(January 30, 2013): The Medicare, Medicaid, and SCHIP Benefits Improvement and Protection Act of 2000 (also referred to as “BIPA”), amended Section 1869 of the Social Security Act, resulting in a number of significant changes to the way administrative appeals of denied Medicare claims are handled. One change in particular has greatly simplified the Medicare appeals process. BIPA established a uniform process for handling both Medicare Part A and Part B administrative appeals.
I. ZPIC Audits Involving Extrapolated Damages Have Become Quite Common.
Unlike the Medicaid administrative claims appeal process (which varies from state to state), thanks to BIPA, the Medicare administrative appeals process is relatively straightforward in terms of its applicable deadlines and its filing procedures. Unfortunately, a number of potential pitfalls remain, especially if a health care provider is inexperienced and has been subjected to an audit involving multiple claims where the Zone Program Integrity Contractor (ZPIC) has engaged in statistical sampling and has “extrapolated” the alleged damages in order to arrive at a projected overpayment. Although most providers can handle the appeal of individual (or even a handful) of claims, if you are facing a “big-box” appeal where alleged damages have been extrapolated, it is strongly recommended that you obtain the assistance of experienced legal counsel to represent you in the proceedings.
II. How Are ZPIC Audits Initiated?
A ZPIC may initiate a post-payment audit of your Medicare claims for a variety of reasons. After handling the administrative appeal of literally tens of thousands of claims, we have found that the two most common reasons for an audit are: (1) Data-Mining and (2) Complaints.
Data-mining may result in a provider being targeted based on the number of patients he or she is allegedly seeing each day, the frequency that a specific Code Procedural Terminology (CPT) code is being billed, or countless other factors examined by a contractor when assessing coding and billing practices. Alternatively, a provider may be reviewed as a result of a complaint filed by a former employee, a dissatisfied patient, or even a competitor. Regardless of the source, once a provider is targeted and an audit has been initiated, it is imperative that the provider diligently work to address any operational, coding, or billing concerns that may arise.
While the nature of a contractor’s initial contact with a Medicare provider can vary (it often is made by an unannounced site visit), a provider may also receive a written request for information from the ZPIC. In past years, written requests were primarily focused on supporting medical documentation related to specific claims for services or devices billed to Medicare. This focus has seemingly changed over the past few years. Although many requests continue to seek only supporting medical documentation, we have seen an appreciable increase in the number of requests for business records sent out by Medicare contractors such as ZPICs. These requests often seek copies of contracts, medical director agreements, and copies of accounting records. Essentially, these document requests are meant to provide the contractor with an accurate picture of the provider’s business and referral relationships. Should the contractor identify any questionable relationships, they will then refer their findings to the Inspector General of the Department of Health and Human Services (HHS-OIG) and / or the Department of Justice (DOJ) for further consideration.
After you have received a request for supporting documentation (either in writing or as a result of an unannounced visit) and have submitted the information sought, the requesting ZPIC will subsequently send you a letter, outlining the ZPICs findings.
While practices vary from ZPIC to ZPIC, a provider typically first learns that an auditing contractor intends to extrapolate an alleged overpayment in one of two ways. In some cases, the initial letter sent to the provider requesting medical records associated with a group of claims may expressly state that the claims identified constitute a statistically relevant sample. As such, when the audit is completed, the ZPIC will then extrapolate the alleged damages to the universe of claims at issue in the case. In most cases, the contractor has examined a universe which consists of a two year period of claims. Alternatively, a provider may not learn that the contractor intended to extrapolate damages until the results of the ZPIC audit are received.
It is not uncommon for a ZPIC to take from 6 months to 2 years to complete its review of your documentation. Shortly after receiving the ZPIC results letter, you should receive a “demand letter” from your Medicare Administrative Contractor (MAC). While the letter from your ZPIC will typically lay out the audit results and discuss the reasons for denying certain claims, you should pay careful attention to see if the ZPIC has extrapolated the alleged damages in your case from the sample of claims reviewed to the universe of claims at issue.
In most cases, the ZPIC letter will expressly state that their correspondence is not a demand letter. Instead, the second letter, sent by the MAC, will state the amount of the alleged overpayment and lay out when payment is due. Normally, the date of the MAC letter is also used to calculate the due date of the provider’s rebuttal and redetermination appeal. While this process has become fairly uniform, we have continued to see exceptions to the general rule. In at least one case, the demand letter was sent out in a third letter. In another case, the contractor’s demand letter language was incorporated into the first letter. As a result, it is imperative that you carefully review any and all correspondence sent by a ZPIC.
III. What is an “Extrapolation”?
An extrapolation is the process of using statistical sampling in a review to calculate and project or extrapolate alleged overpayments made in connection with Medicare claims. Medicare contractors seek out errors in a purported “statistically relevant sample” of the provider’s Medicare claims and then calculate and apply the “error rate” to the entire universe of claims covering a given period of time.
The practice dates back twenty years to a decision by the HHS to authorize the use of statistical sampling in lieu of engaging in onerous claim-by-claim reviews. In Chaves County Home Health Services v. Sullivan, the Court of Appeals for the District of Columbia Circuit upheld extrapolation as within the Secretary’s discretion.
When faced with a potential case where the universe of claims to be reviewed is so large that a claim-by-claim review is not administratively feasible, CMS has authorized its contractors (including ZPICs) to use statistical sampling to arrive at a projected overpayment. As HCFA Ruling 86-1 reflects:
“Intermediaries and carriers may use statistical sampling to project overpayments to providers, physicians and suppliers when claims are voluminous and reflect a pattern of erroneous billing or overutilization and when case-by-case review is not administratively feasible. Providers can appeal the overpayment determination by challenging the statistical validity of the sample or the correctness of the determination in specific cases identified by the sample.”
As HCFA Ruling 86-1 expressly notes, a provider or supplier who is concerned about the correctness of the projected overpayment can challenge the “statistical validity” itself or the correctness of the “specific cases identified by the sample.” As HCFA Ruling 86-1 further notes, statistical sampling is appropriate when:
“. . . The intermediary [has] decided that this method of determining the amount of the overpayment was not administratively feasible, given the volume of records involved and the cost of retrieving all the beneficiary records for the period in question. The cost of identifying and calculating each individual overpayment itself would constitute a substantial portion of the amount the intermediary might reasonably be expected to recover. Further, the allocation of sufficient staff to reexamine all individual claims for the period in question would interfere with current claims processing activities to an unacceptable degree.”
While a provider may still challenge the denial of claims in the sample reviewed, the use of extrapolation greatly increases the potential financial harm that a provider mat suffer as a result of an audit. Moreover, the reliance of ZPICs on statistical sampling only seems to be growing. This makes it essential for providers to involve experienced counsel and qualified experts as soon as possible in cases where damages have been extrapolated.
The use of extrapolation can greatly increase a provider’s potential liability. It is not at all uncommon for a sample of denied claims which would normally add up to a mere $10,000, to be magnified to the universe of claims, to an extrapolated alleged overpayment of $500,000 or even more. As we will discuss, there are a number of business reasons why everyone except the provider benefits from the use of extrapolation.
IV. Challenging a ZPIC’s Extrapolation of Alleged Damages.
In recent years, we have seen Medicare contractors (such as ZPICs) increasingly rely on statistical extrapolation estimates when assessing claims overpayments. In early cases, we successfully challenged countless extrapolations by identifying relatively basic reasons for why the calculations were inconsistent with accepted statistical principles and practices. Now, however, providers should expect ZPICs, and soon, Recovery Audit Contractors (RACs) to send a team made up a statistician, one or more clinical reviewers and an attorney, to vigorously oppose most, if not all, hearings challenging the validity of the extrapolation.
