Biggest RACs Changes Are Here: Learn to Avoid Denied Claims
Part II continues to explain the nuances in the changes made by CMS to its statistical sampling methodology. Originally published on RACMonitor.
The Centers for Medicare & Medicaid Services (CMS) recently made significant changes in its statistical sampling methodology for overpayment estimation. Effective Jan. 2, 2019, CMS radically changed its guidance on the use of extrapolation in audits by Recovery Audit Contractors (RACs), Medicare Administrative Contractors (MACs), Unified Program Integrity Contractors (UPICs), and the Supplemental Medical Review Contractor (SMRC).
The RAC program was created through the Medicare Modernization Act of 2003 (MMA) to identify and recover improper Medicare payments paid to healthcare providers under fee-for-service (FFS) Medicare plans. The RAC auditors review a small sample of claims, usually 150, and determine an error rate. That error rate is attributed to the universe, which is normally three years, and extrapolated to that universe. Extrapolation is similar to political polls – in that a Gallup poll will ask the opinions of 1-2 percent of the U.S. population, yet will extrapolate those opinions to the entire country.
First, I would like to address a listener’s question regarding the dollar amount’s factor in extrapolation cases. I recently wrote, “for example, if 500 claims are reviewed and one is found to be noncompliant for a total of $100, then the error rate is set at 20 percent.”
I need to explain that the math here is not “straight math.” The dollar amount of the alleged noncompliant claims factors into the extrapolation amount. If the dollar amount did not factor into the extrapolation, then a review of 500 claims with one non-compliant claim is 0.2 percent. The fact that, in my hypothetical, the one claim’s dollar amount equals $100 changes the error rate from 0.2 percent to 20 percent.
Secondly, the new rule includes provisions implementing the additional Medicare Advantage telehealth benefit added by the Bipartisan Budget Act of 2018. Prior to the new rule, audits were limited in the telehealth services they could include in their basic benefit packages because they could only cover the telehealth services available under the FFS Medicare program. Under the new rule, telehealth becomes more prominent in basic services. Telehealth is now able to be included in the basic benefit packages for any Part B benefit that the plan identifies as “clinically appropriate,” to be furnished electronically by a remote physician or practitioner.
The pre-Jan. 2, 2019 approach to extrapolation employed by RACs was inconsistent, and often statistically invalid. This often resulted in drastically overstated overpayment findings that could bankrupt a physician practice. The method of extrapolation is often a major issue in appeals, and the, new rules address many providers’ frustrations and complaints about the extrapolation process. This is not to say that the post-Jan. 2, 2019 extrapolation approach is perfect…far from it. But the more detailed guidance by CMS just provides more ways to defend against an extrapolation if the RAC auditor veers from instruction.
Thirdly, hiring an expert is a key component in debunking an extrapolation. Your attorney should have a relationship with a statistical expert. Keep in mind the following factors when choosing an expert:
- Price (more expensive is not always better, but expect the hourly rate to increase for trial testimony).
- Intelligence (his/her CV should tout a prestigious educational background).
- Report (even though he/she drafts a report, the report is not a substitute for testimony).
- Clusters (watch out for a sample that has a significant number of higher reimbursed claims. For example, if you generally use three CPT codes at an equal rate and the sample has an abnormal amount of the higher reimbursed claim, then you have an argument that the sample is an invalid example of your claims.
- Sample (the sample must be random and must not contain claims not paid by Medicaid).
- Oral skills (can he/she make statistics understandable to the average person?)
Fourthly, the new revised rule redefines the universe. In the past, suppliers have argued that some of the claims (or claim lines) included in the universe were improperly used for purposes of extrapolation. However, the pre-Jan. 2, 2019 Medicare Manual provided little to no additional guidance regarding the inclusion or exclusion of claims when conducting the statistical analysis. By contrast, the revised Medicare Manual specifically states:
“The universe includes all claim lines that meet the selection criteria. The sampling frame is the listing of sample units, derived from the universe, from which the sample is selected. However, in some cases, the universe may include items that are not utilized in the construction of the sample frame. This can happen for a number of reasons, including but not limited to:
- Some claims/claim lines are discovered to have been subject to a prior review;
- The definitions of the sample unit necessitate eliminating some claims/claim lines; or
- Some claims/claim lines are attributed to sample units for which there was no payment.”
