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RAC Audits: Alternatives to Litigation

Understanding why there’s a need for auditing the auditors.

I frequently encounter complaints by healthcare providers that when they are undergoing Recovery Audit Contractor (RAC), Medicare Administrative Contractor (MAC), and, more recently, the Targeted Probe-and-Educate (TPE) audits, the auditors are getting it wrong. That’s as in, during a RAC audit, the auditor finds claims noncompliant, for example, for not having medical necessity – but the provider knows unequivocally that the determination is dead wrong. So the question that I get from the providers is whether they have any legal recourse against the RAC or MAC finding noncompliance, besides going through the tedious administrative action, which we all know can take upwards of 5-7 years before reaching the third administrative level.

To which, now, upon a recent discovery in one of my cases, I would have responded that the only other option for relief would be obtaining a preliminary injunction in federal court. To prove a preliminary injunction in federal court, you must prove: a) a likelihood of success on the merits; and b) that irreparable harm would be incurred without the injunction; i.e., that your company would be financially devastated, or even threatened with extinction.

The conundrum of being on the brink of financial ruin is that you cannot afford a legal defense if you are about to lose everything.

This past month, I had a completely different legal strategy, with a different result. I am not saying that this result would be reached by all healthcare providers that disagree with the results of their RAC or MAC or TPE audit, but I now believe that in certain extreme circumstances, this alternative route could work, as it did in my case.

When this particular client hired me, I quickly realized that the impact of the MAC’s decision to rescind the client’s Medicare contract was going to do more than the average catastrophic outcomes resulting from a rescission of a Medicare contract. First, this provider was the only provider in the area with the ability to perform certain surgeries. Secondly, his practice consisted of 90 percent of Medicare. An immediate suspension of Medicare would have been devastating to his practice. Thirdly, the consequence of these Medicaid patients not undergoing this particular and highly specialized surgery was dire. This trifecta sparked a situation in which, I believed, that even a Centers for Medicare & Medicaid Services (CMS) employee (who probably truly believed that the negative findings cited by the RAC or MAC were accurate) may be swayed by the exigent circumstances.

I contacted opposing counsel, who was the attorney for CMS. Prior to this situation, I had automatically assumed that non-litigious strategies would never work. Opposing counsel listened to the facts. She asked that I draft a detailed explanation as to the circumstances. Now, concurrently, I also drafted this provider’s Medicare appeal, because we did not want to lose the right to appeal. The letter was definitely detailed and took a lot of time to create.

In the end, CMS surprised me and we got the Medicare contract termination overturned within months, not years, and without expensive litigation.

(Originally published on RACMonitor)

Medicare TPE Audits: A Wolf in Sheep’s Clothing (Part II)

Let’s talk targeted probe-and-educate (“TPE”) audits – again.

I received quite a bit of feedback on my RACMonitor article regarding Medicare TPE audits being a “Wolf in Sheep’s Clothing.” So, I decided to delve into more depth by contacting providers who reached out to me to discuss specific issues. My intent is to shed the sheep’s clothing and show the big, pointy ears, big, round eyes, and big, sharp teeth that the MACs will hear, see, and eat you through the Medicare TPE audits. So, call the Woodsman, arm yourself with a hatchet, and get ready to be prepared for TPE audits. I cannot stress enough the importance of being proactive.

The very first way to rebut a TPE audit is to challenge the reason you were selected, which includes challenging the data supporting the reason that you were chosen. A poor TPE audit can easily result in termination of your Medicare contract, so it is imperative that you are prepared and appeal adverse results. 42 C.F.R. § 424.535, “Revocation of enrollment in the Medicare program” outlines the reasons for termination. Failing the audit process – even if the results are incorrect – can result in termination of your Medicare contract. Be prepared and appeal.

