Category Archives: Medicare Appeal Process

Instead of Orange, Medicare Advantage Audits Are the New Black

In case you didn’t know, instead of orange, Medicare Advantage is the new black. Since MA plans are paid more for sicker patients, there are huge incentives to fabricate co-morbidities that may or may not exist.

Medicare Advantage will be the next most audited arena. Home health, BH, and the two-midnight rule had held the gold medal for highest number of audits, but MA will soon prevail.

As an example, last week- a New York health insurance plan for seniors, along with amedical analytics company the insurer is affiliated with, was accused by the Justice Department of committing health care fraud to the tune of tens of millions of dollars. The dollar amounts are exceedingly high, which also attracts auditors, especially the auditors who are paid on contingency fee, which is almost all the auditors.

CMS pays Medicare Advantage plans using a complex formula called a “risk score,” which is intended to render higher rates for sicker patients and less for those in good health. The data mining company combed electronic medical records to identify missed diagnoses — pocketing up to 20% of new revenue it generated for the health plan. But the Department of Justice alleges that DxID’s reviews triggered “tens of millions” of dollars in overcharges when those missing diagnoses were filled in with exaggerations of how sick patients were or with charges for medical conditions the patients did not have. “All problems are boring until they’re your own.” – Red

MA plans have grown to now cover more than 40% of all Medicare beneficiaries, so too has fraud and abuse. A 2020 OIG report found that MA paid $2.6 billion a year for diagnoses unrelated to any clinical services.

Diagnoses fraud is the main issue that auditors are focusing on. Juxtapose the other alphabet soup auditors – MACs, SMRCs, UPICs, ZPICs, MCOs, TPEs, RACs – they concentrate on documentation nitpicking. I had a client accused of FWA for using purple ink. “Yeah I said stupid twice, only to emphasize how stupid that is!” – Pennsatucky. Other examples include purported failing of writing the times “in or out” when the CPT code definition includes the amount of time.

Audits will be ramping up, especially since HHS has reduced the Medicare appeals backlog at the Administrative Judge Level by 79 percent, which puts the department on track to clear the backlog by the end of the 2022 fiscal year.

 As of June 30, 2021, the end of the third quarter of FY 2021, HHS had 86,063 pending appeals remaining at OMHA, according to the latest status report, acquired by the American Hospital Association. The department started with 426,594 appeals. This is progress!!

Medicare Appeals: Time Is of the Essence!

Timing is everything. Missing a deadline germane to any type of Medicare or Medicaid audit is deadly. Miss an appeal deadline by one, single day, and you lose your right to appeal an overpayment.

 If anyone has watched Schitt’s Creek, then you know that when Johnny and Moira Rose missed their deadline to file for and pay taxes, they lost their mansion, their money, and way of life. The same catastrophic loss can occur if a provider misses an appeal deadline. Then that provider will be up Schitt’s Creek.

Importantly, when it comes to Medicare appeals, your appeal is due 60 days after the reconsideration review decision. 42 CFR § 405.1014 – Request for an ALJ hearing or a review of a QIC dismissal. A third-level, Medicare provider appeal is considered “filed” upon receipt of the complete appeal at the Office of Medicare Hearings and Appeals, instead of the normal standard acceptance that an appeal is filed upon the mailing stamped date. As in, once you mail your appeal, it will be retroactively filed per the date of mailing. Not true for the third-level, Medicare provider appeal. It is considered filed the date of receipt.

Also, the regulatory clock starts ticking 5 days after the date the of the reconsideration review decision, because, the thought is that the U.S. Post Office will not take more than 5 days to deliver correspondence. Well, that assumption nowadays is inaccurate. The Post Office is a mess, and that’s an understatement. My friend, Dr. Ronald Hirsh told me that his overnighted packages have been received weeks later. More times than not, mail is received weeks after it was mailed, which makes the date of delivery imperative. Yet this regulation forces you to rely on the U.S. Post Office; it makes no logical sense.

We actually had a case in which the ALJ dismissed our appeal because the Post Office delivered the appeal on the 61st day after the reconsideration review decision, including the 5 days window. Literally, the 61st day. The reason that the appeal was received on the 61st day is because the 60th day fell on a holiday, a weekend, or a closure due to COVID – I cannot recall – but OMHA was closed. The mail delivery person had to return the next day to deliver the appeal. Yet, our appeal was dismissed based on the US Post Office! We filed a Motion to Reconsider, but the ALJ denied it. Our only chance at presenting to the ALJ was squashed – due to the Post Office.

