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The slow-motion unraveling of New Mexico’s Medicaid crackdown (With Sound Bites From Me).

There’s no getting around it. Four years after Gov. Susana Martinez’s administration charged 15 behavioral health organizations with potentially defrauding the state’s Medicaid program, its case has experienced a slow-motion unraveling.

No Medicaid fraud was ever found. And those eye-popping estimates that added up to $36 million the organizations had overbilled Medicaid?

In the summer of 2017, the Human Services Department (HSD) is seeking drastically lower reimbursements for overbilling the public health insurance program for low-income residents, a review of public records and state court documents has found.

Now exonerated by the state Attorney General’s Office, many organizations are challenging even those much-lower estimates in administrative hearings or in state court.

Consider Teambuilders Counseling Services, one of the accused behavioral health providers.

Last fall it received a new estimate from the New Mexico Human Services Department. Previous numbers had varied from as high as $9.6 million to as low as $2 million. But the new figure deviated sharply from earlier calculations when Chester Boyett, an administrative law judge in the state agency’s Fair Hearings Bureau, ruled Teambuilders owed only $896.35.

Boyett argued his agency had built its $2 million estimate of Medicaid overbilling on faulty analysis, according to his 12-page decision.

Nancy Smith-Leslie, the department’s director of the Medical Assistance Division, ignored Boyett’s recommendation. In a Jan. 6 letter she said the agency’s analysis was sound, even though she seemed to confirm Boyett’s critique in a Nov. 2 memo in which she had noted the inaccuracy of the extrapolated amount. In that memo Teambuilders and its attorney had not “sufficiently disputed” the method of extrapolation, however, she wrote.

In her Jan. 6 letter, Smith-Leslie sought to clear up matters. She amended her previous statement, saying the extrapolation referred to in her Nov. 2 memo indeed was correct.

Teambuilders and its attorney, Knicole Emanuel, appealed HSD’s ruling over whether Teambuilders overbilled Medicaid and by how much to state court, where three other former behavioral health organizations are fighting HSD’s extrapolated overpayments.

Boyett’s finding that Teambuilders owed hundreds rather than millions of dollars — even if it was ignored — represents a compelling data point given where things stand with other providers.

The state in May reduced to $484.71 what it said Southwest Counseling Center owed after accusing it of overbilling Medicaid by as much as $2.8 million as recently as January.

And last September HSD closed the books  on another organization — Las Cruces-based Families and Youth Inc. — without demanding any reimbursements for overbilling and releasing $1.4 million in Medicaid dollars the state had suspended. The action represented a reversal after a state-ordered 2013 audit that found $856,745 in potential Medicaid overbilling by FYI.

In fact, a review of state and court documents by New Mexico In Depth reveals a pattern regarding the state agency’s overbilling estimates: In many cases, they are moving targets, usually on a downward trajectory.

Like Southwest’s, some have dropped spectacularly. Setting aside Boyett’s figure of $896, even the $2 million HSD claims Teambuilders owes is far smaller than a high of $12 million.

Hogares Inc., another organization accused of fraud, watched last year as the state revised its overbilling estimates five times over six months, starting at $9.5 million in January and ending with $3.1 million in June, according to state court documents.

Meanwhile, Easter Seals El Mirador, initially accused of $850,000 in potential Medicaid overbilling, now stands accused of $127,000.

Emanuel and Bryan Davis, another attorney representing many of the formerly accused organizations, said the constantly changing estimates are due to HSD.

The state agency is examining a sampling of each organization’s Medicaid claims and asking the organizations for documentation to prove the government program was properly billed, they said.

“In most cases (the overbilling estimates) are dropping precipitously” as organizations submit the documents requested by HSD, Davis said.

To cite one example, HSD’s latest overbilling estimate for Counseling Associates, Inc. is $96,000, said Davis, who represents the organization. That compares to $3 million in potential overbilling a 2013 state-ordered audit found.

It is a perplexing situation, given that the Human Services Department found “‘credible allegations of fraud” against the 15 organizations using that 2013 audit, which was performed by Massachusetts-based Public Consulting Group Inc.

“They threw PCG’s audit in the trash,” Davis said of HSD, noting the cost. HSD agreed to pay PCG up to $3 million for the study in February 2013.

The current situation caused Davis to wonder “why PCG didn’t have these documents in the first place,” he said.