By providing detailed criteria with which contractors should exclude certain claims from the universe or sample frame, the revised Medicare Manual will also provide suppliers another means to argue against the validity of the extrapolation.
Lastly, the revised rules explicitly instruct the auditors to retain an expert statistician when changes occur due to appeals and legal arguments.
As a challenge to an extrapolated overpayment determination works its way through the administrative appeals process, often, a certain number of claims may be reversed from the initial claim determination. When this happens, the statistical extrapolation must be revised, and the extrapolated overpayment amount must be adjusted. This requirement remains unchanged in the revised PIM; however, the Medicare contractors will now be required to consult with a statistical expert in reviewing the methodology and adjusting the extrapolated overpayment amount.
Between my first article on extrapolation, “CMS Revises and Details Extrapolation Rules,” and this follow-up, you should have a decent understanding of the revised extrapolation rules that became effective Jan. 2, 2019. But my two articles are not exhaustive. Please, click here for Change Request 10067 for the full and comprehensive revisions.
Effective January 2, 2019, the Center for Medicare and Medicaid Services (CMS) radically changed its guidance on the use of extrapolation in audits by recovery audit contractors (RACs), Medicare administrative contractors (MACs), Unified Program Integrity Contractors (UPICs), and the Supplemental Medical Review Contractor (SMRC).
Extrapolation is the tsunami in Medicare/caid audits. The auditor collects a small sample of claims to review for compliance. She then determines the “error rate” of the sample. For example, if 50 claims are reviewed and 10 are found to be noncompliant, then the error rate is set at 20%. That error rate is applied to the universe, which is generally a three-year time period. It is assumed that the random sample is indicative of all your billings regardless of whether you changed your billing system during that time period of the universe or maybe hired a different biller.
With extrapolated results, auditors allege millions of dollars of overpayments against health care providers…sometimes more than the provider even made during that time period. It is an overwhelming wave that many times drowns the provider and the company.
Prior to this recent change to extrapolation procedure, the Program Integrity Manual (PIM) offered little guidance to the proper method for extrapolation.
Well, Change Request 10067 – overhauled extrapolation in a HUGE way.
The first modification to the extrapolation rules is that the PIM now dictates when extrapolation should be used.
Determining When a Statistical Sampling May Be Used. Under the new guidance, a contractor “shall use statistical sampling when it has been determined that a sustained or high level of payment error exists. The use of statistical sampling may be used after documented educational intervention has failed to correct the payment error.” This guidance now creates a three-tier structure:
- Extrapolation shall be used when a sustained or high level of payment error exists.
- Extrapolation may be used after documented educational intervention (such as in the Targeted Probe and Educate (TPE) program).
- It follows that extrapolation should not be used if there is not a sustained or high level of payment error or evidence that documented educational intervention has failed.
“High level of payment error” is defined as 50% or greater. The PIM also states that the contractor may review the provider’s past noncompliance for the same or similar billing issues, or a historical pattern of noncompliant billing practice. This is HUGE because so many times providers simply pay the alleged overpayment amount if the amount is low or moderate in order to avoid costly litigation. Now those past times that you simply pay the alleged amounts will be held against you.
Another monumental modification to RAC audits is that the RAC auditor must receive authorization from CMS to go forward in recovering from the provider if the alleged overpayment exceeds $500,000 or is an amount that is greater than 25% of the provider’s Medicare revenue received within the previous 12 months.
The identification of the claims universe was also re-defined. Even CMS admitted in the change request that, on occasion, “the universe may include items that are not utilized in the construction of the sample frame. This can happen for a number of reasons, including, but not limited to: (1) Some claims/claim lines are discovered to have been subject to a prior review, (2) The definitions of the sample unit necessitate eliminating some claims/claim lines, or (3) Some claims/claim lines are attributed to sample units for which there was no payment.”
There are many more changes to discuss, but I have been asked to appear on RACMonitor to present the details on February 19, 2019. So sign up to listen!!!
