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.
There are a lot of concerns related to “incident-to“ billing. However, for physician practices, “incident-to” billing is a money maker, which, in the world, of sub-par Medicare reimbursement rates is a minute ray of sunshine in an otherwise eclipsed land. Auditors argue that there are fraud and abuse concerns because practices ignore or are confused about the rules and bill everything “incident-to“regardless of the conditions being met. This can result in a nasty audit, as well as substantial fines, penalties, and attorneys’ fees. If you bill “incident-to,” just follow the rules…unless those rules are eliminated. Until possible elimination, keep up with the rules, which can differ depending on the auditor in the region.
Recently, people have been pushing for Medicare reform to include disallowing nurse practitioners (NPs) and physician assistants (PAs) from billing “incident-to.” Proponents of the suggested amendment claims that the recommendation would save the Medicare program money — approximately $50 to $250 million annually and just under $1 billion over 5 years.
The number of NPs who bill Medicare has more than doubled, from 52,000 to 130,000 from 2010 to 2017
What is “incident-to” billing?
In colloquialism, “incident-to” billing allows non-physician providers (NPPs) to report services “as if” they were performed by a physician. The NPP stands in the shoes of the physician. The advantage is that, under Medicare rules, covered services provided by NPPs typically are reimbursed at 85% of the fee schedule amount; whereas, services properly reported “incident-to” are reimbursed at the full fee schedule value.
In legalize, “incident-to” services under §1861(s)(2)(A) of the Social Security Act are provided by NPPs as a part of the services provided directly by the physician, but billed as if they were in fact performed by the physician. Several, legal, threshold requirements must be satisfied before billing eligibility for these services is established.
Billing using “incident-to” can be a huge money-maker for providers. If billed incorrectly, it can also be a provider’s financial downfall.
“Incident-to” billing can only apply to established patients. Not new patients. Not consults. The other non-negotiable factor is that the physician who is supervising must be on-site. Not a phone call away. Not grabbing a burger at a local eatery. On-site. Although with hospitals, the cafeteria is a viable option. I foresee, in the future, telehealth and Skype may change this on-site requirement. The incident-to rules also require that the services be part of a patient’s normal course of treatment. The rules require that the physician remains actively involved in the patient’s course of treatment. There must be direct supervision. Direct supervision = on-site. The following services cannot be billed as “incident-to:”
- new patient visits
- visits in which an established patient is seen for a new problem
- visits in which the treatment provided or prescribed is not a part of the treatment plan established by a physician
- services provided in the hospital or ambulatory surgery center.
Do not confuse “incident-to” with Medicare patients versus Medicaid patients. MediCAID’s regulations for the coverage of MD services vary significantly than Medicare’s rules and requires direct contact with the patient with exceptions.
Here is a question that I often get: “When billing “incident-to,” do you bill “incident to” the physician who is physically on-site that day or the physician who is overseeing that patient’s care? Both physicians are in the same group and it is billed under the Group NPI, but not sure which physician to reference for “incident-to.”
Answer: Bill under the MD who is on-site. This was addressed by the Center for Medicare and Medicaid Services (CMS) in the 2016 Physician Fee Schedule Final Rule.
The Medicare Benefit Policy Manual addresses the “incident-to” rules for each provider type and in any scenario:
- Section 60 contains policies for services furnished incident to physicians’ services in the physician’s office.
- Chapter 6, section 20.5 enumerates the policies for therapeutic services furnished “incident-to” physicians’ services in the hospital outpatient setting.
- Section 80 states the policies for diagnostic tests in the physician’s office
- Chapter 6, section 20.4 lists the policies for diagnostic tests furnished in the hospital outpatient setting.
Drug Administration under “incident-to”
“The Medicare program provides limited benefits for outpatient prescription drugs. The program covers drugs that are furnished “incident to” a physician’s service provided that the drugs are not usually self-administered by the patients who take them.” Medicare Benefit Policy Manual, 50.2. Injectable drugs, including intravenously administered drugs, are typically eligible for inclusion under the “incident-to” benefit.
The Medicare Administrative Contracts (MACs) (or – auditors) must fully explain the process they will use to determine whether a drug is usually self-administered and thus does not meet the “incident-to” benefit category. The MACs must publish a list of the injectable drugs that are subject to the self-administered exclusion. If there is discrepancy amongst the MACs, a lawsuit could help.