Emanuel offered a pointed answer.

“HSD did not allow PCG to gather all the documents,” she said.

A spokesperson for HSD did not respond multiple requests for comment for this story.

Repercussions of the Medicaid crackdown

The fight over Medicaid overbilling isn’t the only legacy left from the Medicaid crackdown, which happened the last week of June 2013.

The Martinez administration’s decision affected lives. Many lives if you listen to behavioral health advocates and officials in the 15 organizations.

Charging the organizations with fraud and then suspending Medicaid payments to many of them disrupted mental health and addiction services for tens of thousands of New Mexicans. It created chaos for employees. And four years on it has left a number of business failures in its wake, with many of the accused organizations unable to survive long-term without Medicaid dollars.

Teambuilders, which once operated 52 locations in 17 New Mexico counties, is no longer in business, according to Emanuel. Neither is Las Cruces-based Southwest Counseling Center. Or Hogares.

At the same time a gap in care has opened up after three of five Arizona companies the Martinez administration brought in to care for the vulnerable populations have departed the state, leaving New Mexico to pick up the pieces.

“It’s a mess. It’s disgusting,” said James Kerlin, executive director of The Counseling Center of Alamogordo, which no longer sees clients. Like Teambuilders, Hogares, Southwest Counseling and others, it was unable to stay in business without the flow of Medicaid dollars the state suspended. “I want the public to know where we’re at and what’s been done to us. I’m going to start making a lot of noise. This is ridiculous.”

Kerlin’s organization was the first of the 15 organizations exonerated by then Attorney General Gary King in early 2014. And it offered the earliest glimpse of the weaknesses in the Martinez administration’s case against the behavioral health providers.

First signs of weakness in the state’s case

HSD hired PCG to audit all 15 organizations and it found $655,000 in potential Medicaid overbilling by the Counseling Center.

PCG reached that conclusion after finding $1,873 in questionable Medicaid claims and then extrapolating from those claims that the center could have overbilled Medicaid by more than $600,000 based on the size of its Medicaid business over several years.

But during its fraud investigation the AG’s office flagged fewer Counseling Center claims than PCG and found a much lower cost of potential overbillings. It resolved some of the issues by reviewing records and interviewing staff.

In many cases, auditors give staff of audited organizations an opportunity to refute findings or address misunderstandings before finalizing their findings. For example, most state and local governmental agencies are audited annually in New Mexico. Staff within those agencies are afforded the chance to see and respond to audit findings within a certain amount of time before audits are made public.

Kerlin did not get that opportunity during the PCG audit.

PCG later confirmed to NMID that it is the firm’s standard procedure to give companies a chance to respond before issuing official audit findings. A PCG spokesperson would not tell NMID why that didn’t happen in New Mexico.

By the time HSD held a hearing for the Counseling Center, the state agency had lowered its Medicaid overbillings estimate to $379,135. And Kerlin finally was able to hear the accusations against his organization.

Counseling Center submitted evidence to rebut the state agency’s claims, but the hearing officer sided with HSD. The Counseling Center appealed to state court.

In late 2015, State District Court Judge Francis Mathew ruled in favor of Kerlin’s organization, calling HSD’s hearing decision “arbitrary, capricious or otherwise not in accordance with law.”

In addition, the judge found the administrative law judge had shifted the burden of proof from HSD to the Counseling Center and then set too high a standard for the organization. Citing portions of the administrative law judge’s ruling, Mathew noted  the Counseling Center had “offered certain amount of credible evidence in opposition” to HSD’s findings but not as much as the hearing officer required: a “100 percent audit” of records, which the state district judge found “unreasonable.”

HSD appealed the judge’s decision to the state Court of Appeals.

Examples of rejected claims 

The overly stringent standards for documentation — and even a basic lack of understanding by HSD staff of Medicaid billing requirements — can be found in cases involving other organizations that are contesting the department’s charges of overbilling, a review of court documents found.

In a motion appealing the administrative law judge’s ruling that it owed the state $127,240, Easter Seals disputed seven claims, including one HSD had rejected because there was no medication consent form in place, even though the patient and parent had signed a general informed consent form and the patient’s parent was present when the medication was prescribed.

According to the court document, “There was no dispute that the service was medically necessary and was provided to J.A. There is no question as to quality of care provided to the recipient of services.”

