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Medicare and Medicaid RAC Audits: How Auditors Get It Wrong

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.

  1. 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.

  1. 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.

  1. 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.

  1. 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).

  1. 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.

False Claims Act: The Medicare Horror Story

What the heck is the False Claims Act and why is it important to you?

When it comes to Medicaid and Medicare, the ghoulish phrase “False Claims Act” is frequently thrown around. If you google False Claims Act (FCA) under the “news” option, you will see some chilling news article titles.

  • Pediatric Services of America, units to pay $6.88 in False Claims
  • NuVasive, Inc. Agrees to Pay $13.5 Million to Resolve False Claims
  • California Oncologist Pays $736k to Settle False Claims Allegations

False claims cases tend to be high dollar cases for health care providers; many times the amounts are at issue that could potentially put the provider out of business. FCA is spine-chilling, and many health care providers would rather play the hiding child rather than the curious investigator in a horror story.  Come on, let’s face it, the curious characters usually get killed.  But, this is not a horror story, and it is imperative that providers are informed of the FCA and potential penalties.

I have blogged about post payment reviews that use extrapolation, which result in astronomical alleged overpayments. See blog and blog.  Interestingly, these alleged overpayments could also be false claims.  It is just a matter of which governmental agency is pursuing it (or person in the case of qui tem cases).

But the ramifications of false claims allegations are even more bloodcurdling than the astronomical alleged overpayments. It is important for you to understand what false claims are and how to prevent yourself from ever participating in a false claim, knowingly or unknowingly.

First, what is a false claim?

A false claims occurs when you knowingly present, or cause to be presented, to the US Government a false or fraudulent claim for payment or approval. (abridged version).

Let’s analyze.

The false claim does not have to be billed with actual knowledge that it is false or fraudulent. The false claim does not even have to be fraudulent; it can be merely false. The distinction lies in that a fraudulent claim is one that you intentionally alter. A false claim could merely be incorrect information.  Saying it another way, the false claim can be a false or incorrect claim that you had no actual knowledge was false. That is hair-raising.

What is the penalty? It is:

A civil penalty of not less than $5,500 and not more than $11,000 per claim, plus 3 times the amount of the claim. You can see why these are high dollar cases.

The federal government recovered a jaw-dropping $5.7 billion in 2014 under the False Claims Act (FCA). In 2013, the feds recovered $5 billion under the FCA. Expect 2015 to be even higher.  Since the inception of the Affordable Care Act (ACA), FCA investigations have increased.

Overwhelmingly, the recoveries are from the health care industry.

Everyone knows that the Medicare Claims Processing Manual is esoteric, verbose, and vague. Let’s face it: just Chapter 1 “General Billing Requirements” alone is 313 pages! Besides me, who reads the Medicare Claims Processing Manual cover to cover? Who, besides me, needs to know that Medicare does not cover deported beneficiaries or the exceptions to the Anti-markup Payment Limitation?

Not to mention, the Manual is not law. The Manual does not get approved by Congress. The Manual is guidance or policy.

However, in FCA cases, you can be held liable for items in the Medicare Claims Processing Manual of which you were not aware. In other words, in FCA cases, you can be found liable for what you should have known.

Real life hypotheticals:

Hospital submits claims to Medicare and received payment for services rendered in a clinical trial involving devices to improve organ transplants. Unbeknownst to the hospital, the Manual prohibits Medicare reimbursements for non-FDA approved services.

Physician A has reciprocal arrangement with Physician B. A undergoes personal surgery and B serves A’s Medicare Part B patients while A is recovering. A returns and bills Medicare and is paid for services rendered by B 61 days+ after A left the office.

A physician accepts assignment of a bill of $300 for covered Medicare services and collects $80 from the enrollee. Physician neglects to depict on the claim form that he/she collected anything from the patient. Medicare’s allowable amount is $250, and since the deductible had previously been met, makes payment of $200 to the physician.

These are just a few examples of situations which could result in a FCA allegation.

But do not fret! There are legal defenses written into the Social Security Act that provides protection for health care providers!

Important take-aways:

1. Check whether you have insurance coverage for FCA.
2. Have an attorney on hand with FCA experience.
3. Read portions of the Medicare Claims Billing Manual which are pertinent to you.

Most importantly, if you are accused of billing false claims, get your advocate sooner rather than later! Do not engage in any conversations or interviews without counsel!

Appeal all findings!