You are a Medicare health care provider. You perform health care services across the country. Maybe you are a durable medical equipment (DME) provider with a website that allows patients to order physician-prescribed, DME supplies from all 50 states. Maybe you perform telemedicine to multiple states. Maybe you are a large health care provider with offices in multiple states.
Regardless, imagine that you receive 25, 35, or 45 notifications of alleged overpayments from 5 separate “jurisdictions” (the 5th being Region 5 (DME/HHH – Performant Recovery, Inc.). You get one notice dated January 1, 2018, for $65,000 from Region 1. January 2, 2018, you receive a notice of alleged overpayment from Region 2 in the amount of $210.35. January 3, 2018, is a big day. You receive notices of alleged overpayments in the amounts of $5 million from Region 4, $120,000 from Region 3, and two other Region 1 notices in the amount of $345.00 and $65,000. This continues for three weeks. In the end, you have 20 different notices of alleged overpayments from 5 different regions, and you are terrified and confused. But you know you need legal representation.
Do you appeal all the notices? Even the notice for $345.00? Obviously, the cost of attorneys’ fees to appeal the $345.00 will way outweigh the amount of the alleged overpayment.
Here are my two cents:
Appeal everything – and this is why – it is a compelling argument of harassment/undue burden/complete confusion to a judge to demonstrate the fact that you received 20 different notices of overpayment from 5 different MACs. I mean, you need a freaking XL spreadsheet to keep track of your notices. Never mind that an appeal in Medicare takes 5 levels and each appeal will be at a separate and distinct status than the others. Judges are humans, and humans understand chaos and the fact that humans have a hard time with chaos. For example, I have contractors in my house. It is chaos. I cannot handle it.
While 20 distinct notices of alleged overpayment is tedious, it is worth it once you get to the third level, before an unbiased administrative law judge (ALJ), when you can consolidate the separate appeals to show the judge the madness.
Legally, the MACs cannot withhold or recoup funds while you appeal, although this is not always followed. In the case that the MACs recoup/withhold during your appeal, if it will cause irreparable harm to your company, then you need to get an injunction in court to suspend the recoupment/withhold.
According to multiple sources, the appeal success rate at the first and second levels are low, approximately 20%. This is to be expected since the first level is before the entity that determined that you owe money and the second level is not much better. The third level, however, is before an impartial ALJ. The success rate at that level is upwards of 75-80%. In the gambling game of life, those are good odds.
The Centers for Medicare & Medicaid Services (CMS) posted its December 2017 list of health care services that the Recovery Audit Contractors (RACs) will be auditing. As usual, home health is on the chopping block. So are durable medical equipment providers. For whatever reason, it seems that home health, DME, behavioral health care, and dentists are on the top of the lists for audits, at least in my experience.
Number one RAC audit issue:
Home Health: Medical Necessity and Documentation Review
To be eligible for Medicare home health services, a beneficiary must have Medicare Part A and/or Part B per Section 1814 (a)(2)(C) and Section 1835 (a)(2)(A) of the Social Security Act:
- Be confined to the home;
- Need skilled services;
- Be under the care of a physician;
- Receive services under a plan of care established and reviewed by a physician; and
- Have had a face-to-face encounter with a physician or allowed Non-Physician Practitioner (NPP).
Medical necessity is the top audited issue in home health. Auditors also love to compare the service notes to the independent assessment. Watch it if you fail to do one activity of daily living (ADL). Watch it if you do too many ADLs out of the kindness of your heart. Deviations from the independent assessment is a no-no to auditors, even if you are going above and beyond to be sweet. And never use purple ink!
Number two RAC audit issue:
Annual Wellness Visits (AWV) billed within 12 months of the Initial Preventative Physical Examination (IPPE) or Annual Wellness Examination (AWV)
This is a simple mathematical calculation. Has exactly 12 months passed? To the day….yes, they are that technical. 365 days from a visit on January 7, 2018 (my birthday, as an example) would be January 7, 2019. Schedule any AWV January 8, 2019, or beyond.
Number three RAC audit issue:
Ventilators Subject to DWO requirements on or after January 1, 2016
This will be an assessment of whether ventilators are medically necessary. Seriously? Who gets a ventilator who does not need one? I was thinking the other day, “Self? I want a ventilator.”