We appealed the ALJ’s denial to the Medicare Appeals Council with hope of reasonableness. We have no decision yet. It certainly makes me want to say: Eww, David!

Ewww, David!

Medicare Provider Appeals: “Get Thee to an ALJ!”

Get thee to a nunnery!” screamed Hamlet to Ophelia in frustration of his mother marrying Claudius so quickly after his father’s death. Similarly any provider who has undergone a Medicare appeal understands the frustration of getting the appeal to the administrative law judge level (the 3rd level). It takes years to do so, and it is the imperative step instead of the lower level rubber stamps. “Get thee to an ALJ!”

Per regulation, once you appeal an alleged Medicare overpayment, no recoupment of the disputed funds occurs until after you receive the second level review, which is usually the QIC upholding the overpayment. It is no secret that the Medicare provider appeals’ level one and two are basically an automatic approval process of the decision to recoup. “Something is rotten in the state of Denmark.” Hence, the importance of the ALJ level.

There are 5 levels of Medicare appeals available to providers:

  • Redetermination
  • Reconsideration
  • Administrative Law Judge (ALJ)
  • Departmental Appeals Board (DAB) Review
  • Federal Court (Judicial) Review

The third level is the level in which you present your case to an ALJ, who is an impartial independent tribunal. Unfortunately, right now, it takes about five years between levels two and three, although with CMS hiring 70 new ALJs, the Office of Medicare Hearings and Appeals (OMHA) is optimistic that the backlog will quickly dissipate. Last week, I attended an ALJ hearing for a client based on an audit conducted in 2016. Five years later, we finally presented to the ALJ. When the ALJ was presented with our evidence which clearly demonstrated that the provider should not pay anything, he actually said, “I’m shocked this issue got this far.” As in, this should have been reversed before this level. “O what a noble mind is here o’erthrown!”

In many cases, a premature recoupment of funds in dispute will financially destroy the health care provider, which should not be the purpose of any overpayment nor the consequence of any fraud, waste, and abuse program. We are talking about documentation nit-picking. Not fraud. Such as services notes signed late, according to best practices. Or quibbles about medical necessity or the definition of in patient and the two-midnight rule.

You have all probably read my blogs about the Family Rehab case that came out in TX in 2019. A Court found that Family Rehab, a health care facility, which faced a $7 million alleged overpayment required an injunction. The Judge Ordered that CMS be enjoined from prematurely recouping Medicare reimbursements from Family Rehab. Now, be mindful, the Judge did not enjoin CMS the first time Family Rehab requested an injunction; Superior Court initially dismissed the case for lack of jurisdiction based on failure to exhaust its administrative remedies. But instead of giving up, which is what most providers would do when faced with a dismissed injunction request due to emotional turmoil and finances. “To be, or not to be: that is the question:” Instead, Family Rehab appealed the dismissal to the Court of Appeals and won. The 5th Circuit held that Superior Court does have jurisdiction to hear a collateral challenge on both procedural due process grounds as well as an ultra vires action. On remand, Family Rehab successfully obtained a permanent injunction.

The clinical issues supposedly in support of the overpayment are silly. In Family Rehab’s case, the ZPIC claims homebound criteria was not met when it is clearly met by a reasonable review of the documents.

Homebound is defined as:

Criteria One:

The patient must either:

  • Because of illness or injury, need the aid of supportive devices such as crutches, canes, wheelchairs, and walkers; the use of special transportation; or the assistance of another person in order to leave their place of residence

OR

  • Have a condition such that leaving his or her home is medically contraindicated.

If the patient meets one of the Criteria One conditions, then the patient must ALSO meet two additional requirements in Criteria Two below:

Criteria Two:

  • There must exist a normal inability to leave home;

AND

  • Leaving home must require a considerable and taxing effort.

In one of the claims that the ZPIC found no homebound status, the consumer was legally blind and in a wheelchair! The injunction hinged on the Court’s finding that because the ALJ stage is critical in decreasing the risk of erroneous deprivation, an injunction was necessary. I look forward to the ALJ hearing. “The rest is silence.”

CMS Overlooks a Settlement Agreement from 2013 : A 2021 Provider Must Defend!

Today I am talking about a settlement agreement between CMS and the skilled nursing community, which, apparently, CMS conveniently forgot about – just recently. The Jimmo settlement agreement re-defines medical necessity for skilled nursing, especially for terminally, debilitating diseases, such as multiple sclerosis (“MS”). According to CMS/the MAC auditor, my client, who serves 100%, MS patients on Medicare owes over half a million dollars. The alleged overpayment and audit findings are in violation of the Jimmo Settlement and must cease.