Imagine that a ZPIC or RAC hands you a claims analysis rife with alleged errors, an indecipherable list of statistical formulas, and an extrapolated recovery demand that will cripple your practice or clinic. What steps should you take to analyze their work? Based on our experience, providers should carefully assess the contractor’s actions, use of formulas, and application of the RAT-STATs program when selecting a statistical sample and extrapolating the alleged damages based on the sample pulled. Over the years, we have challenged the extrapolation of damages conducted by Medicare contractors around the country, covering tens of thousands of claims. Regardless of whether you are providing E / M, home health, physical therapy, hospice, or other services, it is imperative that you work with experienced legal counsel and statistical experts to analyze the statistical sampling and extrapolation steps taken by the contractor.
Should you succeed in invalidating the extrapolation, the whole game will change. The question is—“How can you go about fighting an extrapolation calculation?” As your legal counsel can attest, there are a number of both legal and substantive statistical arguments that should be analyzed by your counsel and expert statistician when challenging the validity of a statistical extrapolation. The weight given to a specific argument may vary from judge to judge. As a result, it is often in your best interest to assert any and all legitimate arguments in support of your assertion that the statistical extrapolation is fatally flawed.
V. Questions You Should Ask When Retaining Legal Counsel to Represent Your Interests.
When faced with extrapolated damages, it is almost always necessary to retain qualified legal counsel to represent the provider in the Medicare administrative appeals process. Possible considerations include, but are not limited to:
(1) Has the law firm ever handled large, complex contractor audits before? Some firms will happily take your case, despite the fact that they have little or no experience in this area of health law. Do not pay for your attorneys to learn how to handle your case. While every case is different, an experienced firm will have developed a number of arguments and defenses that may be readily used in your case without having to conduct costly, extensive legal research.
(2) Can the firm provide client references? You should not hesitate to ask the attorney for references who can discuss the quality and cost effectiveness of the attorney’s work.
(3) Has the attorney handled multiple hearings before ALJs hearings and / or appeals before the Medicare Appeals Council (MAC)? At the end of the day, there are few substitutes for experience. Make sure you are comfortable with your attorney.
(4) Inquire into who will be used as a statistical expert. Experienced legal counsel will have likely developed solid relationships with statisticians who can be engaged to review the Medicare contractor’s statistical methodology.
(5) The issue of “cost” should be addressed before any final decision is made to retain an attorney to represent your practice or business. Attorneys may be willing to handle your case on an hourly basis, as a flat rate, or on some other basis. It is essential that you conduct an honest review of your financial condition and engage competent counsel at a cost you can afford.
Medicare appeals cases involving extrapolated damages can be quite complicated. If you intend to challenge an extrapolation, it is essential that you work with experienced legal counsel and experts. Not yet facing an audit? Avoid this issue in the first place — develop, implement and adhere to an effective Compliance Plan. Work with your staff to ensure that each of your claims fully meets applicable documentation, coverage and payment requirements before billing.
Robert W. Liles and other health lawyers in Liles Parker have extensive experience representing Part A and Part B providers in Medicare appeals cases, both with and without an extrapolation of projected damages. Our attorneys are also experienced in setting up effective Compliance Plans and Programs for Medicare and Medicaid providers. Should you have any questions, please give Robert a call for a free consultation. He can be reached at: 1 (800) 475-1906.
 A “big-box” appeal is a term used by personnel at the Office of Medicare Hearings and Appeals that refers to a large, multi-claim case typically involving between 50 and 200 claims. In most big-box appeals, the auditing contractor has also sought extrapolated damages.
 In this instance, the “MAC” refers to the Medicare Administrative Contractor (such as TrailBlazer, Palmetto, Pinnacle, CIGNA, etc.).
 931 F.2d 914 (D.C. Cir. 1991).
(January 21, 2013): Medicare appeals of denied claims for services are somewhat common. In years past, both health care providers and members of their staff have represented themselves or their practice in the administrative process. While the rules of participation are quite lenient, the process has significantly changed over the last decade. Moreover, in recent years, contractors working for the Centers for Medicare and Medicaid Services (CMS) have assumed a much greater role in the Medicare appeals process. Hearings conducted in today’s administrative appeals of alleged Medicare overpayments are likely to be quite different from those conducted even a few years ago. Should you decide to represent yourself in a hearing before an Administrative Law Judge (ALJ), you must be prepared to respond to a number of relatively new challenges. As set out below, the current administrative process is really the result of several consecutive legislative changes to the Medicare appeals process.
I. The Enactment of “BIPA” Was the First of Many Changes to the Medicare Appeals Process:
The “Medicare, Medicaid, and SCHIP Benefits Improvement and Protection Act of 2000″ (also referred to as “BIPA” )amended Section 1869 of the “Social Security Act” (Act), resulting in a number of changes. Several of the changes implemented under BIPA included:
The legislation established a consistent, uniform process for handling both Medicare Part A and Part B administrative appeals;
BIPA introduced a new level of appeal for Part A claims, making it so that it now tracked the Part B claims appeals process;
The legislation revised the appeal deadlines for filing Part A and Part B claims appeals and also applied the same deadlines to both Part A and Part B claims;
The legislation identified ”deadlines” for CMS contractors at the first level of appeal (Medicare Administrative Contractors, or “MACs”) to issue a “Redetermination’’ appeal decision;
BIPA also created a second level of appeal which would be heard by a type of CMS contractor known as a Qualified Independent Contractor (QIC) to conduct a “Reconsideration’’ of the MAC’s previously issued redetermination decision;
BIPA established a uniform “amount in controversy threshold” which must be met in order for a health care provider or supplier to appeal a reconsideration denial decision to the Administrative Law Judge (ALJ) level;
Required that each level of appeal conduct a de novo review of the evidence.
II. The MMA Further Refined the Medicare Appeals Process:
Medicare appeals were further changed with the passage of the “Medicare Prescription Drug, Improvement, and Modernization Act of 2003″ (MMA). Several of the refinements made to the Medicare appeals process under the MMA included, but were not limited to:
Under the MMA, the ALJ hearing process was transferred from the Social Security Administration (SSA) to an agency reporting directly to the Secretary, HHS, known as the “Office of Medicare Hearings and Appeals” (OMHA).
The legislation established a process for a health care provider to seek and “expedited” judicial review;
The MMA required that health care providers present their evidence to be considered early in the appeals process so that it could be considered at the second level of appeals.
Under the MMA, health care providers could not seek an administrative or judicial review of a determination by the Secretary of a “sustained or high levels of payment errors”; and
These revisions, along with a number of other changes, have dramatically changed the way that Medicare appeals are conducted. Equally significant, CMS contractors (including Zone Program Integrity Contractors (ZPICs), Recovery Audit Contractors (RACs) and even representative of the QIC now routinely show up at ALJ hearings (as a “participant” not as a “party”)in order to present their reasoning for denying the claims.
While the proceeding is technically “non-adversarial” in nature. The participation in the ALJ hearing of medical and statistical experts working for ZPIC can greatly complicate your handling of a Medicare appeal.
Over the years, our attorneys have represented a wide variety of Part A and Part B providers and suppliers in Medicare hearings before an ALJ. There are no guarantees in litigation. Nevertheless, if you want to maximize your chances of presenting a persuasive case, we recommend that you retain experienced legal counsel to represent you as early in the process as possible.
Robert W. Liles, Esq. serves as Managing Partner at Liles Partner, PLLC. Robert and the firm’s other attorneys have years of experience representing health care providers in the Medicare appeals process. Should you have a question, call Robert for a free consultation: 1 (800) 475-1906.
Lose Your Medicare Appeal at Reconsideration? Don’t Throw in the Towel Just Yet — Consider the Consequences and Your Options.
(June 18, 2011): As a review of the last several quarters of Medicare appeals statistics reflects, an overwhelming percentage of Medicare providers appealing alleged overpayments through the Medicare administrative appeals process have chosen to “throw in the towel,” so to speak, when they have lost at the reconsideration level. As you will recall, at the reconsideration level, Medicare claims are assessed by a Qualified Independent Contractor (QIC) selected by the Centers for Medicare and Medicaid Services (CMS) to hear the second level of administrative appeals.