Number four RAC audit issue:
This will be an assessment of whether cardiac pacemakers are medically necessary. Seriously? Who gets a pacemaker who does not need one? I was thinking the other day, “Self? I want a pacemaker.” Hospitals are not the only providers targets for this audit. Ambulatory surgical centers (ASCs) also will be a target. As patient care continues its transition to the outpatient setting, ASCs have quickly grown in popularity as a high-quality, cost-effective alternative to hospital-based outpatient care. In turn, the number and types of services offered in the ASC setting have significantly expanded, including pacemakers.
Number five RAC audit issue:
Evaluation and Management (E/M) Same Day as Dialysis
Except when reported with modifier 25, payment for certain evaluation and management services is bundled into the payment for dialysis services 90935, 90937, 90945, and 90947
It is important to remember that if you receive a notice of overpayment, you need to appeal immediately. The first level of appeal is redetermination, usually with the Medicare Administrative Contractor (MAC). Medicare will not begin overpayment collection of debts (or will cease collections that have started) when it receives notice that you requested a Medicare contractor redetermination (first level of appeal).
See blog for full explanation of Medicare provider appeals.
Monday, February 22, 2016, The Centers for Medicare and Medicaid Services (CMS) announced that it plans to increase onsite visits and monitoring of health care providers. One of the top priorities for CMS is to verify that provider enrollment and address are correct…
Because, as you know, providers with correct addresses on file are less likely to commit Medicare fraud. Medicare Fraud 101 – Give CMS the wrong address. Really? (While I applaud their valiant effort, the fraud that I have witnessed has not been a health care provider using a fake address to provide fake services…that is too Ponzi, too shallow in thought…too easily detected. Oh no, the fraud I have encountered were providers with actual practices with correct addresses, but embellishing on the amount of services provided to an actual Medicare enrollee to cushion their pockets. This is much more difficult to detect.
But CMS has its reasons for sniffing out fake addresses. CMS’ address hunt-down comes on the heels of a report from June 2015 out of the Government Accountability Office (GAO), which determined that approximately 22% of Medicare provider addresses are “potentially ineligible.” Additionally, last March (2015) CMS decreased the amount of audits conducted by Medicare Administrative Contractors (MACs), which are one of the entities that investigate Medicare provider eligibility.
Whenever the GAO finds potential errors, CMS usually puts on the whole dog and pony show…or, maybe, for a change, a pig and pony show…
With all these political talks about donkeys and elephants, I would like to take a moment and blog about a pig. Some of you know that I own a pet pig. She is 4 1/2 years old and about 30 pounds. See below.
Isn’t she cute?! Some of you will remember my last blog about Oink was “Our Medicaid Budget: Are We Just Putting Lipstick on a Pig?”
The reason I bring up Oink is that she is the smartest, most animated animal I have ever encountered. She is also the best “sniffer-outer” I have ever encountered. Her keen sense of smell is well beyond any human’s sense of smell. If you liken Oink to CMS and Medicare fraud to a Skittle, the Skittle would have no chance.
These upcoming and increased number of audits is CMS’ way of sniffing out fraud. However, CMS’ sense of smell is not up to snuff like Oink’s sense of smell.
Searching for erroneous addresses in order to detect fraud, waste, and abuse (FWA) will, inevitably, be over-inclusive. Meaning, many of the erroneous addresses will not be committing Medicare fraud. Some erroneous addresses exist because providers simply moved to another location and either failed to inform CMS or CMS’ database was not updated with the new address. Other erroneous addresses exist because health care providers went out of business and never informed CMS. A new company leases the property and it appears to CMS that fraudulent billing was occurring a couple years ago out of, for example, what is now a Jimmy John’s.
Searching for erroneous addresses in order to detect FWA will, inevitably, be under-inclusive. Meaning, that many providers committing Medicare fraud do so with accurate office addresses.
My contention is that if you want to find FWA, you need to dig deeper than an incorrect address. Sniffing out Medicare fraud is a bit more in depth than finding improper addresses. That would be like tossing handfuls of Skittles on the ground and expecting Oink to only find the green ones.