In order to meet all the general requirements for coverage under the “incident-to” provision, an FDA approved drug or biological must:
- Be of a form that is not usually self-administered;
- Must be furnished by a physician; and
- Must be administered by the physician, or by auxiliary personnel employed by the physician and under the physician’s personal supervision
The charge, if any, for the drug or biological must be included in the physician’s bill, and the cost of the drug or biological must represent an expense to the physician.
“Incident-to” billing is subject to elimination. The difference in billing “incident-to” is a 100% reimbursement rate versus an 85% reimbursement rate. That 15% difference cannot be passed onto the Medicare recipients.
While “incident-to” billing continues to be allowed, it is imperative to keep up with the ever changing rules.
So many memos, so little time. Federal prosecutors receive guidance on how to prosecute. Maybe “guidance” is too loose a term. There is a manual to follow, and memos are just guidance until the memos are incorporated into what is known as the Justice Manual. Memos are not as binding as the Justice Manual, but memos are persuasive. For the last 22 years, the Justice Manual has not been revised to reflect the many, many memos that have been drafted to direct prosecutors on how to proceed. Until recently…
Justice Manual Revised
The Justice Manual, which is the manual that instructs federal prosecutors how to proceed in cases of Medicare and Medicaid fraud, has been revised for the first time since 1997. The Justice Manual provides internal Department of Justice (DOJ) rules.
The DOJ has new policies for detecting Medicare and Medicaid fraud and abuse. Some of these policies are just addendums to old policies. Or formal acceptance to old memos. Remember the Yates Memo? The Yates Memo directed prosecutors to indict executives, individually, of fraudulent companies instead of just going after the company.
The Yates Memo has now been codified into the Justice Manual.
Then came the Granston Memo – In a January 10, 2018, memo (the “Granston Memo”), the DOJ directed its prosecutors to more seriously consider dismissing meritless False Claims Act (“FCA”) cases brought by whistleblowers. It lists 7 (non-exhaustive) criteria for determining whether the DOJ should dismiss a qui tam lawsuit. The reasoning behind the Granston Memo is that whistleblower lawsuits have risen over 600 cases per year, but the government’s involvement has not mirrored the raise. This may indicate that many of the whistleblower lawsuits are frivolous and filed for the purpose of financial gain, even if the money is not warranted. Remember qui tam relators (people who bring lawsuits against those who mishandle tax dollars, are rewarded monetarily for their efforts…and, usually, the reward is not a de minimus amount. In turn, people are incentivized to identify fraud and abuse against the government. At least, according to the Granston Memo, the financial incentive works too well and frivolous lawsuits are too prevalent.
The Granston Memo has also been codified into the Justice Manual.
Talk about an oxymoron…the Yates Memo instructs prosecutors to pursue claims against more people, especially those in the executive positions for acts of the company. The Granston Memo instructs prosecutors to more readily dismiss frivolous FCA allegations. “You’re a wigwam. You’re a teepee. Calm down, you’re just two tents (too tense).” – a horrible joke that my husband often quips. But this horrible quote is apropos to describe the mixed messages from DOJ regarding Medicare and Medicaid fraud and abuse.
The Brand Memo, yet another memo that we saw come out of CMS, instructs prosecutors not to use noncompliance as subject to future DOJ enforcement actions. In other words, agency guidance does not cannot create binding legal requirements. Going forward, the DOJ will not enforce recommendations found in agency guidance documents in civil actions. Relatedly, DOJ will not use noncompliance with agency guidance to “presumptively or conclusively” establish violations of applicable law or regulations in affirmative civil enforcement cases.
The Brand Memo was not incorporated into the Justice Manual. It also was not repudiated.
Medicare/caid Audit Targets Broadened
Going forward, traditional health care providers will not be the only targets – Medicare Advantage plan, EHR companies, and private equity owners – will all be audited and reviewed for fraud and abuse. Expect more audits with wider nets to catch non-provider targets to increase now that the Yates Memo was codified into the Justice Manual.
Anti-Kickback Statute, Stark Law, and HIPAA Narrowed
The Stark Law (42 U.S.C. 1395nn) and the Anti-Kickback Statute (42 U.S.C. §1320a‑7b(b)) exist to minimize unneeded or over-utilization of health-care services payable by the federal government. Stark Law and the Anti-Kickback regulations criminalize, impose civil monetary penalties, or impose other legal sanctions (such as termination from Medicare) against health care providers and other individuals who violate these laws. These laws are esoteric (which is one reason that I have a job) and require careful navigation by specialized legal counsel. Accidental missteps, even minute documentation errors, can lead to harsh and expensive results.