According to statistics kept by Q2Administrators, the contractor selected to serve as the Administrative QIC (AdQIC), most Medicare providers have chosen not to appeal claims denials issued the QIC at the reconsideration level of appeal. Nationwide, in the last eight quarters, the percentage of Part B QIC cases not being appealed has risen to an astounding 86%. This trend is also occurring in Part A QIC cases, where the numbers of non-appealed cases have grown from roughly half to 75%.
The purpose of this article is to examine possible reasons why Medicare providers have chosen not to appeal claims denials to the Office of Medicare Hearings and Appeals (OMHA) to be heard by an Administrative Law Judge (ALJ). We also examine points to be considered by providers if choosing to be represented by legal counsel in the ALJ hearing process.
I. The Third Level of Medicare Appeals — ALJ Hearings
For 2011, if at least $130 remains in controversy following a QIC’s denial decision at the reconsideration level, a Medicare provider may request an ALJ hearing within 60 days of receipt of the reconsideration denial decision. ALJ hearings are intended to be non-adversarial proceedings aimed at determining the facts so that questions of coverage and payment may be properly addressed. It has been our experience that the ALJ level of appeal is a provider’s best opportunity to present its arguments in support of coverage and payment.
ALJ hearings are usually held by video-teleconference or by telephone, but you may also ask for an in-person hearing. While an ALJ hearing is the third level of the administrative appeals process, it is the first time that a provider is given an opportunity to testify, clarify points missed by reviewers at lower level of appeal and answer any questions that may be raised by the ALJ.
II. Why Are Most Providers Not Filing Medicare Appeals Past the Reconsideration Level?
When facing an overpayment determination levied by a Zone Program Integrity Contractor (ZPIC), a Recovery Audit Contractor (RAC) or in some instances a Medicare Administrative Contractor (MAC), the first question to be addressed by a Medicare provider is:
“Based on the record and the facts, should we have been paid for the services rendered or the products / devices provided to the Medicare beneficiary?”
The answer to this question isn’t always as easy as it may initially seem. Having said that, the basic rule we recommend that providers follow is fairly simple – if it doesn’t belong to you, give it back. In such a situation, a provider should examine the various reasons why the claim does not qualify for coverage and payment and should take steps to better ensure that any deficiencies are remedied. Additionally, any other overpayments noted must be promptly repaid to the government, with the 60 day period mandated under the Affordable Care Act (ACA).
In cases where a provider (or their representative) contends that a claim does, in fact, qualify for payment, it typically appeals an overpayment assessment issued by a ZPIC, RAC or MAC. Nevertheless, as previously discussed the vast majority of providers who lose an appeal at the reconsideration level choose not to further appeal the denial. In speaking with Medicare providers, the primary reasons for not appealing any further include:
Cost / benefit considerations. By the time a provider reaches the ALJ level, the provider has already endured the time, expense and frustration of unsuccessfully arguing its case through two levels of appeal. By this time, many providers conclude that the amount in controversy does not justify the time and expense of further appealing the QIC’s denial to the ALJ level.
- Many providers are intimidated by the hearing process and do not feel comfortable participating in an ALJ hearing. Despite the fact that ALJ hearings are typically conducted by teleconference, the process can still be quite intimidating. ALJs almost always place testifying providers and their designated “experts” under oath before taking their testimony. Additionally, if a provider has introduced new evidence into the record, it will be required to show “good cause” for its admission at this late stage of the proceedings. Finally, most providers find that the ALJ handling their case is quite knowledgeable and typically has extensive experience analyzing coverage requirements and assessing the adequacy of a provider’s documentation. Providers who have failed to adequately prepare for the hearing are likely to find that the process can be quite difficult.
- The ALJ hearing process has become considerably more complicated due to the participation of ZPIC personnel. Over the past year, the ALJ hearing process has become quite complicated when dealing with large, “big box” overpayment cases. For instance, in cases when damages have been extrapolated, it is quite common for representatives of the ZPIC who issued the initial denial decision to attend the hearing as a “participant.” When this occurs, ZPIC representatives often include an attorney representing the ZPIC, a statistician who will be prepared to support the extrapolation applied in the case, and a clinician (typically a Registered Nurse) who will testify why the claims allegedly do not qualify for coverage.
In cases where a provider’s third-party biller has agreed to handle claims appeals, few billers have agreed to pursue a denial past the reconsideration level of appeal.
III. Consequences of Not Taking Your Medicare Appeal to the ALJ Level
Assuming that no extended repayment plan has been established and the alleged overpayment has not already been repaid, the MAC will initiate recoupment of the alleged overpayment 30 days after the QIC issues its denial decision. Unfortunately, this will occur regardless of whether a request for ALJ hearing is filed in a timely fashion.
Should a provider choose not to further appeal, its important to recognize that its “claims denial ratio” will increase. As the government and its contractors increasingly rely on “data mining” when identifying potential targets for audit, providers with a high error rate will likely find their practices subject to further scrutiny.
IV. Don’t Give Up on Properly Billed Claims – Consider Your Options Before Declining to Pursue a Medicare Appeal
As Medicare claims audit and assessment efforts increase (through CMS’ use of ZPICs, PSCs and RACs), health care providers will be under increasing pressure to ensure that all statutory and regulatory medical necessity, documentation, coding and billing requirements are met. Despite a provider’s best efforts to remain compliant, it may find that its practice or clinic is alleged to have been overpaid by a Medicare contractor. Should that occur, we strongly recommend that you retain qualified, experienced legal counsel to represent your interests as early in the Medicare appeals process as possible.
Should you choose to handle the appeal yourself and lose at the reconsideration level, contact experienced legal counsel before deciding to discontinue the appeal. Depending on the facts, you may find that it is both cost-effective and advisable to have your case handled at the ALJ level by experienced legal counsel. When retaining counsel, there are several important questions that you should ask:
“How much of your law practice involves health law issues?
Please describe the extent of your experience handling large, complex administrative appeals of denied Medicare claims.
Please describe your experience in challenging statistical extrapolations applied to an alleged overpayment in a case.
How often have you responded to AdQIC appeals of favorable ALJ decisions?
How often have you handled MAC appeals?
Can you provide provider references?”
Hopefully, your practice will not face a large administrative appeal of denied Medicare claims. However, should such an event occur, you need to be ready to respond to the contractor’s audit.
In addition to representing a wide variety of providers in the administrative appeals process, our Firm has been retained by a number of other law firms to assist them with large, complex administrative appeals. After representing health care providers for many years in administrative hearings, involving literally tens of thousands of claims, it has been our experience that the ALJ level of appeal is the single best opportunity that a provider has to present its arguments in support of payment.
While there are no guarantees in litigation, working with qualified clinical personnel, experienced legal counsel can effectively present a provider’s arguments in support to an ALJ assigned to hear the provider’s case. Keep in mind, the trier of fact is an attorney – not a clinician or a consultant. Experience, coupled with an in-depth knowledge of the statutory and regulatory requirements may prove essential in proving your case. The ALJs we have practiced before have been attentive, knowledgeable, willing to listen to the provider’s viewpoint, and perhaps most importantly, FAIR. Neverthless, it is the job of your legal counsel to present the facts in a concise, coherent, persuasive fashion. If your practice is facing an ALJ hearing, consider the benefits of retaining experienced counsel when considering your options.
Liles Parker attorneys have extensive experience representing Home Health, Hospice, CMHC, DME, Ambulance, Physician Practices, Nursing Homes, SNFs, and PT / ST / OT Therapy providers in the Medicare administrative appeals process. Our attorneys also work with providers to help better ensure that their Compliance Program addresses applicable statutory and regulatory requirements. Need assistance? Call us for a complimentary initial consultation. We can be reached at: 1 (800) 475-1006
(February 19, 2011): Over the years, we have represented a wide variety of health care providers in the Medicare appeals process. Our duties have regularly included representation before Administrative Law Judges (ALJs) presiding out of the Western, Southern, Midwestern and Mid-Atlantic Field Offices of the Office of Medicare Hearings and Appeals. (OMHA).