In 2014, the Center for Medicare and Medicaid Services (“CMS”) began the TPE program that combines a review of a sample of claims with “education” to allegedly reduce errors in the Medicare claims submission process; however, it took years to get the program off the ground. But off the ground it is. It seems, however, that CMS pushed the TPE program off the ground and then allowed the MACs to dictate the terms. CMS claims that the results of the TPE program are favorable, basing its determination of success on the decrease in the number of claim errors after providers receive education. But providers undergoing the TPE audit process face tedious and burdensome deadlines to submit documents and to undergo the “education” process. These 45-day deadlines to submit documents are not supported by federal law or regulation; they are arbitrary deadlines. Yet, these deadlines must be met by the providers or the MACs will aver a 0% accuracy. Private payors may create and enforce arbitrary deadlines; they don’t have to follow federal Medicare regulations. But Medicare and Medicaid auditors must obey federal regulations. A quick search on Westlaw confirms that no provider has challenged the MACs’ TPE rules, at least, litigiously.

The TPE process begins by the MAC selecting a CPT/HCPC code and a provider. This selection process is a mystery. How the MACs decide to audit sleep studies versus chemotherapy administration or a 93675 versus a 93674 remains to be seen. According to one health care provider, which has undergone multiple TPE audits and has Noridian Healthcare Solutions as its MAC informed me that, at times, they may have 4 -5 TPE audits ongoing at the same time. CMS has touted that TPE audits do not overlap claims or cause the providers to undergo redundant audits. But if a provider bills numerous CPT codes, the provider can undergo multiple TPE audits concurrently, which is clearly not the intent of the TPE audits, in general. The provider has questioned ad nauseam the data analysis that alerted Noridian to assign the TPE to them in the first place. Supposedly, MACs target providers with claim activity that contractors deem as unusual. The usual TPE notification letter contains a six-month comparison table purportedly demonstrating the paid amount and number of claims for a particular CPT/HCPC code, but its accuracy is questionable. See below.

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This particular provider ran its own internal reports, and regardless of how many different ways this provider re-calculated the numbers, the provider could not figure out the numbers the TPE letter was alleging they were billing. But, because of the short turnaround deadlines and harsh penalties for failing to adhere to these deadlines, this provider has been unable to challenge the MAC’s comparison table. The MACs have yet to share its algorithm or computer program used to govern (a) which provider to target; (b) what CPT code to target; and (c) how it determines the paid amount and number of claims.

Pushing back on the original data on which the MACs supposedly relied upon to initially target you is an important way to defend yourself against a TPE audit. Unmask the wolf from the beginning. If you can debunk the reason for the TPE audit in the first place, the rest of the findings of the TPE audit cannot be valid. It is the classic “fruit of the poisonous tree” argument. Yet according to a quick search on Westlaw, no provider has appealed the reason for selection yet. For example, in the above image, the MAC compared one CPT code (78452) for this particular provider for dates of services January 1, 2017, through June 30, 2017, and then compared those claims to dates July 1, 2017, through December 31, 2017. Why? How is a comparison of the first half of a year to a second end of a year even relevant to your billing compliance? Before an independent tribunal, this chart, as supposed evidence of wrongdoing, would be thrown out as ridiculous. The point is – the MACs are using similar, yet irrelevant charts as proof of alleged, aberrant billing practices.

Another way to defend yourself is to contest the auditors/surveyors background knowledge. Challenging the knowledge of the nurse reviewer(s) and questioning the denial rate in relation to your TPE denials can also be successful. I had a dentist-client who was audited by a dental hygienist. Not to undermine the intelligence of a dental hygienist, but you can understand the awkwardness of a dental hygienist questioning a dentist’s opinion of the medical necessity of a service. If the auditor/surveyor lacks the same level of education of the health care provider, an independent tribunal will defer to the more educated and experienced decisions. This same provider kept a detailed timeline of their interactions with the hygienist reviewer(s), which included a summary of the conversations. Significantly, notes of conversations with the auditor/surveyor would normally not be allowed as evidence in a Court of law due to the hearsay rules. However, contemporaneous notes of conversations written in close time proximity of the conversation fall within a hearsay exception and can be admitted.

Pushing back on the MACs and/or formally appealing the MAC’s decisions are/is extremely important in getting the correct denial rate.  If your appeal is favorable, the MACs will take into your appeal results into account and will factor the appeal decision into the denial rate.