My client received correspondence dated February 25, 2021, regarding CMS Inquiry #2349 that re-alleged an overpayment in the amount of $578,564.45, but the audit is in violation of the Jimmo Settlement with CMS. One basis for the claims denials is that “There is doc that the pt. has a dx of MS with no doc of recent exacerbation or change in function status.” After the first level of appeal, on June 8, 2021, the denial reason was as follows:

“The initial evaluation did not document there was an ACUTE exacerbation of this chronic condition that would support the need for skilled services.” This basis is in violation of the Jimmo Settlement. See below excerpt from the Jimmo Settlement.

In January 2013, the Centers for Medicare & Medicaid Services (“CMS”) settled a lawsuit, and the “Jimmo” Settlement Agreement was approved by the Court. Jimmo v. Sebelius, No. 5:11-CV17 (D. Vt., 1/24/2013). The Jimmo Settlement Agreement clarified that, provided all other coverage criteria are met, the Medicare program covers skilled nursing care and skilled therapy services under Medicare’s skilled nursing facility, home health, and outpatient therapy benefits when a beneficiary needs skilled care in order to maintain function or to prevent or slow decline or deterioration. Specifically, the Jimmo Settlement Agreement required Medicare Manual revisions to restate a “maintenance coverage standard” for both skilled nursing and therapy services under these benefits. The Jimmo Settlement Agreement 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.”

In the case of Jimmo v. Sebelius, which resulted in the Jimmo Settlement Agreement, the Center for Medicare Advocacy (“CMA”) alleged that Medicare claims involving skilled care were being inappropriately denied by contractors based on a rule-of-thumb-“Improvement Standard”— under which a claim would be summarily denied due to a beneficiary’s lack of restoration potential, even though the beneficiary did in fact require a covered level of skilled care in order to prevent or slow further deterioration in his or her clinical condition. In the Jimmo lawsuit, CMS denied establishing an improper rule-of-thumb “Improvement Standard.”

While an expectation of improvement would 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 federal 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 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.

A beneficiary’s lack of restoration potential cannot serve as the basis for denying coverage, without regard to an individualized assessment of the beneficiary’s medical condition and the reasonableness and necessity of the treatment, care, or services in question. Conversely, coverage in this context would not be available in a situation where the beneficiary’s care needs can be addressed safely and effectively through the use of nonskilled personnel. Thus, such coverage depends not on the beneficiary’s restoration potential, but on whether skilled care is required, along with the underlying reasonableness and necessity of the services themselves.

Any Medicare coverage or appeals decisions concerning skilled care coverage must reflect this basic principle. In this context, it is also essential and has always been required that claims for skilled care coverage include sufficient documentation to substantiate clearly that skilled care is required, that it is provided, and that the services themselves are reasonable and necessary, thereby facilitating accurate and appropriate claims adjudication.

The Jimmo Settlement Agreement includes language specifying that “Nothing in this Settlement Agreement modifies, contracts, or expands the existing eligibility requirements for receiving Medicare coverage. Id. The Jimmo Settlement Agreement clarifies that when skilled services are required in order to provide care that is reasonable and necessary to prevent or slow further deterioration, coverage cannot be denied based on the absence of potential for improvement or restoration.

100% of my client’s consumers suffer from MS. MS is a chronic condition that facilitates a consistent decline over a long period of time. 90% of those with MS do not suffer from acute exacerbations after approximately 5 years of their initial diagnosis. They move into a new phase of their disease called secondary progressive where there are no exacerbations but a slow, consistent decline is now the clinical presentation. According to the Jimmo Settlement, there is no requirement that a provider demonstrate recent exacerbation or change of function. This has been litigated and settled. My client’s Medicare audit is in violation of the Jimmo Settlement and must cease, yet the audit must still be defended.

My client’s documents clearly demonstrate that its consumers who all suffer from MS, qualify for skilled therapy based on the Jimmo Settlement Agreement and their physicians’ recommendations. The Jimmo Settlement clearly states that if the therapist determines that skilled nursing is necessary to stop further decline, then, under the Jimmo Settlement, skilled nursing is appropriate.

Now my client is having to defend itself against erroneous allegations that are clearly in violation of the Jimmo Settlement, which is adversely affecting the company financially. It’s amazing that in 2021, my client is defending a right given in a settlement agreement from 2013. Stay proactive!

