background. With simulations, the statistician knows and controls the truth. Simulation is used advantageously in a number of situations, including providing the empirical estimation of sampling distributions. Footnote 10 in the report stated that ”reviewers used the specific simulation test referenced here to provide information about whether the lower limit for a given sampling design was likely to achieve the target confidence level.” If you are really interested in learning more about it, there is a great paper called
“The design of simulation studies in medical statistics” by Burton et al. (2006).
Its application in these types of audits is to “simulate” the audit many thousands of times to see if the mean audit results fall within the expected confidence interval range, thereby validating the audit results within what is known as the Central Limit Theorem (CLT).
Often, the sample sizes used in recoupment-type audits are too small, and this is usually due to a conflict between the sample size calculations and the distributions of the data. For example, in RAT-STATS, the statistical program maintained by the OIG, and a favorite of government auditors, sample size estimates are based on an assumption that the data are normally (or near normally) distributed. A normal distribution is defined by the mean and the standard deviation, and includes a bunch of characteristics that make sample size calculations relatively straightforward. But the truth is, because most auditors use the paid amount as the variable of interest, population data are rarely, if ever, normally distributed. Unfortunately, there is simply not enough room or time to get into the details of distributions, but suffice it to say that, because paid data are bounded on the left with zero (meaning that payments are never less than zero), paid data sets are almost always right-skewed. This means that the distribution tail continues on to the right for a very long distance.
In these types of skewed situations, sample size normally has to be much larger in order to meet the CLT requirements. So, what one can do is simulate the random sample over and over again to see whether the sampling results ever end up reporting a normal distribution – and if not, it means that the results of that sample should not be used for extrapolation. And this seems to be what the OIG was talking about in this report. Basically, they said that some but not all of the appeals entities (MACs and QICs) did this type of simulation testing, and others did not. But for those that did perform the tests, the report stated that $41.5 million of the $42 million involved in the reversals of the extrapolations were due to the use of this simulation testing. The OIG seems to be saying this: if this was an unintended consequence, meaning that there wasn’t any guidance in place authorizing this type of testing, then it should not have been done, and those extrapolations should not have been overturned. But if it should have been done, meaning that there should have been some written guidance to authorize that type of testing, then it means that there are likely many other extrapolations that should have been reversed in favor of the provider. A sticky wicket, at best.
Under the heading “Opportunity To Improve Contractor Understanding of Policy Updates,” the report also stated that “the MACs and QICs have interpreted these requirements differently. The MAC that previously used simulation testing to identify the coverage of the lower limit stated that it planned to continue to use that approach. Two MACs that previously did not perform simulation testing indicated that they would start using such testing if they had concerns about a program integrity contractor’s sample design. Two other MACs, which did not use simulation testing, did not plan to change their review procedures.” One QIC indicated that it would defer to the administrative QIC (AdQIC, the central manager for all Medicare fee-for-service claim case files appealed to the QIC) regarding any changes. But it ended this paragraph by stating that “AdQIC did not plan to change the QIC Manual in response to the updated PIM.”
With respect to this issue and this issue alone, the OIG submitted two specific recommendations, as follows:
- Provide additional guidance to MACs and QICs to ensure reasonable consistency in procedures used to review extrapolated overpayments during the first two levels of the Medicare Parts A and B appeals process; and
- Take steps to identify and resolve discrepancies in the procedures that MACs and QICs use to review extrapolations during the appeals process.
In the end, I am not encouraged that we will see any degree of consistency between and within the QIC and MAC appeals in the near future.
Basically, it would appear that the OIG, while having some oversight in the area of recommendations, doesn’t really have any teeth when it comes to enforcing change. I expect that while some reviewers may respond appropriately to the use of simulation testing, most will not, if it means a reversal of the extrapolated findings. In these cases, it is incumbent upon the provider to ensure that these issues are brought up during the Administrative Law Judge (ALJ) appeal.