The upshot is – do not accept the sheep’s clothing. Understand that you are under target during this TPE “educational” audit. Understand how to defend yourself and do so. Call the Woodsman. Get the hatchet.

Nursing Home Safety Is Under Scrutiny from CMS – Staff May Be Penalized!

This past Tuesday, CMS unveiled a new initiative aimed at improving safety at nursing homes. While the study did not compare nursing home safety for staff, which, BTW, is staggering in numbers; i.e., more nursing home staff call-in sick or contract debilitating viruses versus the normal population. I question why ER nurses/doctors do not have the same rate of sickness. But that is the source of another blog…

The Committee on Energy and Commerce (“the Committee”) began conducting audits of nursing homes after numerous media reports described instances of abuse, neglect, and substandard care occurring at skilled nursing facilities (SNFs) and nursing facilities (NFs) across the country, including the Rehabilitation Center at Hollywood Hills where at least 12 residents died in the immediate aftermath of Hurricane Irma in September 2017.

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Under the Civil Money Penalty Reinvestment Program, CMS will create training products for nursing home professionals including staff competency assessment tools, instructional guides, webinars and technical assistance seminars.

These materials aim to help staff reduce negative events (including death), improve dementia care and strengthen staffing quality, including by reducing staff turnover and enhancing performance. A high rate of staff attrition is a product of low hourly wages, which is a product of low Medicare/caid reimbursement rates.

“We are pleased to offer nursing home staff practical tools and assistance to improve resident care and positively impact the lives of individuals in our nation’s nursing homes,” CMS Administrator Seema Verma said in a statement.

Seema Verna

The three-year effort is funded by federal civil penalties, which are fines nursing homes pay the CMS when they are noncompliant with regulations. There is no data as to how much CMS collects from civil fines against nursing homes per year, which is disconcerting considering everything about CMS is public record for taxpayers.

A proposed rule in the works to implement a federal law would allow the CMS to impose enforcement actions on nursing home staff in cases of elder abuse or other illegal activities.

CMS is increasing its oversight of post-acute care settings through this new civil money penalties initiative on nursing home staff and a new verification process to confirm personal attendants actually showed up to care for seniors when they are at home. This directive is targeted at personal care services (“PCS”). A proposed rule would allow CMS to impose enforcement actions on nursing home staff in cases of elder abuse or other illegal activities. The regulation being developed will outline how CMS would impose civil money penalties of up to $200,000 against nursing home staff or volunteers who fail to report reasonable suspicion of crimes. In addition, the proposed regulation would allow a 2-year exclusion from federal health programs for retaliating. It is questionable as to why CMS would penalize staff and/or volunteers rather than the nursing home company. One would think that volunteers may be more rare to find with this ruling.

CMS has been under heightened Congressional pressure to improve safety standards following ongoing media reports of abuse, neglect and substandard care occurring at nursing facilities across the country in recent years – or, at least, reported.

The federal government cited more than 1,000 nursing homes for either mishandling cases related to, or failing to protect residents against, rape, sexual abuse, or sexual assault, with nearly 100 facilities incurring multiple citations.

On October 20, 2017, the Committee sent a bipartisan letter requesting documents and information from Jack Michel, an owner of the Rehabilitation Center at Hollywood Hills (“Rehabilitation Center”) where at least 12 residents died in the immediate aftermath of Hurricane Irma in Florida. Excessive heat was the issue. According to the Florida Agency for Health Care Administration (AHCA), the Rehabilitation Center failed to follow adequate emergency management procedures after the facility’s air conditioning system lost power during Hurricane Irma. No generator? Despite increasingly excessive heat, staff at the facility did not take advantage of a fully functional hospital across the street and “overwhelmingly delayed calling 911” during a medical emergency. The facility also had contractual agreements with an assisted living facility and transportation company for emergency evacuation purposes yet did not activate these services. CMS ultimately terminated the Rehabilitation Center from the Medicare and Medicaid programs following an on-site inspection where surveyors found that the facility failed to meet Medicare’s basic health and safety requirements.