In the course of our work, we have routinely been asked by our health care provider clients for our opinion regarding the “independence” of ALJs from the pressures exerted by the Centers for Medicare and Medicaid Services (CMS) and its contractors (including, but not limited to the Qualified Independent Contractors (QICs), Zone Program Integrity Contractors (ZPICs) and Program Safeguard Contractors (PSCs)). The purpose of this brief article is to examine this issue in more detail.
As many of you will recall, prior to the passage of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA), Medicare appeals of denied claims and services were heard by Judges working for the Social Security Administration’s (SSA’s) Office of Hearings and Appeals. For much of that time, the SSA was an agency of the Department of Health and Human Services (HHS). In 1994, the SSA was officially separated from HHS and was made an independent agency. Despite the fact that the SSA was no longer part of HHS, its Judges continued to hear Medicare administrative appeals.
Despite the fact that SSA used to a part of HHS (and for a short period was independent of HHS), in our opinion, SSA Judges were generally thought to be “independent” adjudicators of the facts, not impacted by, or bowing to, the effects of outside agency pressures.
II. Changes to the Medicare Appeals Process After the Passage of the MMA:
With the enactment of the MMA, the responsibility for hearing Medicare appeals of claims denied by ZPICs and PSCs was transferred over to HHS, with the OMHA reporting solely to the Secretary, HHS. In doing so, the OMHA was placed completely outside of CMS’ organizational structure, ostensibly free from any agency pressures that CMS might informally care to exert. This also placed the OMHA independent of the various contractors working for CMS. As a review of the Congressional Record reflects, the issue of independence was carefully considered by Congress and the separation of the OMHA from CMS was consistent with their concerns. (See Congressional Record, V. 149, Pt. 22, November 20, 2003 to November 23, 2003, Page 30400). As set out in the June 23, 2005 issuance of the Federal Register (70 Fed.Reg. 36386), titled “Office of Medicare Hearings and Appeals; Statement of Organization, Functions, and Delegations of Authority,” the OMHA is under the direction of a Chief Administrative Law Judge who reports directly to the Secretary, HHS. This organizational structure was specifically intended to meet the “independence” requirements of the Section 931(b)(2) of the MMA.
III. What Should You Now Expect When Pursuing a Medicare Appeal Before an ALJ?
In terms of functional authority, ALJs are comparable in many respects, to that of an Article III Judge, who is appointed by the President and confirmed by the Senate.
While ALJ’s are not Article III Judges, it has been our experience that they are strongly independent, adjudicating over Medicare proceedings in a formal, professional fashion, similar to what you would expect to encounter in a Federal District Court proceeding.
Pursuant to 42 C.F.R. § 405.1026, ALJs cannot even conduct a hearing if they are prejudiced or partial to any party, or if they have an interest in the matter pending for resolution. To date, we have not seen an ALJ that has been “prejudiced or partial to any party.”
IV. What Are Your Chances of Winning?
To be clear, health care providers do not always prevail — every case stands or falls based on its merits. Moreover, just because you have experienced a positive outcome with a particular ALJ on one occasion does not mean that you should expect a similar result when you are next in front of the same judge. ALJs are trained to weigh the facts and the evidence.
While in past years it was rare for CMS or its contractors to participate in a Medicare appeals hearing, it is now commonplace for representatives of the Zone Program Integrity Contractor (ZPIC) or the Program Safeguard Contractor (PSC) to now attend the hearing and seek to provide support for their initial denial actions. As a result, the job of ALJ is now more complicated than ever. Although the proceeding is not supposed to be “adversarial,” it can get quite heated when ZPIC representatives are there trying to defend their denial decisions. Be prepared. Have experienced legal counsel represent your interests.
The current administrative Medicare appeals system has been specifically designed to insulate ALJs from the actual and / or implied pressures which could conceivably be exerted by CMS and its various contractors. When appearing before an ALJ, it is important to remember that the process has become significantly more complicated now that CMS contractors are now regularly attending and participating in the process. In light of these changes, it is recommended that you engage experienced legal counsel to represent your interests in an ALJ hearing. Although the system and its Judges are set up to provide a fair opportunity for you to present your case and be heard, it is much more difficult to prevail when up to three representatives of the ZPIC (a lawyer, a statistician and a clinician) are also participating in the proceedings, providing support and explanations for their prior Medicare claim denial decisions.
Robert W. Liles and other Liles Parker attorneys have extensive experience representing both Part A and Part B providers and suppliers in the Medicare appeals process, including hearings at the ALJ stage of appeal. Please feel free to contact Robert for a complimentary consultation. He can be reached at: 1 (800) 475-1906.
Be Prepared — ZPIC and QIC Representatives Are Increasing their Participation in ALJ Appeal Hearings.
(February 12, 2011): Over the last year, we have noted an important trend when representing Medicare providers in post-payment overpayment cases at the Administrative Law Judge (ALJ) level of appeal. Medicare contractors are actively attending and participating in many ALJ hearings. The virtual “Courtroom” where ALJ hearings are typically held (most ALJ hearings are now held by teleconference or video-teleconference — few are conducted in person) are no longer attended by only a provider, its attorney and the Judge. Instead, it is now relatively crowded, requiring the scheduling of experts and the testimony of various clinical specialists — representing not only the provider, but also one or more government Medicare contractors. Although mostly limited to “big-box” cases where the amount at issue ranges from $100,000 to several million dollars, we have even had Medicare contractors attend ALJ hearings involving alleged overpayments of only a few thousand dollars.
This proverbial ”sea change” in how the government and its contractors view their role in working to help ensure that alleged overpayments stay in place demands that providers reconsider their decision to represent themselves in ALJ appeals hearings. While many health care providers feel comfortable handling an ALJ hearing on their own when the only parties on the teleconference or on the video-teleconference are the Judge and the Medicare providers themselves, it is a completely different situation when one or more contractors elects to participate in the hearing and present their denial reasons to the ALJ. The purpose of this article to examine this trend and discuss a number of considerations that Medicare providers should be taking into account when deciding whether or not to represent themselves at ALJ hearing, without an attorney.
I. Rights / limitations of a ZPIC or other contractor when acting as a “participant” in an ALJ hearing.
Pursuant to 42 C.F.R. § 405.1010, both representatives from the Centers for Medicare and Medicaid Services (CMS) and its contractors may participate in an ALJ hearing. Moreover, an ALJ may request that CMS or its contractors participate in a hearing. As the regulatory provisions provide:
“(a) An ALJ may request, but may not require, CMS and/or one or more of its contractors to participate in any proceedings before the ALJ, including the oral hearing, if any. CMS and/or one or more of its contractors may also elect to participate in the hearing process.
(b) If CMS or one or more of its contractors elects to participate, it advises the ALJ, the appellant, and all other parties identified in the notice of hearing of its intent to participate no later than 10 calendar days after receiving the notice of hearing.
(c) Participation may include filing position papers or providing testimony to clarify factual or policy issues in a case, but it does not include calling witnesses or cross-examining the witnesses of a party to the hearing. (emphasis added).
(d) When CMS or its contractor participates in an ALJ hearing, the agency or its contractor may not be called as a witness during the hearing.
(e) CMS or its contractor must submit any position papers within the time frame designated by the ALJ.
(f) The ALJ cannot draw any adverse inferences if CMS or a contractor decides not to participate in any proceedings before an ALJ, including the hearing.”
While ZPICs and other contractors may not “cross-examine” a Medicare provider or its witnesses during an ALJ hearing, contractors have easily worked around this regulatory obstacle. Rather than confront a provider directly, a contractor will merely point out their concerns or make a specific point to the Judge. The presiding ALJ will often then merely ask the provider the same questions first raised by the ZPIC. As a result, a Medicare contractor never has to cross-examine the provider but his points and questions are still ultimately answered. For instance, the following very simple exchange might occur during an ALJ hearing:
“ALJ: I would like to hear the Medicare contractor’s views regarding the medical necessity of this E/M claim.