Another claim was rejected because there was no doctor’s signature on a psychosocial assessment, however the state could provide no legal requirement for the signature, according to Easter Seals’ appeal. “A signature might be best practice, or advisable, but it is not a requirement,” the filing argued.

Also in the appeal, Easter Seals noted that the Human Service Department’s coding witness not only could not cite rules disallowing two services to be delivered during the same time period, but also appeared to be using a coding manual from Medicare, the insurance for seniors, and not Medicaid. And furthermore, she did not even realize there was a manual for Medicaid.

HSD ignored evidence in 2013 that refuted overbilling claims 

Even those organizations that have avoided administrative hearings and court battles have stories to tell about HSD and its actions.

Consider Presbyterian Medical Services, which signed an agreement with the Human Services Department in 2013 to pay $4 million after PCG found nearly $4.5 million in potential Medicaid overbillings.

It wasn’t an easy decision, its CEO said this week, and it shouldn’t be construed as agreement with the state’s conclusions.

“We agree to disagree” is how Steven Hansen put it.

Until Presbyterian began negotiating an agreement, in fact, it had not seen the findings of the PCG audit.

During the negotiations PMS officials found documents they thought could refute PCG’s audit findings, Hansen and other PMS officials told state lawmakers in October 2014.

Presbyterian tried to give the files to PCG and the Human Services Department as proof that they had properly billed Medicaid for payment. The consulting firm said it would review the documentation if directed to by HSD, but PCG later told Presbyterian Medical Services the state agency “did not want to accept those records.”

“We believe there is a strong argument that nothing was owed back to HSD,” Presbyterian’s general counsel told lawmakers in 2014.

At that point, Presbyterian had to make a choice: Settle with the state or fight and possibly run out of money.

Presbyterian settled, paying the $4 million.

The decision has worked out for the organization.

“We’re doing more business than we did before” the 2013 crackdown, Hansen said.

That’s because as the Arizona providers the Martinez administration brought in have left New Mexico, Presbyterian Medical Services has taken over mental health and addiction services.

Presbyterian has added Carlsbad, Alamogordo, Deming, Espańola, Grants, Artesia, Santa Fe and Rio Rancho to the places it provides behavioral health services, Hansen said, adding it’s “bits and pieces” of areas formerly serviced by three of the five Arizona companies.

“We feel like it’s going in a good direction for us,” Hansen said. “That’s hard for us to say because there were so many great organizations that are no longer in the state. But we’ve had to move on.”

Audits “Breaking Bad” in New Mexico: Part II

By: Edward M. Roche, the founder of Barraclough NY LLC, a litigation support firm that helps healthcare providers fight against statistical extrapolations.

In the first article in this series, we covered how a new governor of New Mexico recently came into power and shortly thereafter, all 15 of the state’s nonprofit providers for behavioral health services were accused of fraud and replaced with companies owned by UnitedHealthcare.

When a new team is brought in to take over a crisis situation, one might expect that things would improve. The replacement companies might be presumed to transfer to New Mexico newer and more efficient methods of working, and patient services would become better and more efficient. Out with the old, in with the new. The problem in New Mexico is that this didn’t happen – not at all.

The corporate structure in New Mexico is byzantine. UnitedHealth Group, Inc. is a Minnesota corporation that works through subsidiaries, operating companies and joint ventures to provide managed healthcare throughout the United States. In New Mexico, UnitedHealth worked through Optum Behavioral Health Solutions and United Behavioral Health, Inc. OptumHealth New Mexico is a joint venture between UnitedHealthcare Insurance Company and United Behavioral Health, according to the professional services contract signed with the State of New Mexico.

And that’s not all. OptumHealth is not the company providing the services. According to the contract, It was set up to act as a bridge between actual providers of health services and a legal entity called the State of New Mexico Interagency Behavioral Health Purchasing Collaborative. This Collaborative combines together 16 agencies within the state government.

OptumHealth works by using subcontractors to actually deliver healthcare under both Medicaid and Medicare. Its job is to make sure that all claims from the subcontractors are compliant with state and federal law. It takes payment for the claims submitted and then pays out to the subcontractors. But for this service, OptumHealth takes a 28-percent commission, according to court papers.