The Centers for Disease Control (“CDC”) found that, as of 2014, there were 15,600 nursing home facilities in the United States; 69.8 % of U.S. nursing home facilities have for-profit ownership. OIG has been accusing nursing homes of elderly abuse for years, but, only now, does the federal government have a sword for its accusations. Accusations, however, come with false ones. The appeal process for such accusations will be essential.

According to HHS OIG’s 2017 report, nursing facilities continue to experience problems ensuring quality of care and safety for people residing in them. OIG identified instances of substandard care causing preventable adverse events, finding an estimated 22% of Medicare beneficiaries had experienced an adverse event during their nursing stay. The report further states that “OIG continues to raise concerns about nursing home residents being at risk of abuse and neglect. In some instances, nursing home care is so substandard that providers may have liability under the False Claims Act.”

HHS has continuously expressed concerns about nursing home residents being at risk of abuse and neglect.

With the new initiative, nursing homes that do not achieve substantial compliance within six months will be terminated from participating in Medicare and Medicaid. Appeals to come…

Hasty and Careless Termination Decisions Can Put Medicare/caid Providers Out of Business

When action happens in the Medicare/caid world, it happens quickly. Sometimes you do not receive adequate notice to coordinate continuity of care for your consumers or patients. For example, on August 3, 2018, the Center for Medicare and Medicaid Services announced that at midnight on August 18, 2018, it would be terminating the contract between CMS and ESEC, LLC, an Oklahoma-based surgery center.

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CMS provided ESEC 15 days notice of complete termination of Medicare and Medicaid reimbursements. Now I do not know the details of ESEC’s financial reliance on Medicare or Medicaid, but, these days, few providers are solely third-party pay or cash-only. I can only assume that ESEC is scrambling to initiate a lawsuit to remain afloat and open for business. Or ESEC is praying for a “rescind” by correcting whatever issues it purportedly had. Personally, I would not count on a possible rescind. I would be proactively seeking legal intervention.

Here are some examples of recent terminations and the notice received by the providers:

  • Baylor St. Luke’s Medical Center’s heart transplant program lost federal funding August 17, 2018. The hospital will no longer be able to bill Medicare and Medicaid for heart transplants.
  • Effective August 9, 2018, Brookwood Baptist Medical Center’s Medicare contract was terminated. The notice was published July 25, 2018.
  • As of August 12, 2018, The Grandview Nursing & Rehabilitation Facility’s Medicare contract was terminated. Notice of the termination was published August 1, 2018.
  • As of September 1, 2018, Compassus-Kansas City, a hospice company, will lose its Medicare contract. Notice was provided August 17, 2018.
  • On August 3, 2018, CMS announced that it was terminating Deligent Health Services Inc.’s Medicare and Medicaid contact, effective December 5, 2017. (That is quite a retroactive timeframe).

Can Careless Judy put a healthcare provider out of business?

This happens all the time. Sure, ESEC probably had knowledge that CMS was investigating it. However, CMS has the authority to issue these public notices of termination without holding a hearing to determine whether CMS’ actions are accurate. What if Careless Judy in Program Integrity made a human error and ESEC actually does meet the standards of care. But you see, Careless Judy accidentally used the minimum standards of care from 2008 instead of 2018. It’s an honest mistake. She had no malice against ESEC. But, my point is – where is the mechanism that prevents a surgical ambulatory center from going out of business – just because Careless Judy made a mistake?

To look into whether any legal mechanism exists to prevent Careless Judy from putting the ambulatory center out of business, I turn to the legal rules.

42 CFR 488.456 governs terminations of provider agreements. Subsection (a) state that termination “ends – (1) Payment to the facility; and (2) Any alternative remedy.”

Subsection (b) states that CMS or the State may terminate the contract with the provider if the provider “Is not in substantial compliance with the requirements of participation, regardless whether immediate jeopardy is present.” On the bright side, if no immediate jeopardy exists then CMS or the State must give 15 days notice. If there is found to be immediate jeopardy, the provider get 2 days. But who determines what is “substantial compliance?” Careless Judy?