Programming Note: Listen to Frank Cohen report this story live during the next edition of Monitor Mondays, 10 a.m. Eastern.
Fairness in Medicare: Post Payment Review in the Courts of Equity
As children, we say things are or are not fair. But what is fair? In law, fairness is “tried” in the courts of equity rather than law. Equitable estoppel and the defense of laches are arguments made in the courts of equity. Is it fair if you’ve been billing Medicare for services that you were told by CMS was billable and reimburse-able – for years – then, unexpectantly, CMS says, “Hey, providers, what you were told was reimburse-able, actually is not. In fact, providers, even though you relied on our own guidance, we will cease and desist from paying you going forward AND…we are now going back three years to retroactively collect the money that we should never have paid you…”
How is this fair? Yet, many of you have probably encountered RAC or MAC audits and a post payment review. What I described is a post payment review. Let me give you an example of a nationwide, claw-back by CMS to providers.
On January 29, 2020, CMS announced that beginning March 1, 2020, MACs will reject claims for HCPCS code L8679 submitted without an appropriate HCPCS/CPT surgical procedure code. Claims for HCPCS code L8679 billed with an appropriate HCPCS/CPT surgical code will be suspended for medical review to verify that coverage, coding, and billing rules have been met.
At least according to the announcement, it sounded like CMS instructed the MACs to stop reimbursing L8679 going forward, but I read nothing about going back in time to recoup.
In the last few months, my team has been approached by chiropractors and holistic medical providers who received correspondence from a UPIC and their MACs that they owe hundreds of thousands of dollars for L8679 going back three years prior to CMS’ 2020 announcement to cease using the code.
In this particular instance, many of the providers who had been using the L8679 code did so under the direct guidance of CMS, MACs, and other agents over the years. It becomes a fairness question. Should CMS be able to recoup for claims paid for services rendered when CMS had informed the providers it was the correct code for years?
Another factor to consider is that many of these providers are victims of an intentional scheme to sell devices with the false advice that the devices are covered by Medicare. Litigation has already been filed against the company. In a case filed December 6, 2019, in US District Court of the Eastern District of PA, Neurosurgical Care LLC sued Mark Kaiser and his current company, Doc Solutions LLC, claiming that Kaiser’s company falsely marketed the device as being covered by Medicare. Stivax is a “non-narcotic and minimally invasive form of neurostimulation” which is represented as “one of the only FDA approved microchip controlled microstimulation devices for treating back, joint and arthritic pain.”
Recall that, over the years, CMS paid for these approved procedures with no problem. This situation begins to leave the realm of the courts of law and into the court of equity. It becomes an equitable issue. Is there fairness in Medicare?
There may not be fairness, but there is an administrative appeal process for health care providers! Use it! Request redeterminations!
Big Change in Medicaid Audits? Or Just More Auditing Companies?
According to “Report on Medicare Compliance,” dated August 5, 2013, (Yes, I actually subscribe to this Report), the Center for Medicare and Medicaid Services (CMS) has BIG changes on the horizon for Medicare AND Medicaid audits (nationwide).
According to “New CMS Program-Integrity Plan Is In the Works; No More ZPICs, MICs,” CMS is developing a “unified program integrity strategy” that will consolidate some Medicaid and Medicare audits.
What does that mean to NC health care providers? Less audits? More audits?
Apparently, CMS intends to contract with 5 – 15 new “unified program integrity contractors (UPIC)…yes, another new acronym… The article also states that UPICs would replace zone program integrity contractors (ZPICs) and Medicaid integrity contractors and program safeguard contractors.
However, according to the article, the Recovery Audit Contractors (RACs) will remain in place.
Companies wanting to act as UPICs were to respond to CMS by August 13th. So these UPICs may be effective in the near future.
Are UPICS intended to streamline the audit process (by consolidating Medicare and Medicaid audits)?
Or will UPICS just add an additional 5 – 15 auditing companies, increasing the number of audits on providers, and weeding out providers willing to accept Medicaid to decrease Medicaid spending?