In a health care world in which collaboration among providers is being pushed and recommended, the Anti-Kickback, Stark, and HIPAA laws are antiquated and fail to recognize the current world. Existing federal health-care fraud and abuse laws create a “silo effect” that requires mapping and separating financial interests of health-care providers in order to ensure that patient referrals cannot be tainted by self-interest. Under Stark, a strict liability law, physicians cannot make a referral for the provision of “designated health services” to an entity with which they have a financial relationship (unless one of approximately 30 exceptions applies). In other words, for example, a hospital cannot refer patients to the home health care company that the hospital owns.
Going forward – and this has not happened yet – regulators and the Department will begin to claw back some of the more strict requirements of the Stark, Anti-Kickback, and HIPAA regulations to decrease the “silo effect” and allow providers to collaborate more on an individual’s whole health method. I had an example of this changing of the tide recently with my broken leg debacle. See blog. After an emergency surgery on my leg by an orthopedic surgeon because of a contracted infection in my wound, my primary care physician (PCP) called to check on me. My PCP had nothing to do with my leg surgery, or, to my knowledge, was never informed of it. But because of new technology that allows patient’s records to be accessed by multiple providers in various health care systems or practices, my PCP was informed of my surgery and added it to my chart. This never could have happened 20 years ago. But this sharing of medical records with other providers could have serious HIPAA implications if some restrictions of HIPAA are not removed.
In sum, if you haven’t had the pleasure of reading the Justice Manual in a while, now would be an appropriate time to do so since it has been revised for the first time in 22 years. This blog does not enumerate all the revisions to the Justice Manual. So it is important that you are familiar with the changes…or know someone who is.
What in the health care is going on in Detroit??
Hospitals in Detroit, MI may lose Medicare funding, which would be financially devastating to the hospitals. Is hospital care in Detroit at risk of going defunct? Sometimes, I think, we lose sight of how important our local hospitals are to our communities.
The Center for Medicare and Medicaid Services (CMS) notified DMC Harper University Hospital and Detroit Receiving Hospital that they may lose Medicare funding because they are allegedly not in compliance with “physical environment regulations.”
42 C.F.R. § 483.90 “Physical environment” states “The facility must be designed, constructed, equipped, and maintained to protect the health and safety of residents, personnel and the public.”
CMS will give the hospitals time to submit corrective action plan, but if the plans of correction are not accepted by CMS, Medicare will terminate the hospitals’ participation by April 15, 2019 (tax day – a bad omen?).
The two hospitals failed fire safety and infection control. Section 483.90 instructs providers to ensure fire safety by installing appropriate and required alarm systems. Providers are forbidden to have certain flammable goods in the hallways. It requires sprinkler systems to be installed. It requires emergency generators to be installed on the premises. Could you imagine the liability if Hurricane ABC destroys the area and Provider XYZ loses power, which causes Grandma Moses to stop breathing because her oxygen tube no longer disseminate oxygen? Think of the artwork we would have lost! Ok, that was a bad example because there are no hurricanes in Detroit.
Another important criterion of the physical environment regulations is infection control, which, according to the letters from CMS, is the criterion that the two hospitals allegedly have failed. Each hospital underwent a survey on Oct. 18th when the alleged deficiencies were discovered.
“We have determined that the deficiencies are significant and limit your hospital’s capacity to render adequate care and ensure the health and safety of your patients,” stated the Jan. 15 letters to the hospitals from CMS. CMS informed the hospitals they had until Jan. 25 to submit a plan of correction. It is unclear whether the hospitals submitted these plans. Hopefully, both hospitals have a legal team that did draft and submit the plans of correction.
Michigan is a state in which if Medicare funds are terminated, then Michigan will terminate Medicaid funds automatically. So termination of Medicare funding can be catastrophic. Concurrently, Scott Steiner, chief of Detroit Receiving Hospital, is resigning (shocker).
Detroit must have something in the water when it comes to health care issues in the news because, also in Detroit, a police task force Monday removed 26 fetuses from a Detroit Medical Center (DMC) morgue, all of which were allegedly mishandled by Perry Funeral Home. Twenty of the bodies taken from the DMC cooler had dates-of-birth listed from 1998 and earlier, with six dating to the 1970s. The earliest date of birth of a discovered fetus was Aug. 11, 1971.