42 CFR 489.53 lists the reasons on which CMS may rely to terminate a provider. Although, please note, that the regulations use the word “may” and not “must.” So we have some additional guidance as to when a provider’s contract may be terminated, but it still seems subjective. Here are the reasons:

  1. The provider is not complying with the provisions of title XVIII and the applicable regulations of this chapter or with the provisions of the agreement.
  2. The provider or supplier places restrictions on the persons it will accept for treatment and it fails either to exempt Medicare beneficiaries from those restrictions or to apply them to Medicare beneficiaries the same as to all other persons seeking care.
  3. It no longer meets the appropriate conditions of participation or requirements (for SNFs and NFs) set forth elsewhere in this chapter. In the case of an RNHCI no longer meets the conditions for coverage, conditions of participation and requirements set forth elsewhere in this chapter.
  4. It fails to furnish information that CMS finds necessary for a determination as to whether payments are or were due under Medicare and the amounts due.
  5. It refuses to permit examination of its fiscal or other records by, or on behalf of CMS, as necessary for verification of information furnished as a basis for payment under Medicare.
  6. It failed to furnish information on business transactions as required in § 420.205 of this chapter.
  7. It failed at the time the agreement was entered into or renewed to disclose information on convicted individuals as required in § 420.204 of this chapter.
  8. It failed to furnish ownership information as required in § 420.206 of this chapter.
  9. It failed to comply with civil rights requirements set forth in 45 CFR parts 80, 84, and 90.
  10. In the case of a hospital or a critical access hospital as defined in section 1861(mm)(1) of the Act that has reason to believe it may have received an individual transferred by another hospital in violation of § 489.24(d), the hospital failed to report the incident to CMS or the State survey agency.
  11. In the case of a hospital requested to furnish inpatient services to CHAMPUS or CHAMPVA beneficiaries or to veterans, it failed to comply with § 489.25 or § 489.26, respectively.
  12. It failed to furnish the notice of discharge rights as required by § 489.27.
  13. The provider or supplier refuses to permit copying of any records or other information by, or on behalf of, CMS, as necessary to determine or verify compliance with participation requirements.
  14. The hospital knowingly and willfully fails to accept, on a repeated basis, an amount that approximates the Medicare rate established under the inpatient hospital prospective payment system, minus any enrollee deductibles or copayments, as payment in full from a fee-for-service FEHB plan for inpatient hospital services provided to a retired Federal enrollee of a fee-for-service FEHB plan, age 65 or older, who does not have Medicare Part A benefits.
  15. It had its enrollment in the Medicare program revoked in accordance to § 424.535 of this chapter.
  16. It has failed to pay a revisit user fee when and if assessed.
  17. In the case of an HHA, it failed to correct any deficiencies within the required time frame.
  18. The provider or supplier fails to grant immediate access upon a reasonable request to a state survey agency or other authorized entity for the purpose of determining, in accordance with § 488.3, whether the provider or supplier meets the applicable requirements, conditions of participation, conditions for coverage, or conditions for certification.

As you can see from the above list of possible termination reasons, many of which are subjective, it could be easy for Careless Judy to terminate a Medicare contract erroneously, based on inaccurate facts, or without proper investigation.

The same is true for Medicaid; your contract can be terminated on the federal or state level. The difference is that at the state level, Careless Judy is a state employee, not a federal.

42 CFR 498.5 governs appeal rights for providers contract terminations. Subsection (b) states that “Any provider dissatisfied with an initial determination to terminate its provider agreement is entitled to a hearing before an ALJ.”

42 CFR 498.20 states that an initial determination by CMS (like a contract termination) is binding unless it is reconsidered per 42 CFR 498.24.

A Stay of the termination should suspend the termination until the provider can obtain a hearing by an impartial tribunal until the appeal has been completed. The appeal process and supposed automatic Stay of the termination is the only protection for the provider from Careless Judy. Or filing an expensive injunction.