This is a nice margin. A complaint filed by whistleblower Karen Clark, an internal auditor with OptimumHealth, indicated that from October 2011 until April 2012, OptumHealth paid out about $88.25 million in Medicaid funds and got a commission of $24.7 million. The payments went out to nine subcontractors. Clark claimed that from Oct. 1, 2011 until April 22, 2013, the overall payouts were about $529.5 million, and the 28-percent commission was about $148.3 million.

In spite of the liberal flow of taxpayer money, things did not go well. Clark’s whistleblower suit, filed in the U.S. District Court for the District of New Mexico, claimed that OptumHealth knew of massive fraud but refused to investigate. Clark says she was eventually fired after she uncovered the malfeasance. It appears that even after learning of problems, OptumHealth kept billing away, eager to continue collecting that 28-percent commission.

Clark’s complaint details a number of problems in New Mexico’s behavioral health sector. It is a list of horrors: there were falsified records, services provided by unlicensed providers, use of improper billing codes, claims for services that never were provided, and many other problems. Allegedly, many client files contained no treatment plans or treatment notes, or even records of what treatments had been provided and s services billed for times when offices were closed. The suit also claims that some services were provided by probationers instead of licensed providers, and a number of bills were submitted for a person who was outside the United States at the time.

The complaint further alleges that one provider received $300,000 in payments, but had submitted only $200,000 worth of claims. When Clark discovered this she allegedly was told by her supervisor at OptumHealth that it was “too small to be concerned about”. It also is alleged that a) insight-oriented psychotherapy was billed when actually the client was being taught how to brush their teeth; b) the same services were billed to the same patient several times per month, and files were falsified to satisfy Medicaid rules; c) interactive therapy sessions were billed for patients who were non-verbal and unable to participate; d) individual therapy was claimed when group therapy was given; e) apart from Medicaid, other sources allegedly were billed for exactly the same services; and f) developmentally disabled patients were used to bill for group therapy from which they had no capacity to benefit. Clark also stated that investigations of one provider for false billing were suspended because they were “a big player in the state”.

Other alleged abuse included a provider that submitted claims for 15-20 hours per day of group therapy for 20 to 40 children at a time, and for numerous psychotherapy services never provided. The complaint also describes one individual provider that supposedly worked three days per week, routinely billing Medicaid for twelve 30-minute individual psychotherapy sessions; 12 family psychotherapy sessions; 23 children in group therapy; and 32 children in group interactive psychotherapy each day.

A number of other abuses are detailed in the complaint: a) some providers had secretaries prescribing medication; b) one provider claimed that it saw 30 patients each 90 minutes per day for psychotherapeutic treatment; c) some individuals allegedly submitted claims for 30 hours per day of treatment; and d) some facilities had no credentialed psychotherapist at any of its facilities. Remember that all of these subcontractors are providing behavioral (psychiatric and psychological) services. Clark found that others submitted bills claiming the services were performed by a medical doctor, but there were none at their facility.

And in one of the most stunning abuses imaginable, one provider allegedly diagnosed all of their patients as having autism. Clark believes this was done because it allowed billing under both medical and mental health billing codes.

These are only a few of the apparent problems we see in New Mexico’s behavioral services.

You would think that once all of this had been brought to light, then public authorities such as the state’s Attorney General’s office would be eager to investigate and begin to root out the abusers. But that isn’t what happened.

James Hallinan, a spokesman for that office, stated that “based on its investigation, the Office of the Attorney General determined it would be in the best interest of the State to decline to intervene in the case.”

While it was making this decision, Clark’s allegations remained under court seal. But now they can be shown.

Note:

(*) Hallinan, James, spokesman for Attorney General’s office, quoted by Peters, J. and Lyman, A. Lawsuit: $14 million in new Medicaid fraud ignored in botched behavioral health audits, January 8, 2016, NM Political Report, URL: http://nmpoliticalreport.com/26519/lawsuit-optumhealth-botched-audits-of-nm-providers/ accessed March 22, 2016.

This article is based on US ex rel. Karen Clark and State of New Mexico ex rel. Karen Clark and Karen Clark, individually vs. UnitedHealth Group, Inc., United Healthcare Insurance Company, United Behavioral Health, Inc., and OptumHealth New Mexico, Complaint for Damages and Penalties, United States District Court for the District of New Mexico, No. 13-CV-372, April 22, 2013 held under court seal until a few weeks ago.