ZPIC: Your honor, the 1997 E/M Guidelines clearly reflect the types of situations which would qualify as “High Complexity.” We don’t believe that the facts here represented that level of complexity. Additionally, the physician is now alleging that the patient suffered from multiple serious co-morbities which complicated the medical decision-making required. Where is there proof that the patient had these conditions?
ALJ: Dr. Smith, can you point out where these medical conditions are documented in the medical records submitted?”
In most instances, a provider should expect the ZPIC’s challenge to be much more pointed that the example cited above. In any event, the bottom line is simple, under the current rules, it remains quite easy for a ZPIC to point out weaknesses in the provider’s case. ALJ’s are seeking to determine the facts and decide whether the claims at issue qualify for coverage and payment. When a ZPIC raises a concern, most ALJ’s will want to follow-up with the provider in order to obtain an answer regarding the points raised.
Over the last year, we have also seen a marked increase in the number of cases where a ZPIC has chosen to file a post-hearing brief with the Court. This can be especially problematic for providers who choose to represent themselves at hearing because the ZPICs have used this as an opportunity to present new evidence and/or new arguments that were never introduced at lower levels of the case or at ALJ hearing. As a result, the provider is often placed in the position of trying to respond to new arguments, never before presented by the ZPIC or other contractors, at the last minute in the ALJ hearing process.
II. Who will show up from the ZPIC’s or PSC’s office?
Medicare providers should keep in mind that both ZPICs and Program Safeguard Contractors (PSCs) are quite sophisticated and are becoming more and more active in the ALJ hearing process, often replying to arguments presented to the Judge by a Medicare provider. Moreover, it is not uncommon for a ZPIC to send as many as three professionals to participate in an ALJ hearing — all of whom may ultimately defend the ZPIC’s initial denial of the provider’s Medicare claims. One of the ZPIC representatives very well may be an attorney. A ZPIC contractor against whom we regularly litigate often sends a licensed attorney to respond to pro-provider arguments that the claims qualify for payment because they were not reopened in a timely fashion or that even if the claims do not meet all of the applicable coverage requirements, any overpayment would still qualify for “waiver.” The ZPIC’s attorney may also respond to a number of limited arguments presented by a provider when trying to get a statistical extrapolation declared invalid by an ALJ. It has been our experience that the ZPIC’s attorney is typically polished, smart and prepared. When facing an unrepresented physician, the ZPIC’s lawyer would likely easily address any non-medical arguments presented by a Medicare provider. A second ZPIC or PSC representative likely to participate in an ALJ hearing is the contractor’s statistician. He is responsible for defending the legitimacy of the statistical sampling and extrapololation methodology employed by the ZPIC or PSC when extrapolating the damages in a case. While a significant number of physicians and other health care providers are knowledgeable in statistics and mathematics, few know or understand the regulatory requirements which must be met before a contractor may engage in statistical sampling and seek to extrapolate damages. As a result, few unrepresented providers have been able to convince an ALJ that an extrapolation is invalid. While the additional cost of engaging a statistical expert to review a ZPICs extrapolation actions can be costly, it is likely required if a provider hopes to have a reasonable chance of challenging an extrapolation. Finally, it is quite common for a ZPIC to send a third representative (typically a Registered Nurse) to provide clinical testimony in support of the ZPIC’s decision not to cover and pay certain claims, often citing the ZPIC’s own unique interpretation of LCD and LMRP requirements (an interpetation withwhich we often disagree). Overall, an unrepresented provider is often unprepared to address and respond to the many legal, statistical and clinical arguments presented by the various ZPIC participants in an ALJ hearing.
While ZPIC and PSC representatives are now regularly participating in ALJ hearings, they are not the only contractors who are prepared to rise to the challenge. Representatives of the Qualified Independent Contractor (QIC) have also been participating in some ALJ hearings. In cases we are aware of, the QIC representative has been an attorney working for the contractor. Nevertheless, there is nothing to prevent a clinician working for the QIC from attending the ALJ hearing and presenting the QIC’s arguments why certain claims did not qualify for coverage and payment. Additionally, in at least one fairly recent case we handled on behalf of a provider, a Medicare Administrative Contractor (MAC) clinical reviewer chose to participate in the ALJ hearing.
III. What are the differences between a “party” to a hearing and a “participant” in a hearing?
As 42 C.F.R. § 405.1010(c) reflects, there are significant differences between a “party” to an ALJ hearing and a “participant” in an ALJ hearing. As we previously discussed, a “participant” does not have the right to call witnesses or cross-examine parties or their witnesses. Additionlly, participants do not have the right to object to the issues described in the ALJ’s “Notice of Hearing.” As CMS has argued, these elements are “cornerstones” of the adversarial process. In the absence of these cornerstones, a proceeding is not considered to be adversarial, even though multiple Medicare contractor representatives may participate in an ALJ hearing. As a result, since the proceeding was not adversarial in nature, a provider will be precluded from seeking to have its attorney’s fees paid under the “Equal Access to Justice Act,” even though it ultimately prevailed at hearing. While perhaps technically correct, the idea that ALJ hearings are truly “non-adversarial” when Medicare contractors choose to join as a “participant” is flatly untrue. ZPIC lawyers, clinical reviewers and expert statisticians have proven themselves to be highly capable and effective when arguing their positions, despite the fact that their role in the hearing was considered to be “non-adversarial” in nature. To their credit, even though both sides may be passionate about their position on the issues, all of the ALJs we have practiced before have kept a strict rein on the proceedings.
IV. Depending on the specifics of a case, many providers would be better off engaging experienced legal counsel to represent their interests in an ALJ appeal.
When faced with an administrative overpayment case that is highly complex, involves a significant alleged overpayment or is based on a statistical extrapolation of damages, we recommend that a Medicare provider retain experienced legal counsel to represent the provider’s interests. While it is possible for an experienced attorney to step in and handle a case at a later level of administrative appeal (such as the QIC and ALJ levels), it becomes more and more difficult to do so in an effective fashion as the case progresses. We have seen a number of cases where a provider has failed to properly establish the record in a case and important supportive documentation stood the chance of not being admitted in the record because the provider failed to introduce it at lower levels of appeal. An experienced attorney can help ensure that the record is properly constructed and no important legal defenses or payment arguments have been left out of the case. Additionally, legal counsel will be able to assess the coverage requirements, identify possible holes in the provider’s case and work with the provider to identify witnesses and obtain supportive evidence to hopefully fill any gaps in the provider’s case.
As a final point, it essential to remember that the trier of fact, the ALJ responsible for presiding over the provider’s case, is a lawyer, not a clinician. Arguably, an experienced defense lawyer — rather than a clinician — is uniquely trained to analyze the legal issues presented, organize the provider’s facts and present the relevant evidence to the ALJ (another attorney). Together, a supporting clinician and a skilled attorney can be a formidable team when presenting a Medicare provider’s case. Moreover, this team is best equipped to respond to any arguments raised by participating ZPIC representatives during the overpayment hearing.
Robert W. Liles and other Liles Parker attorneys in the Firm’s Health Law Practice have extensive experience representing Part A and Part B health care providers and suppliers around the country in ZPIC, PSC and RAC overpayment appeals cases . Should you have any questions about your case or the overpayment appeals process, please feel free to call Roberts for a complimentary consultation. He can be reached at 1 (800) 475-1906.
(December 29, 2010):
Many health care providers are familiar with the revised administrative appeals process for contesting denied Medicare claims. In exercising their appeal rights, many providers (or their legal counsel) have appealed denied claims through the second level of appeal, submitting their claims and arguments in support of payment to the Qualified Independent Contractor (QIC) responsible for hearing reconsideration appeals. Q2 Administrators (Q2A) is one of the contractors selected by the Centers for Medicare and Medicaid Services (CMS) to serve as a QIC.