In fiscal year 2014, Medicare paid $554 billion for health care and related services. CMS estimates that $60 billion (about 10 percent) of that total was paid improperly (not only because of incorrect addresses).
CMS is responsible for developing provider and supplier enrollment procedures to help safeguard the program from FWA. CMS contracts with Medicare Administrative Contractors (MACs) and the National Supplier Clearinghouse (NSCs) to manage the enrollment process. MACs are responsible for verifying provider and supplier application information in Provider Enrollment, Chain and Ownership System (PECOS) before the providers and suppliers are permitted to enroll into Medicare. CMS currently contracts with 12 MACs, each of which is responsible for its own geographic region, known as a “jurisdiction.
As you can see, we live in Jurisdiction 11. These MACs act as the “sniffer-outers” for CMS.
According to the GAO June 2015 report, about 23,400 (22 percent) of the 105,234 addresses that GAO initially identified as a Commercial Mail Receiving Agency (CMRA), vacant, or invalid address are potentially ineligible for Medicare providers and suppliers. “About 300 of the addresses were CMRAs, 3,200 were vacant properties, and 19,900 were invalid. Of the 23,400 potentially ineligible addresses, [GAO] estimates that, from 2005 to 2013, about 17,900 had no claims associated with the address, 2,900 were associated with providers that had claims that were less than $500,000, and 2,600 were associated with providers that had claims that were $500,000 or more per address.”
In other words, out of 105,234 addresses, only 2,600 actively billed Medicare for over $500,000 from 2005 through 2013 (8 years). Had CMS narrowed the scope and looked at practices that billed over $500,000 since 2010, I fancy the the number would have been much lower, because, as discussed above, many of these providers either moved or went out-of-business.
Now, 2,600 is not a nominal number. I am in no way undermining CMS’ efforts to determine the accuracy of providers’ addresses; I am not insinuating that these efforts are unnecessary or a complete waste of time. I think verification of health care providers’ addresses is an important aspect of detecting FWA. Instead, I believe that, as discussed above, verifying providers’ addresses is a poor, under and over-inclusive attempt at searching for FWA. Because, as I stated at the beginning of this blog, the people who are intentionally trying to defraud the system, are not going to intentionally give an erroneous address. It is just too easy for the government to discover the error. No, the people who are intentionally defrauding the state will have a legitimate office.
For example, in my opinion, it is unlikely that anyone intentionally trying to defraud the system will inform the government that they provide health care services from the following places:
Again, if I liken CMS’ search for FWA by detecting inaccurate addresses to Oink, it would be like tossing a handful of Skittles on the ground and expecting Oink to only find the green ones.
If CMS audits are to Oink as fraud is to Skittles, then I think there is a less intrusive, less inclusive way to detect FWA rather than throwing out packets of Skittles for Oink. All that does is make Oink eat too much.
Medicare Appeals to OMHA Reaches 15,000 Per Week, Yet Decisions Take Years; Hospital Association Sues Over Medicare Backlog
When you are a health care provider and make the business determination to accept Medicare or Medicaid, you are agreeing to deal with certain headaches. Low reimbursement rates and more regulations than you can possibly count make accepting Medicare and Medicaid a daunting experience. Throw in some pre- and post-payment review audits, some inept contractors, and dealing with the government, in general, and you have a trifecta of terrible to-dos.
But having to “pay back” (by reimbursement withholding) an alleged overpayment before an appeal decision is rendered is not a headache which hospitals have agreed to take, says the American Hospital Association. And it said so very definitively, in the form of a Complaint in the U. S. District Court for the District of Columbia
In both Medicaid and Medicare audits, if you get audited and are told to pay back XX dollars, you have a right to appeal that determination. Obviously, with Medicare, you appeal on the federal level and with Medicaid, you appeal to the state level. But the two roads to appeal (the state and federal) are not identical. Robert Frost once said, “Two roads diverged in a wood, and I, I took the one less traveled by, And that has made all the difference.” However,the Medicare appeal route is NOT the route less traveled by.