State authorities are looking into another case of dozens of infant remains allegedly hidden for years in a DMC hospital. News articles do not mention the DMC hospital’s name, but one cannot help but wonder whether the two incidents – (1) Detroit hospitals failing infection control specifications; and (2) decomposing bodies found in a hospital – are intertwined.
Detroit has to be winning a record here with health care issues – Medicare audit failures in hospitals, possible loss of Medicare contracts, possible suspension of Medicaid reimbursements, and, apparently decomposing fetuses in funeral homes and hospitals.
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!!!
Change your calendars! 2019 is here!
2019 is the 19th year of the 21st century, and the 10th and last year of the 2010s decade. Next we know it’ll be 2020.
Few fun facts:
- January 7th is my birthday. And no, you may not ask my age.
- In February 2019, Nigeria will elect a new president.
- In June the Women’s World Cup will be held in France.
- November 5, 2019, USA will have our next election. Three Governor races will occur.
What else do we have in store for 2019? There are a TON of changes getting implemented for Medicare in 2019.
Hospital Prices Go Public
For starters, hospital prices will go public. Prices hospitals charge for their services will all go online Jan. 1 under a new federal requirement. There is a question as to how up-to-date the information will be. For example, a hospital publishes its prices for a Cesarian Section on January 1, 2019. Will that price be good on December 1, 2019? According to the rule, hospitals will be required to update the information annually or “more often as appropriate.”
“More often as appropriate” is not defined and upon reading it, I envision litigation arising between hospitals and patients bickering over increased rates but were not updated on the public site “more often as appropriate.” This recently created requirement for hospitals to publish its rates “more often as appropriate” will also create unfamiliar penalties for hospitals to face. Because whenever there is a rule, there are those who break them. Just ask CMS.
Skilled Nursing Facility Value-Based Purchasing Program (SNF VBP) Is Implemented
Skilled nursing facilities (SNF) will be penalized or rewarded on an annual basis depending on the SNFs’ performance, which is judged on a “hospital readmissions measure” during a performance period. The rule aims to improve quality of care and lower the number of elderly patients repeatedly readmitted to hospitals. The Medicare law that was implemented in October 2018 will be enforced in 2019.
Basically, all SNFs will receive a “performance score” annually based on performance, which is calculated by comparing data from years prior. The scores range from 0 – 100. But what if you disagree with your score? Take my word for it, when the 2019 scores roll in, there will be many an unhappy SNFs. Fair scoring, correct auditing, and objective reviews are not in Medicare auditors’ bailiwick.
Expansion of Telehealth
Telehealth benefits are limited to services available under Medicare Part B that are clinically appropriate to be administered through telecommunications and e-technology. For 2019, a proposed rule creates three, new, “virtual,” CPT codes that do not have the same restrictions as the current, “traditional” telehealth definition. Now CMS provides reimbursement for non-office visits through telehealth services, but only if the patients present physically at an “originating site,” which only includes physician offices, hospitals, and other qualified health care centers. This prevents providers from consulting with their patients while they are at their home. The brand-new, 2019 CPT codes would allow telehealth to patients in homes.
Word of caution, my friends… Do not cross the streams.
- CPT #1 – Telephone conference for established patients only; video not required
- CPT #2 – Review of selfies of patient to determine whether office visit is needed; established patients only
- CPT #3 – Consult with a specialist or colleague for advice without requiring a specialist visit; patient’s consent required.
These are not the only developments in Medicare in 2019. But these are some highlights. Here is wishing you and yours a very happy New Year, and thank you for reading my blog because if you are reading this then you read the whole blog.
5th Circuit Finds Subject Matter Jurisdiction For Medicare and Medicaid Providers – Why Collards Matter
“I’d like some spaghetti, please, and a side of meatballs.” – This sentence is illogical because meatballs are integral to spaghetti and meatballs. If you order spaghetti – and -meatballs, you are ordering “spaghetti and meatballs.” Meatballs on the side is not a thing.
Juxtapose, a healthcare provider defending itself from an alleged overpayment, But during the appeal process undergoes a different penalty – the state or federal government begins to recoup future funds prior to a decision that the alleged recoupment is authorized, legal, or warranted. When a completely new issue unrelated to the allegation of overpayment inserts itself into the mix, then you have spaghetti and meatballs with a side of collard greens. Collard greens need to be appealed in a completely different manner than spaghetti and meatballs, especially when the collard greens could put the company out of business because of the premature and unwarranted recoupments without due process.