Notably, Q2A has also been awarded the first task order to serve as Administrative Qualified Independent Contractor (AdQIC). Q2A’s responsibilities as AdQIC are separate and distinct from its responsibilities as one of the general QICs chosen by CMS to serve as the reconsideration reviewer of denied Medicare claims.
III. Official Duties of an AdQIC:
The role played by Q2A as AdQIC is often misunderstood by both health care providers and attorneys alike. Officially, Q2A performs its AdQIC duties out of its headquarters in Columbia, South Carolina. As Q2A’s reflects, in its role as AdQIC, is responsible for performing a number of essential administrative appeal functions. As AdQIC, QA2 notes that the unit is responsible for:
- Developing training and standard work protocols.
- Analyzing appeal outcomes.
- Recommending improvements to the appeals process.
- Managing case files.
Sounds fairly innocuous doesn’t it? Unfortunately, the current AdQIC system represents a major challenge for prevailing providers to overcome. Rather than merely “analyzing appeal outcomes,” as Q2A’s website reflects, the AdQIC appears to primarily serve as CMS’ appellate counsel, challenging favorable decisions by Administrative Law Judges (ALJs) with which it disagrees. To be clear, we have seen no evidence that the AdQIC serves as an impartial reviewer of ALJ decisions. Instead, our review of the cases referred to the Medicare Appeals Council (MAC) by the AdQIC suggests that unit is only interested in cases where the presiding ALJ has ruled in favor of the provider.
So what does as AdQIC really do? As Q2A’s website reflects, the company’s stated mission is to:
“[P]rovide support and services to the Federal government and other customers that reflect our ideal of ‘Quality to the Next Level.’ Q2A delivers consistent, quality outcomes and solutions for our customers by utilizing sound processes and a stringent quality assurance program. (emphasis added).
On its face, Q2A’s mission expressly reflects where its interests lie – the company’s focus is on delivering “consistent, quality outcomes and solutions” for its “customers.” In this case, the customer is CMS — not health care providers, and frankly, that’s undersandable. As the “Frequently Asked Questions” section Q2A’s website reflects:
Question: What happens after I receive a favorable (emphasis added) ALJ Decision?
Answer: Favorable rulings by an Administrative Law Judge (ALJ) do not result in immediate payment of claims.
Once an ALJ rules favorably on an appeal, the Office of Medicare Hearings and Appeals (OMHA) forwards the decision and case file to the Administrative Qualified Independent Contractor (AdQIC).
The AdQIC subsequently has 10 days to update the appeals tracking system and to decide whether the case requires further review by the Medicare Appeal Council or is sent to the Medicare contractor for payment. The AdQIC’s review cannot begin until it receives the case file. Regulations do not require the OMHA to forward case files within a given amount of time.
If the AdQIC refers the case to the Medicare Appeals Council, the Medicare contractor that processed the original claim is notified. Effectuations (payment of claims) made by the contractor are then contingent upon the Medicare Appeal Council’s decision.
For ALJ decisions that require no further review, the AdQIC sends an effectuation notice to the contractor, who must then pay specified claim amounts within 30 days. Effectuations in which the contractor must calculate the amount may take up to 60 days.
While an AdQIC doesn’t have the authority to appeal a favorable ALJ decision to the MAC, it can (and often will) refer a case (where the provider prevailed) to the MAC and ask that the council review the decision. Two primary points of contention have been typically been argued by the AdQIC:
(1) Cases where the ALJ has overturned an extrapolation of damages previously imposed by a Zone Program Integrity Contractor (ZPIC), as part of its initial audit.
(2) Cases where the ALJ has held that a provider is not liable for alleged overpayments associated with one or more claims under Section 1870 of the Social Security Act.
In many (but not all) cases, the MAC will, in fact, open and review an ALJ’s favorable decision. The MAC may then remand the case back to the presiding ALJ for reconsideration of the contested points.
IV. Be Prepared — Don’t Go Into this Process Alone – Retain Experienced Legal Counsel:
As Medicare claims audit and assessment efforts increase (through CMS’ use of ZPICs, RACs and PSCs), health care providers will be under increasing pressure to ensure that statutory and regulatory coding and billing requirements are met. Despite your best efforts to remain compliant, you may find that your practice or clinic is subjected to review. Should that occur, we strongly recommend that you retain qualified, experienced legal counsel to represent your interests. In a number of cases, we have been retained by other law firms to assist with administrative appeals. When working with other law firms, the level of our involvement has varied from case to case.
V. When is a “Win” Truly a “Win”?
Unfortunately, it is becoming more and more difficult each year to rely on a favorable ALJ ruling. Over the past year, the AdQIC has become more aggressive than ever in challenging holdings with which it disagrees. As a result, it is important that your counsel plan for beyond the ALJ level when asserting defenses to the government’s arguments. While a number of arguments may be persuasive to an ALJ, the same arguments may also automatically generate a referral by an AdQIC to the MAC. When hiring an attorney to handle your Medicare claims case, be sure and ask prospective counsel the following:
- How much of your law practice is devoted to health law issues?
- Please describe the extent of your experience handling large, complex administrative appeals of denied Medicare claims.
- How often have you responded to AdQIC appeals of favorable ALJ decisions?
- How often have you handled MAC appeals?
- Can you provide provider references?
Hopefully, your practice will not face a large administrative appeal of denied Medicare claims. However, should such an event occur, you need to be ready to respond to the contractor’s audit. While there are no guarantees in this business, knowledge of the rules and experience handling administrative appeals may prove essential to increasing the likelihood of your success.
Liles Parker attorneys have extensive experience handling complex Medicare administrative appeals. Our attorneys have represented Home Health Agencies, Hospice Companies, Ambulance Companies, Chiropractic Clinics, Physical / Occupational / Speech Therapy Clinics, Nursing Homes, Physian Practices (E/M Claims), Psychology Practices, DME Companies and a wide variety of other Medicare Part A and Part B providers. Should your practice or clinic be audited by a ZPIC or RAC, give Robert W. Liles for a free consultation. He can be reached at: 1 (800) 475-1906.
RACs Are Auditing Your Claims — What Should Physicians and other Medicare Providers Know about Appeals and Recoupment?
(July 2, 2010): CMS’ Recovery Audit Contractor (RAC) program is now permanent and nationwide. As we discussed in Part I of this series, while small providers were largely ignored during the demonstration program, physicians, home health, hospice, and durable medical equipment (DME) suppliers should be on the lookout for increased attention. In Part II, we discussed some ways providers can prepare for and respond to an audit request.
In this Part III, we will discuss a provider’s appeal options in the event that a RAC identifies an alleged overpayment as a result of its audit. It is important to remember that RACs are paid on a contingency fee basis and so are highly incentivized to seek out overpayment errors.
CMS’ enthusiastic trumpeting of the RAC demonstration program results seems to ignore the RACs’ reputation for overly aggressive auditing. Indeed, a June 2010 CMS program update reveals that, when providers chose to appeal a RAC determination, providers won 64.4% of the time. CMS has since implemented a requirement that the RAC remit its contingency fee if its audit determination is overturned at any level of appeal, not just the first level. Whether this will improve RACs dismal win rate on appeal remains to be seen.
I. What Are the Options to Appeal a RAC Determination of Overpayment?
First, providers that want to challenge the determination should be aware they have a very limited period of time to file for redetermination appeal if they wish to avoid recoupment. While a provider has 120 days to file for redetermination appeal, if they wait past day 30, the Medicare contractor (not the RAC) will initiate recoupment. Additional information regarding recoupment is discussed below.
Appealing a RAC claims denial follows the uniform Medicare Part A and Part B appeals process. The following deadlines are strictly adhered to.