As of February 12, 2014, over 480,000 Medicare appeals were pending for assignment to an Administrative Law Judge (ALJ), with 15,000 new appeals filed each week. In December 2013, HHS Office of Medicare Hearings and Appeals (OMHA) announced a moratorium on assignment of provider appeals to ALJs for at least the next two years, and possibly longer. The average wait-time for a hearing is approximately 24 months, but will undoubtedly increase quickly due to the moratorium. A decision would not come until later. And all the while the parties are waiting, the provider’s reimbursements will be withheld until the alleged overpayment amount is met. Literally, a Medicare appeal could take 3-5 years.
The American Hospital Association is fed up. And who can blame them? On May 22, 2014, the American Hospital Association (AHA) filed a Complaint in the United States District Court in the District of Columbia against Kathleen Selebius, in her official capacity as Secretary of Health and Human Services (HHS), complaining that HHS is noncompliant with federal statutory law because of the Medicare appeal backlog. I am not surprised by AHA’s Complaint; I am only surprised that it took this long for a lawsuit. I am also surprised that more providers, other than hospitals, are not taking action.
AHA is requesting relief under the Mandamus Act, 28 U.S.C. § 1361. The Mandamus Act allows a court to compel an officer or employee of the United States or any agency thereof to perform a duty owed. In this case, the AHA is saying that HHS has a statutory duty to resolve Medicare appeals within 90 days. So, AHA is asking the district court to compel HHS to resolve Medicare appeals by not later than the end of the 90-day period beginning on the date a request for hearing has been timely filed.
And, here, I am obliged to insert a quick, two thumbs-up for our very own Office of Administrative Hearings (OAH) in NC for its handling of Medicaid appeals. If you file a contested case at OAH, it will not take 3-5 years.
AHA’s lawsuit is significant because AHA does not restrict the relief requested to only hospital Medicare appeals. AHA requests that the District Court “enter a declaratory judgment that HHS’s delay in adjudication of Medicare appeals violates federal law.” If granted, I would assume that this declaratory judgment would impact all Medicare providers. The only way to ensure all providers are covered by this decision is for all providers to either (1) file a separate action (to include damages, which is not included in AHA’s action for some reason); or (2) to join AHA’s action (and forego damages), but its impact will be broad. I am not sure why AHA did not seek damages; the time value of money is a real damage…the non-ability for the hospitals to invest in more beds because their money is stuck at HHS is a real damage…the loss of the interest on the withheld money, which is obviously benefiting the feds, is a real damage.
AHA’s request is not dissimilar to an arrested individual’s right to a speedy trial. During a criminal trial, the defendant remains incarcerated. Therefore, because we believe our liberty is so important, the defendant has a right to a speedy trial. That way, if he or she is innocent, the defendant would have spent the least number of days imprisoned.
With a Medicare audit appeal, HHS begins immediately withholding reimbursements until the alleged overpayment amount is met, even though through the appeal, that overpayment will most likely be decreased quite substantially. Apparently, across the nation, the percent of overturned Medicare audits through appeal is around 72%, but I could not find out whether the 72% represents ANY amount overturned or the entire 100% of the audit being overturned. Because, in my personal experience, 99.9% of Medicare appeals have SOME reduction in the alleged amount (I would have said 100%, but we are taught not to use definitive remarks as attorneys).
Because the provider’s Medicare money is withheld based on an allegation of an overpayment, the fact that the cases are backlogged at the ALJ level is financially distressing for any provider.Even without the backlog, Medicare appeals take longer than Medicaid appeals. In Medicare, there is four-step appeal process. Going before the ALJ is the 3rd level.
First, a Medicare appeal begins with the Medicare Administrative Contractor (MAC) for redetermination. The MAC must render a redetermination decision within sixty days.
If unsuccessful, a provider can appeal the MAC’s decision to a Qualified Independent Contractor (“QIC”) for reconsideration. QICs must render a decision within sixty days.
Provided that the amount in controversy is greater than $140 (for calendar year 2014), the next level, and where the backlog begins, is at the level of appeal to an ALJ. The ALJ is required both to hold a hearing and to render a decision within ninety days, which is not happening.
Hence, AHA’s lawsuit. Hopefully AHA will be successful, because a backlog of Medicare appeals at the ALJ level doesn’t help anyone. And audits are not going away.