RAC Audit Update: Renewed Focus on the Two-Midnight Rule

In RAC news, on June 1, 2021, Cotiviti acquired HMS RAC region 4. Don’t be surprised if you see Cotiviti’s logo on RAC audits where you would have seen HMS. This change will have no impact in the day-to-day contract administration and audit timelines under CMS’ guidance. You will continue to follow the guidance in the alleged, improper payment notification letter for submission of medical documentation and discussion period request. In March 2021, CMS awarded Performant an 8.5 year contract to serve as the Region 1 RAC. 

There really cannot be any deviations regardless the name of the RAC Auditor because this area is so regulated. Providers always have appeal rights regardless Medicare/caid RAC audits. Or any other type of audit. Medicaid RAC provider appeals are found in 42 CFR 455.512. Whereas Medicare provider redeterminations and the 5 levels of appeal are found in 42 CFR Subpart I. The reason that RAC audits are spoken about so often is that the Code of Federal Regulations applies different rules for RAC audits versus MAC, TPE, UPIC, or other audits. The biggest difference is that RAC auditors are limited to a 3 year look back period according to 42 CFR 455.508. Other auditors do not have that same limitation and can look back for longer periods of time. Of course, whenever “credible allegations of fraud” is involved, the lookback period can be for 10 years.

The federal regulations also allow States to request exceptions from the Medicaid RAC program. CMS mandates every State to participate in the RAC program. But there is a federal reg §455.516 that allows exceptions. To my knowledge, no State has requested exceptions out of the RAC Audit program.

RAC auditors have announced a renewed focus on the two-midnight rule for hospitals. Again. This may seem like a rerun and it is. You recall around 2012, RACs began noticing high rates of error with respect to patient status in certain short-stay Medicare claims submitted for inpatient hospital services. CMS and the RACs indicated the inpatient care setting was medically unnecessary, and the claims should have been billed as outpatient instead. Remember, for stays under 2 midnights, inpatient status may be used in rare and unusual exceptions and may be payable under Medicare Part A on a case-by-case basis.

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.

Premature Recoupment of Medicare Reimbursements Defies Due Process!

Who knows that – regardless your innocence –the government can and will recoup your funds preemptively at the third level of Medicare appeals. This flies in the face of the elements of due process. However, courts have ruled that the redetermination and the reconsideration levels afford the providers enough due process, which entails notice and an opportunity to be heard. I am here to tell you – that is horse manure. The first two levels of a Medicare appeal are hoops to jump through in order to get to an independent tribunal – the administrative law judge (“ALJ”). The odds of winning at the 1st or 2nd level Medicare appeal is next to zilch, although often you can get the alleged amount reduced. The first level is before the same entity that found you owe the money. Auditors are normally not keen on overturning themselves. The second level is little better. The first time that you present to an independent tribunal is at the third level.

Between 2009 and 2014, the number of ALJ appeals increased more than 1,200 percent. And the government recoups all alleged overpayments before you ever get before an ALJ.

In a recent case, Sahara Health Care, Inc. v. Azar, 975 F.3d 523 (5th Cir. 2020), a home health care provider brought an action against Secretary of Department of Health and Human Services (“HHS”) and Administrator for the Centers for Medicare and Medicaid Services (“CMS”), asserting that its statutory and due process rights were violated and that defendants acted ultra vires by recouping approximately $2.4 million in Medicare overpayments without providing a timely ALJ hearing. HHS moved to dismiss, and the provider moved to amend, for a temporary restraining order (“TRO”) and preliminary injunction, and for an expedited hearing.

The case was thrown out, concluding that adequate process had been provided and that defendants had not exceeded statutory authority, and denied provider’s motion for injunctive relief and to amend. The provider appealed and lost again.

What’s the law?

Congress prohibited HHS from recouping payments during the first two stages of administrative review. 42 U.S.C. § 1395ff(f)(2)(A).

If repayment of an overpayment would constitute an “extreme hardship, as determined by the Secretary,” the agency “shall enter into a plan with the provider” for repayment “over a period of at least 60 months but … not longer than 5 years.” 42 U.S.C. § 1395ddd(f)(1)(A). That hardship safety valve has some exceptions that work against insolvent providers. If “the Secretary has reason to believe that the provider of services or supplier may file for bankruptcy or otherwise cease to do business or discontinue participation” in the Medicare program, then the extended repayment plan is off the table. 42 U.S.C. § 1395ddd(f)(1)(C)(i). A provider that ultimately succeeds in overturning an overpayment determination receives the wrongfully recouped payments with interest. 42 U.S.C. § 1395ddd(f)(2)(B). The government’s interest rate is high. If you do have to pay back the alleged overpayment prematurely, the silver lining is that you may receive extra money for your troubles.