Medicare Appeal Deadlines
|Level||Stage||Reviewing Entity||Filing Deadline|
|1st||Redetermination||Medicare Administrative Contractor (MAC)||
120 days of receiving notice of initial determination
|2nd||Reconsideration||Qualified Independent Contract (QIC)||
180 days of receiving notice of redetermination decision
|3rd||Hearing||Administrative Law Judge (ALJ)||
60 days of receipt of the QIC’s decision
|4th||Administrative Review (HHS)||Medicare Appeals Council (MAC)||
60 days of receipt of the ALJ’s decision
|5th||Judicial Review||Federal District Court||
60 days of receipt of the MAC’s decision
Our experience has shown that ALJs are honest brokers who are the most willing to hear arguments from providers. While they will follow the law and applicable coverage provisions, they tend to be much more thorough and consider the provider’s arguments in support of payment. In many cases, this has been the first level that a fair and reasonable consideration of the evidence has occurred.
II. What about Recoupment Issues? Are They Applicable in Connection with a RAC Audit?
Notably, the deadlines above are filing deadlines only. Medicare begins recouping funds well before the time frame for appeal has lapsed at each stage. Medicare begins recouping funds only 30 days after the RAC’s initial determination and only 60 days after its redetermination decision. This puts significant pressure on providers to file for first and second level appeals more rapidly than they otherwise might. In later stages, recoupment cannot be stayed by filing the appeal.
|Day One - Initial Demand of a RAC Overpayment Determination||First Level Appeal — Redetermination (Handled by a Medicare Administrative Contractor)||Second Level Appeal — Reconsideration (Handled by a Qualified Independent Contractor)||Appeals to Administrative Law Judge|
|The process begins when a Demand Letter, with appeal rights, is sent to the Provider by the Medicare Administrative Contractor. Don’t confuse this with the overpayment results letter sent by the RAC.If there is no appeal and the provider does not remit the demanded amount, offset begins on day 41.||To avoid recoupment starting on day 41, the Provider must request the 1st level appeal within 30 days from the date of the Demand Letter. If a redetermination appeal request is received after day 30, recoupment will still on day 41 must will stop when the appeal letter is processed. The recoupment process will stop until the redetermination appeal decision is issued — at that point, the clock starts again and recoupment will start up unless a reconsideration appeal is filed within 60 days of the date of the redetermination appeal decision letter.||To avoid recoupment beginning or resuming after a redetermination decision letter is received, the provider must submit the 2nd level appeal request to the QIC within 60 days from the date of the redetermination decision letter. If an appeal request is received after day 60, the recoupment process will stop on the remaining balance after the reconsideration appeal is received and logged in by the QIC.||Limitations on recoupment end after the 2nd level appeal decision is issued. Recoupment shall begin 30 days from the QIC appeal decision and will continue until the debt is satisfied, whether or not the provider appeals to the ALJ or subsequent levels.|
Separate from and prior to the appeals process, a provider may “rebut” any proposed recoupment action within 15 days of the notice of impending recoupment. A provider may issue a statement to the claims processing contractor providing evidence as to why the overpayment action should not take place. This process does NOT provide an opportunity to review the medical documentation or the audit determination itself.
(June 28, 2010): In Part I of this series, we reacquainted you with the design and purpose of the now permanent Recovery Audit Contractor (RAC) Program. Although RACs largely focused on inpatient care during CMS’ demonstration program, RACs are a real threat to small providers that don’t have the intensive compliance programs in place that most hospitals do. In this Part II, we will look at how physicians, home health, hospice, and durable medical equipment (DME) suppliers can prepare for and respond to RAC audits.
Even if no demands are issued, the RAC audit process exposes providers to substantial risks and administrative costs. Fortunately, both can be managed with thoughtful implementation of effective compliance measures and a well-planned response to an audit.
I. How Should Physicians and Other Small Providers Prepare for a RAC Audit?
It is essential that the preparation for a RAC audit begins before the RAC ever knocks on the door. Deadlines are tight and so physicians without effective compliance programs in place run the risk of claims being denied simply because they can’t show that they crossed all the “T’s” and dotted the “I’s” in time.
Physicians, home health, hospice, and DME suppliers can begin to target their compliance efforts by examining the reasons for denials issued during the recently concluded RAC demonstration program. During the course of that program, of improper payments identified,
- 35% were the result of incorrect coding;
- 8% were the result of insufficient documentation (including failure to submit information on time or to submit enough information); and
- 17% were the result of other issues, such as basing claim payments on outdated fee schedules or duplicate claims. Meanwhile,
- 40% were deemed medically unnecessary.
In other words, 60% of denied claims had nothing to do with patient care. No one goes into health care to spend their time creating and perfecting paper trails but long experience with Medicare tells us that doing so cannot be avoided.
Thus, to prepare for a RAC audit, as a provider you can:
- Implement and continuously review your compliance plan;
- Review the documentation requirements for each item or service you provide;
- Maintain your files thoroughly and consistently;
- Do NOT rely on other suppliers or providers for record-keeping; and
- Make sure all your documentation is legible.
II. How Should Physicians and Other Small Providers Respond to a RAC Audit?
The RAC audit process starts with a request for records, upon which the provider has a strictly enforced 45 days (plus mail time) to respond. Upon receiving a request for records, providers can take several steps to protect yourselves:
- Take care before conducting an internal review of the claims requested. While an internal analysis can be invaluable, you want to avoid creating a non-privileged paper trail of identified problems that could later be referred to law enforcement if a RAC makes a fraud referral.
- Review past claims audits and evaluations to determine whether the requested claims have been previously evaluated.
- Remember that filing deadlines are strictly enforced so calculate early on when appeals must be filed and begin to gather supporting documentation.
- Consider retaining an expert in extrapolation.
- Do NOT assume the contractor’s arguments are meritorious. Carefully review Medicare policy to see if the RAC cited it correctly.
- Retain duplicates of any information that you submit to the RAC.
III. Is Anything Different in the Permanent Program?
Small providers with experience being audited in the demonstration program should be on the lookout for the several changes implemented under the permanent program that may help protect them. For instance,
- RACs’ Contractor Medical Directors are now required to speak with a provider regarding a claim denial, if requested, and a reviewer must provide credentials upon request.
- The reason for the review must be listed on a request for records letters and overpayment letters.
- The look-back period is reduced to 3 years from 4.
- CMS has set uniform limits on the number of records that can be requested in a 45 day period (sliding scale).
More details concerning these and other changes to the permanent program can be found in the CMS RAC Demonstration Evaluation Report, available at https://www.cms.gov/RAC/02_ExpansionStrategy.asp.
Robert W. Liles and other Liles Parker attorneys have extensive experience handling complex Medicare appeals cases. We represent health care providers in the administrative appeals process. Are you being audited? Call us for a complementary consultation regarding your case. We can be reached at: 1 (800) 475-1906.
(June 25, 2010): The purpose of this series of articles is to assess the Recovery Audit Contractor (RAC) Program from the perspective of physicians, home health, hospice, durable medical equipment (DME) providers, and other relatively small Medicare providers. As many non-hospital providers will acknowledge, early cries of wolf by law firms and consultants did a fine job of initially publicizing the RAC threat. Unfortunately, the threat of a RAC audit now appears to be largely ignored by non-hospital providers due to the seemingly widespread sense that RACs will likely continue to focus their efforts on large, institutional Medicare providers – the ultimate “low hanging fruit” in terms of potential Medicare overpayments.
I. Should Non-Hospital Providers Worry About a RAC Audit?
RACs are, in fact, a real threat to physicians and other small Medicare providers, despite the fact that these particular contractors have passed over these providers in the past.
Over the last six weeks, the Centers for Medicare and Medicaid Services (CMS) has sponsored nationwide conference calls titled “Nationwide RAC 101 Call” specifically aimed at physicians, home health, hospices, and DME providers. Further, CMS conducted two general nationwide conference calls discussing the RAC program that were open to all Medicare providers.
