(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).
(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.
(September 1, 2010):
I. Introduction — ZPIC Contractors Are Likely to Participate in Your ALJ Hearing:
As previously discussed, after representing health care providers for many years in administrative hearings, involving well over 10,000 Medicare claims this year alone, it has been our experience that Administrative Law Judges (ALJs) remain a provider’s single best opportunity to present its legal, regulatory and factual arguments in support of payment. While there are no guarantees, the ALJs we have practiced before have been attentive, knowledgeable, willing to listen to the provider’s viewpoint, and perhaps most importantly, FAIR. In recent years though, it has become more complicated for a health care provider to present it case during an ALJ hearing. This is due, at least in part, to the fact that ZPIC auditors are now often showing up at the ALJ hearing to advise the Judge the reason(s) they decided to deny your Medicare claims.
II. The Medicare Appeals Hearing Process:
Once a request for an ALJ hearing is filed, the Court generally takes one of three actions. It either:\
Conducts the hearing and issues a decision (either Favorable, Partially Favorable or Unfavorable),
Issues an order of dismissal of the appellant’s request for ALJ hearing, or
Remands a case back to the Qualified Independent Contractor (QIC) for additional necessary action.
When appealing individual claims, a Court may choose to rule on behalf of the provider, without the necessity of a hearing. However, in “big box,” multiple-claim, high dollar cases, a hearing is almost always held unless the appellant requests that the Court base its decision solely on the record, without the benefit fo testimony. When hearings are held, they are usually conducted by teleconference or video-teleconference. Upon request, the Court may (but is not required to) grant an “in-person” hearing. However, it has been our experience that ALJs prefer to conduct hearings by other means.
If a favorable (or, for that matter, unfavorable) ruling is issued by the Court, a number of steps remain before the decision can be effectuated. Medicare contractors (such as Intermediaries and Carriers — now, combined into entities known as “Medicare Administrative Contractors” (MACs)) do not immediately take action based the decision of the Court. Instead, once an ALJ issues the Court’s decision regarding a case, a copy of the ruling is sent by the respective Office of Medicare Hearings and Appeals (OMHA) to an organization known as the “Administrative Qualified Independent Contractor” (AdQIC). The AdQIC is then responsible for reviewing the decision and sending it to the responsible MAC for effectuation.
III. Rise of the AdQIC — A New Factor to Consider in the Medicare Appeals Process:
In 2004, Q2 Administrators (Q2A) was awarded the first task order to serve as an AdQIC under the new administrative appeals process by the Centers for Medicare and Medicaid Services (CMS). As Q2A’s website reflects, in its capacity as an AdQIC, the contractor is required to develop training and standard work protocols, analyze appeal outcomes, recommend improvements to the appeals process and manage case files.
While the AdQIC does, in fact, perform all of the above functions, the likelihood of their involvement in your case appears to have greatly increased over the past year. In a number of the cases we have handled, the AdQIC has aggressively sought to overturn both favorable legal arguments and holdings by ALJs invalidating fatally flawed statistical extrapolations applied by a Zone Program Integrity Contractor (ZPIC) or Program SafeGuard Contractor (PSC) in a case. While AdQICs do not have the authority to file an appeal with the Medicare Appeals Council (also referred to as the “MAC” — but not to be confused with Medicare Administrative Contractors which are are referred to by CMS as a “MAC”), they have gotten around this pesky issue by sending notices to the MAC outlining their concerns. The MAC has then been reviewing the decisions on its own authority. As a result, the AdQIC has effectively been granted administrative appeal authority, despite the fact that this function is not one of the enumerated tasks outlined for the entity by CMS or by statute.
In light of these developments, it is imperative that you retain counsel who is experienced responding to AdQIC notices (de facto appeals) to the MAC. Unlike other steps in the administrative appeals process, if your ALJ’s decision is challenged by an AdQIC to the MAC, you will have a short, limited amount of time to respond to the AdQIC’s arguments. It is strongly recommended that you work with an attorney who is experienced responding to an AdQIC challenge. An attorney who is knowledgeable of the MAC appeals process can properly advise you of your options at this point in the appeals process.
While the AdQIC’s new perceived role – as overseer and critic of the ALJs – can make the process even more costly and frustrating than usual, it has been our experience that the AdQIC’s legal arguments often mimic the positions taken by other contractors earlier in the process. Notably, we have yet to see (or even hear) of an AdQIC “appeal” of an ALJ decision that was unfavorable to the provider. As a result, we believe it is quite clear that the AdQIC is far from being a “disinterested” party.
IV. Don’t Handle a Medicare Appeals Hearing Alone – Hire an Experienced Attorney:
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 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. Even if you prevail before an ALJ, depending on the reasons relied on by the Court, there is a real chance that the AdQIC may seek to have the Court’s decision overturned by the MAC. When hiring an attorney, be sure and ask him the following:
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.
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.
Robert W. Liles and other Liles Parker attorneys have extensive experiences representing Part A and Part B health care providers in connection with Medicare appeals. Should you require additional information regarding these issues, call Robert for a free consultation. He can be reached at: 1 (800) 475-1906.
(August 30, 2010):
I. Introduction — “Medical Necessity” Issues Presented:
Health Data Insights (HDI), the Centers for Medicare & Medicaid Services (CMS) Recovery Audit Contractor (RAC) responsible for auditing health care providers in Region D, has announced it will immediately begin reviews on previously approved projects which involve the medical necessity of selected inpatient DRG payments. A complete list of the medical necessity “issues” currently being examined by HDI can be found on its Website.