The years-long back log, however, may dwindle. The agency has received a funding increase, and currently expects to clear the backlog by 2022. In fact, the Secretary is under a Mandamus Order requiring such a timetable. 

A caveat regarding this grim news. This was in the Fifth Circuit. Other Courts disagree. The Fourth Circuit has held that providers do have property interests in Medicare reimbursements owed for services rendered, which is the correct holding. Of course, you have a property interest in your own money. An allegation of wrongdoing does not erase that property interest. The Fourth Circuit agrees with me.

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.

Provider Relief Funds: The Hottest RAC Audit Subject

Reporting the use of PRFs will be an ongoing issue due to the fraud and abuse implications of misusing PRFs.

The federal Provider Relief Fund (PRF) was created under the provisions of the Coronavirus Aid, Relief, and Economic Security (CARES) Act, which was passed to address the economic harm suffered by healthcare providers that have incurred (or will incur) additional expenses and have lost (or will lose) significant revenue as a result of the COVID-19 pandemic. PRF payments have been made from either the “general distribution” tranche or via various “targeted distributions.” PRF payment amounts and whether the providers complied with the terms and conditions will be a hotly contested topic in Recovery Audit Contractor (RAC) and Medicare Administrative Contractor (MAC) audits for years to come. If Centers for Medicare & Medicaid Services (CMS) auditors put out a monthly magazine, like Time, PRF would be on the cover. This will be the hot topic of RAC audits, come Jan. 1, 2021.

The U.S. Department of Health and Human Services (HHS) Office of Inspector General (OIG) will audit Medicare payments made to hospitals for COVID-19 discharges that qualified for the 20-percent add-on payment under the CARES Act, according to a new item on the agency’s work plan.

To use the PRF funding from either the general or targeted distributions, providers must attest to receiving the funds and agree to all terms and conditions. However, what constitutes a “healthcare-related expense” or how to calculate “lost revenue” is not clearly defined. Similarly, how you net healthcare-related expenses toward lost revenue is also vague and undefined. On Nov. 2, HHS issued a clarification to post-payment reporting guidance for PRF funds.

The current guidance, issued Oct. 22, includes a two-step process for providers to report their use of PRF payments. The guidance specifically cites:

  • Healthcare-related expenses attributable to COVID that another source has not reimbursed and is not obligated to reimburse, which may include general and administrative (G&A) or “healthcare-related operating expenses;” and
  • PRF payment amounts not fully expended on healthcare-related expenses attributable to coronavirus are then applied to lost revenues associated with patient care, net of the healthcare-related expenses attributable to coronavirus calculated under the first step. Recipients may apply PRF payments toward lost revenue, up to the amount of the difference between their 2019 and 2020 actual patient care revenue.

HHS’s newest clarification came from its response to a FAQ, in which it said that healthcare-related expenses are no longer netted against the patient care lost revenue amount cited in the second portion. HHS indicated that a revised notice would be posted to remove the “net of the healthcare-related expenses” language in the guidance. Of course, as of now, we have no guidance regarding when this clarification is to be put into place officially. Yet another moving target for auditors.

Anticipate audits of the use of your PRF payments. CMS is choosing a sample of hospitals across the country that have received PRF payments to verify that such expenditures were for healthcare-related expenses. For each audit, OIG will obtain data and interview HHS/PRF program officials to understand how PRF payments were calculated, and then review actual PRF payments for compliance with CARES Act requirements. OIG will also review whether HHS’s controls over PRF payments ensured that payments were calculated correctly and disbursed to eligible providers.

Audits will also focus on how providers initially applied to receive PRFs, including calculations utilized and how COVID-19 patients are defined. When each hospital ceased netting expenses against lost revenue will now be another hot topic.

Balance billing is another area of interest. The terms and conditions require providers that accept the PRFs not to collect out-of-pocket payments from patients for all care for a presumptive or actual case of COVID-19 that exceeded what they would pay an in-network provider.

More havoc may ensue with any purchases or sales transactions that occur in the next year or so. Providers will need to know how to navigate compliance risks associated with any accepted or transferred PRFs. Tracking and reporting use of the PRFs will also be an ongoing issue due to the fraud and abuse implications of misusing PRFs, and there is limited guidance regarding how use will be audited. Many questions remain unanswered. Many terms remain undefined.

Programming Note: Knicole Emanuel, Esq. is a permanent panelist on Monitor Mondays. Listen to her RAC Report every Monday at 10 a.m. EST.

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!