Audits “Breaking Bad” in New Mexico

By: Ed Roche, founder of Barraclough NY LLC, a litigation support firm that helps healthcare providers fight against statistical extrapolations

It was published in RACMonitor.

Healthcare providers sometimes can get caught up in a political storm. When this happens, audits can be used as a weapon to help preferred providers muscle into a market. This appears to have happened recently in New Mexico.

Let’s go back in time.

On Sept. 14, 2010, Susana Martinez was in Washington, D.C. She was looking for campaign contributions to run for the governorship of New Mexico. She visited the office of the government lobbying division of UnitedHealth Group and picked up a check for $25,000.

The next day, Martinez published an editorial claiming that Bill Richardson’s administration in New Mexico was tolerating much “waste, fraud and abuse” in its Medicaid program. Eventually, she was elected as the 31st governor of New Mexico and took office Jan. 1, 2011.

According to an email trail, by the fall of 2012, Martinez’s administration was busy exchanging emails with members of the boards of directors of several healthcare companies in Arizona. During this same period, the Arizonans made a number of contributions to a political action committee (PAC) set up to support Martinez. At the same time, officers from New Mexico’s Human Services Department (HSD) made a number of unannounced visits to Arizona.

The lobbying continued in earnest. Hosted in part by UnitedHealth money, the head of HSD visited Utah’s premier ski resort, and the bill was paid for by an organization financed in part by UnitedHealth. The governor’s chief of staff was treated to dinner at an expensive steakhouse in Las Vegas. There is suspicion of other contacts, but these have not been identified. All of these meetings were confidential.

The governor continued to publicly criticize health services in New Mexico. She focused on 15 mental health providers who had been in business for 40 years. They were serving 87 percent of the mental health population in New Mexico and had developed an extensive delivery system that reached all corners of the state.

Martinez honed in on one mental health provider because the CEO used a private aircraft. He was accused of using Medicaid funds to finance a lavish lifestyle. None of this was true. It turned out that the owner had operations all over the state and used the plane for commuting, but it made for good sound bites to feed the press.

The state decided to raise the pressure against the providers. Public Consulting Group (PCG), a Boston-based contractor, was called in to perform an audit of mental health services. In addition to taking samples and performing analyses of claims, PCG was asked to look for “credible allegations of fraud.”

In legal terms, the phrase “credible allegations of fraud” carries much weight. Under the Patient Protection and Affordable Care Act, it can be used to justify punitive actions against a provider. It is surprising that only “allegations” are necessary, not demonstrated proof. The reality is that in practical terms, a provider can be shut down based on allegations alone.

In a letter regarding its work, PCG stated that “there are no credible allegations of fraud.” Evidently, that was the wrong answer. PCG was kicked out of New Mexico and not allowed to complete its audit. HSD took over.

The PCG letter had been supplied to HSD in a Microsoft Word format. In a stunning act, HSD removed the statement concluding that there were “no credible allegations of fraud.” HSD continued to use the PCG letter, but only in this altered form.

HSD continued to insist publicly that there were credible allegations of fraud. Since PCG had been kicked out before completing the audit, a HSD staff attorney took the liberty of performing several statistical extrapolations that generated a repayment demand of more than $36 million. During testimony, the attorney admitted that the extent of his experience with statistics was an introductory course he had taken years earlier in college.

Two years later, statistical experts from Barraclough NY LLC who are elected fellows of the American Statistical Association examined HSD’s work and concluded that it was faulty and unreliable. They concluded there was zero credibility in the extrapolations.

But for the time being, the extrapolations and audits were powerful tools. On June 24, 2013, all of the aforementioned 15 nonprofits were called into a meeting with HSD. All were accused of massive fraud. They were informed that their Medicaid payments were to be impounded. The money needed to service 87 percent of New Mexico’s mental health population was being cut off.

The next day, UnitedHealth announced a $22 million investment in Santa Fe. We have not been able to track down the direct beneficiaries of these investments. However, we do know that the governor’s office immediately issued a press release on their behalf.

The 15 New Mexico providers were being driven out of business. This had been planned well in advance. Shortly thereafter, the government of New Mexico, through HSD, [approved] issued $18 million in no-bid contracts to five Arizona-based providers affiliated with UnitedHealth. These are the same companies that had been contributing to the governor’s PAC.

These five Arizona companies then took over all mental health services for New Mexico. Their first step was to begin cutting back services. To give one example: patients with two hours therapy per week were cut back to 10 fifteen-minute sessions per year.It was the beginning of a mental health crisis in New Mexico.