I have been arguing this for years based off of, not only, a 1976 Supreme Court case, but multiple state case law, as well as, success I have had in the federal and administrative courts, and BTW – logic.
On March 27, 2018, I was confirmed again. The Fifth Circuit Court of Appeals decided a landmark case for Medicare and Medicaid providers across the country. The case, Family Rehab., Inc. v Azar, 2018 U.S. App. LEXIS 7668, involved a Medicare home health service provider, which was assessed for approximately $7.8 million in Medicare overpayments. Family Rehab, the plaintiff in the case, relied on 88% to 94% of its revenue from Medicare. The company had timely appealed the alleged overpayment, and it was at the third level of the Medicare five step process for appeals. See blog. But there is a 3 – 5 year backlog on the third level, and the government began to recoup the $7.8 million despite the ongoing appeal. If no action were taken, the company would be out of business well-before any ALJ could rule on the merits of the case, i.e. whether the recoupment was warranted. How is that fair? The provider may not owe $7.8 million, but before an objective tribunal decides what is actually owed, if anything, we are going to go ahead and take the money and reap the benefit of any interest accrued during the time it takes the provider to get a hearing.
The backlog for Medicare appeals at the ALJ level is unacceptably long. See blog and blog. However, the federal regulations only prevent recoupment during the appeal process during the first and second levels. This is absolutely asinine and should be changed considering we do have a clause in the Constitution called “due process.” Purported criminals receive due process, but healthcare providers who accept Medicare or Medicaid, at times, do not.
At the third level of appeal, Family Rehab underwent recoupments, even though it was still appealing the decision, which immediately stifled Family Rehab’s income. Family Rehab, because of the premature recoupments, was at risk of losing everything, going bankrupt, firing its staff, and no longer providing medically necessary home health services for the elderly. This situation mimics a situation in which I represented a client in northern Indiana who was losing its Medicaid contract. I also successfully obtained a preliminary injunction preventing the provider from losing its Medicaid contract. See blog.
It is important to note that in this case the ZPIC had audited only 43 claims. Then it used a statistical method to extrapolate the alleged over-billings and concluded that the alleged overpayment was $7,885,803.23. I cannot tell you how many times I have disputed an extrapolation and won. See blog.
42 USC 1395(f)(f)(d)(1)(A) states that the ALJ shall conduct and conclude the hearing and render a decision no later than 90 days after a timely request. Yet the Fifth Circuit Court of Appeals found that an ALJ hearing would not be forthcoming not within 90 days or even 900 days. The judge noted in his decision that the Medicare appeal backlog for an ALJ hearing was 3 – 5 years. The District Court held that it lacked subject matter jurisdiction because Family Rehab had not exhausted its administrative remedies. Family Rehab appealed.
On appeal, Family Rehab argued the same arguments that I have made in the past: (1) its procedural due process and ultra vires claims are collateral to the agency’s appellate process; and (2) going through the appellate process would mean no review at all because the provider would be out of business by the time it would be heard by an ALJ.
What does collateral mean? Collard greens are collateral. When you think collateral; think collards. Collard greens do not normally come with spaghetti and meatballs. A collateral issue is an issue that is entirely collateral to a substantive agency decision and would not be decided through the administrative appeal process. In other words, even if Family Rehab were to only pursue the $7.8 million overpayment issue through the administrative process, the issue of having money recouped and the damage to the company that the recoupment was causing would never be heard by the ALJ because those “collateral” issues are outside the ALJ’s purview. The premature recoupment issue could not be remedied by an ALJ. The Fifth Circuit Court of Appeals agreed.
The collateral argument also applies to terminations of Medicare and Medicaid contracts without due process. In an analogous case (Affiliated Professional), the provider argued that the termination of its Medicare contract without due process violated its right to due process and the Equal Protection Clause and was successful.
The upshot is obvious, if the Court must examine the merits of the underlying dispute, delve into the statute and regulations, or make independent judgments as to plaintiff’s eligibility under a statute, the claim is not collateral.
The importance of this case is that it verifies my contention that if a provider is undergoing a recoupment or termination without due process, there is relief for that provider – an injunction stopping the premature recoupments or termination until due process has been completed.
Here is an article that I wrote that was first published on RACMonitor on March 15, 2018:
All audits are questionable, contends the author, so appeal all audit results.