These seemingly innocent informational calls were in fact extraordinarily significant, servicing almost as a “touchstone” for CMS and its RAC auditors. With the completion of these nationwide teleconferences, outreach has now been completed and CMS can affirmatively state that these non-hospital providers have been given multiple opportunities to learn about the program and prepare for an audit. All states are now eligible for review.
While CMS must still approve “issues” prior to their widespread review by the RACs, the contractors now have the billing data that they need to analyze and identify possible targets.
II. What Have Other Provider Experiences with RACs Been?
As physicians and other non-hospital providers prepare for possible audit, it is helpful to review hospitals’ experiences when preparing for and responding to a RAC audit. On June 22, 2010, the American Hospital Association (AHA) released its findings that the RAC program is having a widespread impact on almost all hospitals, even though many have not even been subjected yet to a RAC audit. In fact, for the first quarter of 2010 alone:
84% of responding hospitals reported that RACs impacted their organization;
49% of responding hospitals reported increased administrative costs; and
17% of the hospitals using external resources to address RACs hired consultants at an average cost of almost $92,000.
So, what do providers and non-hospital Medicare providers need to know about RACs? This multi-part series will address the following: First, the purpose and impact of RACs; Second, how to respond to RACs when they come calling; Third, some of the emerging issues for physicians and other small Medicare providers regarding RACs.
III. What’s a RAC?
The program was created by Section 306 of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA). Operating under the direction of the Department of Health and Human Services (HHS), RACs are independent third-party contractors tasked with identifying and correcting improper past Medicare payments. Each of four RACs has jurisdiction over a separate region of the United States.
After a three year demonstration in which RACs identified $1.03 billion in improper Medicare fee-for-service payments, the program became permanent earlier this year. CMS created the following table to clarify the role that these contractors are supposed to play compared to others, such as ZPICs. However, as we will see later in this series, these roles are not clearly delineated and the overlap in the review process can create substantial confusion and waste.
Role of Medicare Review Contractors
Improper Payment Function
|Contractor Performing Function|
|Preventing future improper payments through pre-pay review and provider education||Medicare claims processing contractors|
|Detecting past improper payments||RACs, ZPICs, PSCs|
|Measuring improper payments||CERT [Comprehensive Error Rate Testing]|
|Performing higher-weighted DRG [diagnosis related group] reviews and expedited coverage reviews||QIOs [Quality Improvement Organization]|
RACs are incentivized to hunt for evidence of overpayments in high-cost categories of service and to needle out errors that have nothing to do with actual patient care.
IV. How Are These Types of Contractors Paid?
RACs are paid on a contingency basis so it stands to reason that, during the initial program demonstration, only 4% of improper payments identified were underpayments. This “bounty hunter” approach also helps to explain why prior audits have focused almost exclusively on high-cost inpatient care services. Recent GAO testimony shed light on this situation and may cause RACs or other contractors to shift their focus to entities that do not have hospitals’ long history of review and compliance, namely physicians and other relatively small Medicare providers. Finally, a substantial percentage of overpayments collected by RACs during the demonstration program resulted from preventable coding errors, countering the myth that CMS is primarily focused on weeding out unnecessary service claims.
Providers in Region C may want to consider that the AHA found hospitals in that region, encompassing nearly 40% of all U.S. hospitals including those in Texas, Florida, and Virginia, reported the highest number of medical records requested, the highest amount of dollars targeted in medical record requests, and the highest number of denied claims (47% of the $2.47 million in denied claims reported in the first quarter of 2010).
V. Are There Any Safeguards to Protect Physicians and Other Small Group Providers?
Based on the demonstration program, numerous providers and others have expressed concern that RACs are overly aggressive auditors. Despite some improvements, concerns about the RAC process are likely to persist. As recent testimony by the GAO Health Care Director pointed out, the oversight of RACs leaves something to be desired.
Changes have been made to reduce the RACs unintended incentive to drive up fees (through the improper denial of claims). RACs are now required to pay back their contingency fee if the claim is overturned at any level of appeal, rather than just the first level as in the demonstration program.
Additionally, there are some limitations in place regarding the RACs ability to overwhelm providers with record requests. RACs may not request records more frequently than every 45 days and, for institutional providers, their requests are limited to 1% of all claims submitted for the previous calendar year. This is an overall limit, however, meaning that a RAC may determine the composition of the records in an additional document request. They can – and do – request categories of records up to the limit even if the request is disproportionate the provider’s business.
Finally, none of these improvements address the concern that the first several levels of the appeals process do not provide meaningful recourse for the overly aggressive auditing.
Robert W. Liles and Liles Parker attorneys have extensive experience representing health care providers around the country in Medicare appeals cases. Should you have any questions regarding these issues, don’t hesitate to contact Robert. For a complementary consultation, you may call us at: 1 (800) 475-1906.
 Available at http://www.aha.org/aha/content/2010/pdf/Q1RACTracResults.pdf
 Available at http://www.racaudits.com/uploads/RAC_Demonstration_Evaluation_Report.pdf.
(March 1, 2010): The number of auditors, reviewers, investigators and prosecutors going after health care providers is increasing and signals an alarming, unprecedented effort by the government to uncover and recover alleged overpayments to health care providers.
Health care providers now face not only simple repayment demands, but also civil False Claims Act cases and criminal Medicare / Medicaid fraud claims identified by various new government contractors. Regrettably, we have seen unintentional mistakes, incomplete documentation and technical errors cited as the basis for seeking the repayment of millions of dollars, representing Medicare services rendered long ago, in some cases as many seven years before the demand letter was sent. Perhaps most troubling is the fact that no one, including the ZPIC and / or PSC conducting the medical review, doubts that the medical services were rendered and in most cases, the Medicare beneficiary benefited from the care and treatment provided. Today, every health care provider must beware of:
- “RACs” or Recovery Audit Contractors.
- “ZPICs” or Zone Program Integrity Contractors.
- “MICs” Medicaid Integrity Contractors.
- “MCFU” Medicaid Fraud Control Unit.
- “HHS-OIG” Department of Health and Human Services, Office of Inspector General.
- “DOJ” U.S. Department of Justice, and
- “HEAT” Healthcare Fraud Prevention & Enforcement Task Force (in a number of U.S. Attorney’s Offices around the country).
RACs and the havoc they are expected to wreak is old news, quite frankly. The newest players in town, ZPICs, MICs and HEAT Teams should be at the top of your current list of concerns. As you will recall, CMS consolidated functions of all Program Safeguard Contractors (PSCs) and Medicare Prescription Drug Integrity Control (MEDIC) contracts into ZPIC contracts. ZPICs are designed to combine claims data (FIs, Regional Home Health Intermediary, Carrier, DMERC) and other data to create a platform for documenting complex data analysis. While RACs (until recently) have focused solely on recovering money, ZIPCs also look for fraud.
MICs are just now revving up around the country. Unburdened by many of the restrictions placed on RACs, providers with a heavy Medicaid beneficiary base should diligently review their Medicaid coding and billing efforts to better ensure compliance with applicable statutory and regulatory requirements.
HEAT Teams are made up of top level law enforcement and professional staff from DOJ and HHS. HEAT was implemented to prevent fraud and enforce current anti-fraud laws and prevent waste that focuses on improving data and information sharing between the Center for Medicare & Medicaid Services and law enforcement agencies. HEAT is working to strengthen program integrity activities to monitor and ensure compliance and enforcement. HEAT’s tools to identify fraud include hotlines and web sites for healthcare workers and ordinary citizens. Furthermore, HEAT officials are helping state Medicaid officials conduct better audits and provide better monitoring to detect fraudulent activities.
How should you respond? The best response is to follow the rules. If you don’t already have an effective Compliance Plan in place, we recommend you take steps to immediately implement one.
Liles Parker attorneys represent health care providers around the country in complex Medicare overpayment appeals cases. Should you have any questions regarding your case, give us a call. We can you our initial assessment and provide client references. You may call us for a complimentary consultation at: 1 (800) 475-1906.