As of today, two of the Arizona providers have abandoned their work in New Mexico. A third is in the process of leaving. What is the result? Thousands of New Mexico mental health patients have been left with no services. Entire communities have been completely shut [cut] off. The most vulnerable communities have been hit the hardest.

Through litigation, the 15 original providers forced the New Mexico Attorney General to examine the situation. It took a long time. All of the providers now are out of business. The Attorney General reported a few weeks ago that there were never any credible allegations of fraud.

This should mean that the impounded money would be returned to the 15 providers. After all, the legal reason why it was impounded in the first place has been shown to be false. One would think that the situation could return to normal.

The original 15 should be able to continue their business, and hire back the more than 1,500 persons they had been forced to lay off. Once the impounded monies are returned to the providers, they will be able to pay their legal bills, which now add up to hundreds of thousands of dollars.

Unfortunately, that is not happening. HSD still is claiming that the $36 million extrapolation is due, and that actually, the providers owe the state money. The New Mexico government is not budging from its position. The litigation continues.

Meanwhile, New Mexico now is tied with Montana in having the highest suicide rate in the continental United States.

Alphabet Soup: RACs, MICs, MFCUs, CERTs, ZPICs, PERMs and Their Respective Look Back Periods

I have a dental client, who was subject to a post payment review by Public Consulting Group (PCG). During the audit, PCG reviewed claims that were 5 years old.  In communication with the state, I pointed out that PCG surpassed its allowable look back period of 3 years.  To which the Assistant Attorney General (AG) said, “This was not a RAC audit.”  I said, “Huh. Then what type of audit is it? MIC? ZPIC? CERT?” Because the audit has to be one of the known acronyms, otherwise, where is PCG’s authority to conduct the audit?

There has to be a federal and state regulation applicable to every audit.  If there is not, the audit is not allowable.

So, with the state claiming that this post payment review is not a RAC audit, I looked into what it could be.

In order to address health care fraud, waste, and abuse (FWA), Congress and CMS developed a variety of approaches over the past several years to audit Medicare and Medicaid claims. For all the different approaches, the feds created rules and different acronyms.  For example, a ZPIC audit varies from a CERT audit, which differs from a RAC audit, etc. The rules regulating the audit differ vastly and impact the provider’s audit results greatly. It can be as varied as hockey and football; both have the same purpose of scoring points, but the equipment, method of scoring, and ways to defend against an opponent scoring are as polar opposite as oil and water. It can be confusing and overwhelming to figure out which entity has which rule and which entity has exceeded its scope in an audit.

It can seem that we are caught swimming in a bowl of alphabet soup. We have RACs, ZPICs, MICs, CERTs, and PERMs!!

alphabet soup

What are these acronyms??

This blog will shed some light on the different types of agencies auditing your Medicare and Medicaid claims and what restrictions are imposed on such agencies, as well as provide you with useful tips while undergoing an audit and defending the results.

First, what do the acronyms stand for?

  • Medicare Recovery Audit Contractors (RACs)
  • Medicaid RACs
  • Medicaid Integrity Contractors (MICs)
  • Zone Program Integrity Contractors (ZPICs)
  • State Medicaid Fraud Control Units (MFCUs)
  • Comprehensive Error Rate Testing (CERT)
  • Payment Error Rate Measurement (PERM)

Second, what are the allowable scope, players, and look back periods for each type of audit? I have comprised the following chart for a quick “cheat sheet” when it comes to the various types of audits. When an auditor knocks on your door, ask them, “What type of audit is this?” This can be invaluable information when it comes to defending the alleged overpayment.

SCOPE, AUDITOR, AND LOOK-BACK PERIOD
Name Scope Auditor Look-back period
Medicare RACs

Focus:

Medicare zaqoverpayments and underpayments

Medicare RACs are nationwide. The companies bid for federal contracts. They use post payment reviews to seek over and under payments and are paid on a contingency basis. Region A:  Performant Recovery

Region B:  CGI Federal, Inc.

Region C:  Connolly, Inc.

Region D:  HealthDataInsights, Inc.

Three years after the date the claim was filed.
Medicaid RACs

Focus:

Medicaid overpayments and underpayments

Medicaid RACs operate nationwide on a state-by-state basis. States choose the companies to perform RAC functions, determine the areas to target without informing the public, and pay on a contingency fee basis. Each state contracts with a private company that operates as a Medicaid RAC.