Providers ask me all the time – how will you legally prove that an alleged overpayment is erroneous? When I explain some examples of mistakes that Recovery Audit Contractors (RACs) and other health care auditors make, they ask, how do these auditors get it so wrong?
First, let’s debunk the notion that the government is always right. In my experience, the government is rarely right. Auditors are not always healthcare providers. Some have gone to college. Many have not. I googled the education criteria for a clinical compliance reviewer. The job application requires the clinical reviewer to “understand Medicare and Medicaid regulations,” but the education requirement was to have an RN. Another company required a college degree…in anything.
Let’s go over the most common mistakes auditors make that I have seen. I call them “oops, I did it again.” And I am not a fan of reruns.
- Using the Wrong Clinical Coverage Policy/Manual/Regulation
Before an on-site visit, auditors are given a checklist, which, theoretically, is based on the pertinent rules and regulations germane to the type of healthcare service being audited. The checklists are written by a government employee who most likely is not an attorney. There is no formal mechanism in place to compare the Medicare policies, rules, and manuals to the checklist. If the checklist is erroneous, then the audit results are erroneous. The Centers for Medicare & Medicaid Services (CMS) frequently revises final rules, changing requirements for certain healthcare services. State agencies amend small technicalities in the Medicaid policies constantly. These audit checklists are not updated every time CMS issues a new final rule or a state agency revises a clinical coverage policy.
For example, for hospital-based services, there is a different reimbursement rate depending on whether the patient is an inpatient or outpatient. Over the last few years there have been many modifications to the benchmarks for inpatient services. Another example is in behavioral outpatient therapy; while many states allow 32 unmanaged visits, others have decreased the number of unmanaged visits to 16, or, in some places, eight. Over and over, I have seen auditors apply the wrong policy or regulation. They apply the Medicare Manual from 2018 for dates of service performed in 2016, for example. In many cases, the more recent policies are more stringent that those of two or three years ago.
- A Flawed Sample Equals a Flawed Extrapolation
The second common blunder auditors often make is producing a flawed sample. Two common mishaps in creating a sample are: a) including non-government paid claims in the sample and b) failing to pick the sample randomly. Both common mistakes can render a sample invalid, and therefore, the extrapolation invalid. Auditors try to throw out their metaphoric fishing nets wide in order to collect multiple types of services. The auditors accidentally include dates of service of claims that were paid by third-party payors instead of Medicare/Medicaid. You’ve heard of the “fruit of the poisonous tree?” This makes the audit the fruit of the poisonous audit. The same argument goes for samples that are not random, as required by the U.S. Department of Health and Human Services (HHS) Office of Inspector General (OIG). A nonrandom sample is not acceptable and would also render any extrapolation invalid.
- A Simple Misunderstanding
A third common blooper found with RAC auditors is simple misunderstandings based on lack of communication between the auditor and provider. Say an auditor asks for a chart for date of service X. The provider gives the auditor the chart for date of service X, but what the auditor is really looking for is the physician’s order or prescription that was dated the day prior. The provider did not give the auditor the pertinent document because the auditor did not request it. These issues cause complications later, because inevitably, the auditor will argue that if the provider had the document all along, then why was the document not presented? Sometimes inaccurate accusations of fraud and fabrication are averred.
- The Erroneous Extrapolation
Auditors use a computer program called RAT-STATS to extrapolate the sample error rate across a universe of claims. There are so many variables that can render an extrapolation invalid. Auditors can have too low a confidence level. The OIG requires a 90 percent confidence level at 25 percent precision for the “point estimate.” The size and validity of the sample matters to the validity of the extrapolation. The RAT-STATS outcome must be reviewed by a statistician or a person with equal expertise. An appropriate statistical formula for variable sampling must be used. Any deviations from these directives and other mandates render the extrapolation invalid. (This is not an exhaustive list of requirements for extrapolations).
- That Darn Purple Ink!
A fifth reason that auditors get it wrong is because of nitpicky, nonsensical reasons such as using purple ink instead of blue. Yes, this actually happened to one of my clients. Or if the amount of time with the patient is not denoted on the medical record, but the duration is either not relevant or the duration is defined in the CPT code. Electronic signatures, when printed, sometimes are left off – but the document was signed. A date on the service note is transposed. Because there is little communication between the auditor and the provider, mistakes happen.
The moral of the story — appeal all audit results.