In NC, we use PCG and HMS.

Three years after the date the claim was filed, unless the Medicaid RAC has approval from the state.
MICs

Focus:

Medicaid overpayments and education

MICs review all Medicaid providers to identify high-risk areas, overpayments, and areas for improvement. CMS divided the U.S. into five MIC jurisdictions.

New York (CMS Regions I & II) – Thomson Reuters (R) and IPRO (A) • Atlanta (CMS Regions III & IV) – Thomson Reuters (R) and Health Integrity (A) • Chicago (CMS Regions V & VII) – AdvanceMed (R) and Health Integrity (A) • Dallas (CMS Regions VI & VIII) – AdvanceMed (R) and HMS (A) • San Francisco (CMS Regions IX & X) – AdvanceMed (R) and HMS (A)

MICs are not paid on a contingency fee basis.

MICs  may review a claim as far back as permitted under the laws of the respective states (generally a five-year look-back period).
ZPICs

Focus:

Medicare fraud, waste, and abuse

ZPICs investigate potential Medicare FWA and refer these cases to other entities.

Not random.

CMS, which has divided the U.S. into seven ZPICs jurisdictions.

Only investigate potential fraud.

ZPICs are not paid on a contingency fee basis.

ZPICs have no specified look-back period.
MFCUs

Focus:

Medicaid fraud, waste, and abuse

MFCUs investigate and prosecute (or refer for prosecution) criminal and civil Medicaid fraud cases. Each state, except North Dakota, has an MFCU.

Contact info for NC’s:

Medicaid Fraud Control Unit of North Carolina
Office of the Attorney General
5505 Creedmoor Rd
Suite 300
Raleigh, NC   27612

Phone: (919) 881-2320

website

MFCUs have no stated look-back period.
CERT

Focus:

Medicare improper payment rate

CERT companies indicate the rate of improper payments in the Medicare program in an annual report. CMS runs the CERT program using two private contractors (which I am yet to track down, but I will). The look back period is the current fiscal year (October 1 to September 30).
PERM

Focus:

Medicaid improper payment rate

PERM companies research improper payments in Medicaid and the Children’s Health Insurance Program. They extrapolate a national error rate. CMS runs the PERM program using two private contractors(which I am yet to track down, but I will). The look back period is the current fiscal year (the complete measurement cycle is 22 to 28 months).

 As you can see, the soup is flooded with letters of the alphabet. But which letters are attached to which audit company determines which rules are followed.

It is imperative to know, when audited, exactly which acronym those auditors are

Which brings me back to my original story of my dental provider, who was audited by a “non-RAC” entity for claims 5 years old.

What entity could be performing this audit, since PCG was not acting as its capacity as a RAC auditor? Let’s review:

  • RAC: AG claims no.
  • MIC: This is a state audit, not federal. No.
  • MFCU: No prosecutor involved. No.
  • ZPIC: This is a state audit, not federal. No allegation of fraud. No.
  • CERT:This is a state audit, not federal. No.
  • PERM: This is a state audit, not federal. No.

Hmmmm….

If it walks like a duck, talks like a duck, and acts like a duck, it must be a duck, right?

Or, in this case, a RAC.

Prior To Means BEFORE: An Amendment to N.C. Gen. Stat 108C-5(i) and Renovating the Leaning Tower of Pisa

The way it works with our three, separate branches of government is that if the court system determines that a statute should be interpreted as ‘A,’ and the legislative branch does not appreciate the way in which the statute was interpreted, then, during the next session, the legislative branch can pass a bill into law that specifically states that the statute is ‘B’ (provided the statutes are consistent with the constitution).

Take the leaning Tower of Pisa. It was built on unsteady ground and within 10 years of its construction, the builders knew it would lean…much like many of our Medicaid and Medicare laws. A beautiful tower, on paper, may not work in real life and on unsteady ground. But once the tower is erected, renovations can occur that will stop the tower from falling over (supposedly, the leaning Tower of Pisa is now stable).

Similarly, when a new law is enacted, no one can predict whether the law will work in real life or be effective in the manner for which it was intended.

N.C. Gen. Stat. 108C-5 was enacted in 2011 and allows the Department of Health and Human Services (DHHS) to audit a small sample of a health care provider’s medical records and extrapolate the error rate against the universe of all of the provider’s records. For example, HMS, one of NC’s hired auditors, asks a Hospital X for all 99222, 99219 and 99235 codes, that is, initial hospital encounter codes, for the period of time of January 1, 2010 – January 1, 2011. After HMS reviews a sample of those medical records, it determines that Hospital X is miscoding at an error rate of 45% (a conclusion which is ALWAYS likely to be wrong, from my experience) for an actual overpayment amount (from just that particular record sample) of $100,000.00. N.C. Gen. Stat. 108C-5 allows HMS to extrapolate the actual overpayment over a universe all of the Hospital’s records for ‘x’ number of years, to reach an alleged overpayment amount of $4,000,000.00 for the audited time period

It really is ridiculous. For example, one of my clients, a behavioral health care provider, who works very hard for his clients, received from the auditor an alleged notice of overpayment of $640,441.00. My associate, Robert Shaw, reviewed the exact same documents that the auditors reviewed and determined that the audit was erroneous. Robert didn’t even have to take it to court. After he drafted correspondence to the auditing company with explanations of why the audit was incorrect, the auditing company admitted that almost every single one of its conclusions was in error, and agreed to accept $258.20 for one claim.

Going back to N.C. Gen. Stat. 108C-5, subsection (i) used to state, “Prior to extrapolating the results of any audits, the Department shall demonstrate and inform the provider that (i) the provider failed to substantially comply with the requirements of State or federal law or regulation or (ii) the Department has credible allegation of fraud concerning the provider.”

Using the plain language of the statute, in court, I would often argue in defense of a health care provider that the extrapolation should be thrown out because DHHS would send a Tentative Notice of Overpayment (TNO) that included the extrapolated amount in the same correspondence in which DHHS was “demonstrating and informing” the health care provider that either: (i) the provider failed to substantially comply with the requirements of State or federal law or regulation or (ii) the Department has a credible allegation of fraud concerning the provider. N.C. Gen. Stat. 108C-5 clearly states that the demonstration and informing should be given to the health care provider prior to extrapolating.

The DHHS attorney would argue that my argument would create absurd results in that DHHS could demonstrate and inform the provider in one correspondence, then one minute later send the extrapolation. The judges at the Office of Administrative Hearings (OAH) agreed with me to a point. They agreed that the first extrapolation should be thrown out because DHHS did not demonstrate and inform prior to extrapolating.

However, when a provider receives an extrapolation, the first level of appeal is an informal reconsideration review within DHHS, Division of Medical Assistance (DMA). The hearing officers are hired by DHHS and do not, generally, have legal backgrounds; although I can think of one exception. After the reconsideration review, DHHS, through its hired vendor, conducts another extrapolation, which usually does not usually result in a severe decrease in alleged overpayment.

So the Administrative Law Judges (ALJs) held that the subsequent extrapolations…the extrapolations after receiving the TNO which provides the provider notice, are legit…that the TNOs satisfy the requirement of DHHS to demonstrate and inform the provider prior to extrapolating

Well, long story short, DHHS did not like having to defend itself for not providing sufficient notice prior to extrapolating.

Enter Session Law 2014-100, otherwise known as the sneaky Appropriations Bill that appropriates more than our budget.

Session Law 2014-100 revises N.C. Gen. Stat 108C-5(i) to state “(i) Prior to extrapolating the results of any audits, the Department shall demonstrate and inform the provider that (i) the provider failed to substantially comply with the requirements of State or federal law or regulation or (ii) the Department has a credible allegation of fraud concerning the provider. Nothing in the subsection shall be construed to prohibit the Department from identifying the extrapolated overpayment amount in the same notice that meets the requirements of this subsection.

See the difference? Poof! The leaning Tower of Pisa is renovated!

Session Law 2014-100 retroactively became effective July 31, 2014. So, going forward, I can no longer argue that the TNO is not sufficient notice in order to throw out the first extrapolation.

However, I do have more arguments as to how DHHS is not complying with N.C. Gen. Stat. 108C-5 in an effort to throw out the extrapolation. There is more than one way to skin a cat! In fact, I am waiting for a decision from an ALJ on an innovative argument I made the last week.

Perhaps the leaning Tower of Pisa will lean a little more in the future despite the renovations…