II. Scope of Responsibilities Assigned to Health Date Insights:
RACs, such as HDI, contract with the CMS to perform post-payment reviews of Medicare claims to find overpayments (and theoretically, underpayments in return for a percentage (from 9 percent to 12.5 percent) of the amounts recovered. Put simply, they “eat what they kill.” HDI was awarded responsibility for handling Region D audits. Region D consists of 17 States and 3 U.S. territories (Alaska, Arizona, California, Hawaii, Iowa, Idaho, Kansas, Missouri, Montana, North Dakota, Nebraska, Nevada, Oregon, South Dakota, Utah, Washington, Wyoming, Guam, American Samoa and Northern Marianas). HDI’s contingency fee contract award dollar amount is 9.49% according to CMS. The 29 DRGs where HDI will be examining “medical necessity” requirements, include certain procedures related to:
Nervous System Disorders
Endocine, Nutritional & Metabolism Disorders
Kidney & Urinary Tract Disorders, and
Blood & Immunological Disorders
III. Provider Concerns:
A continuing concern of health care providers is that the RAC determinations of medical necessity will be performed by personnel with little, if any, specific knowledge of the specific claims at issue. Given the RAC business model, providers remain worried that audits will not reflect a fair and reasonable application of applicable coverage requirements. This is especially worrisome in light of the fact that approximately 41 percent of overpayments in the demonstration project were due to medical necessity determinations.
III. Audit and Appeal Considerations:
As set out CMS’ June 2010 reported entitled “The Medicare Recovery Audit Contractor (RAC) Program — Update to the Evaluation of the 3-Year Demonstration,” as of 03/09/10, the cumulative number of claims with overpayment determinations identified by RACs has grown to 598,238. Notably, only 76,073 of these overpayments were appealed by health care providers. Of the claims appealed, over half were decided in favor of the health care provider. Interestingly, HDI had one of the highest number of claims denials overturned on appeal, in favor of the appealing provider. Four basic steps to be taken when preparing for a RAC audit include:
(1) Monitor issues of interest to the government and its contractors. Are the services you provide currently under scrutiny by RACs and other Medicare contractors? You should keep abreast of current enforcement initiatives and mistakes made by other providers. Learn from their mistakes.
(2) Know where your current weaknesses are and fix them. This typically requires that you conduct an internal audit of your coding, billing and operational practices. Take care when engaging an outside “consultant.” We have seen numerous cases where the consultant conducts an internal assessment and identifies multiple problems with the provider’s prior and current practices. Unfortunately, few consultants consider the fact that their adverse report to the provider will likely not be privileged. As a result, if the provider is ever investigated, the report could easily serve as a roadmap for the government. Prior to conducting an internal audit – call your attorney!
(3) Know your rights. If your practice is audited, know your rights both during the audit and once the audit results are issued by the contractor. There is a fine line between exercising your rights as a provider and being perceived by a contractor as refusing to cooperate in their review. You should immediately call your attorney to clarify which actions must be taken if your practice is subjected to a site visit by a Medicare contractor. The best practice would be for you to call your attorney today and discuss how you should respond in the event of a site visit. CMS takes allegations of non-cooperation very seriously. Should the contractor argue that you refused to cooperate in their efforts, you could find the action taken by the contractor is to seek a revocation of your Medicare number. This is an especially sensitive issue.
(4) Have a firm understanding of how the Medicare appeals process works. Depending on the amount in controversy, you may choose to handle Medicare claims denials internally. As the use of data-mining increases, Medicare contractor reliance on provider profiling will continue to increase. While mere errors or mistakes should be returned to the government (or not appealed is properly denied by the contractor), should you find that claims were improperly denied, we recommend that you appeal such denials. RACs and other Medicare contractors will likely focus on providers with high error rates.
While every case is different, health care providers should consider the following when faced with a RAC audit:
- The scope of RAC audits is expanding. In the past, hospitals and other “low-hanging fruit” were the focus of HDI and other RACs around the country. As a result, some physicians, small practice groups, clinics and other smaller providers have grown complacent in their compliance efforts. This is a mistake, as more issues are identified and approved, the RACs will be expanded the scope of their reviews. Now is the time to get your practice in order.
- ZPICs and PSCs continue to represent a greater danger to small physician practices and health care provider groups. Zone Program Integrity Contractors (ZPICs) and Program SafeGuard Contractors (PSCs) are not subject to the time, audit and service scope limitations imposed on RACs. The implementation of effective compliance efforts will help reduce the likelihood of liability should the practice be audited by a ZPIC, PSC or RAC.
- Beware of “canned” consultant solutions. As a search on Google will readily attest, consulting firms around the country are touting the latest RAC audit “tool” or audit response “template.” We recommend that you exercise caution when retaining any organization that “guarantees” results or seeks to dissuade you from engaging legal counsel support.
- Retain experienced health care counsel. Under the current appeal structure, there is a significant likelihood that your case will eventually be heard by an Administrative Law Judge (ALJ). Importantly, ALJs are lawyers — not typically clinicians. In defending your case, it is strongly recommended that you retain legal counsel, regardless of whether you ultimately decide to work with a consultant or employ a clinician as an expert witness. Legal counsel will be best situated to understand and argue the various legal arguments which may prove essential in winning your case.
While RACs have not represented much of a threat to individual physicians and small practice groups in the past, the future is likely to be quite different. Physicians must already contend with audits by ZPICs, PSCs, Medicaid Integrity Contractors (MICs), Medicaid Fraud Control Unit (MFCU) investigators and Comprehensive Error Rate Testing (CERT) contractors. The expansion of the RAC program will further increase the need for statutory and regulatory compliance. Physicians and small practice groups and organizations should avoid the misconception that their limited size and / or relative billings will keep them “off the radar,” thereby limiting their chances of being audited.
IV. ZPICs and PSCs are Continuing to Rely on Statistical Sampling in an Effort to Extrapolate Damages:
In our practice, we have seen a marked increase in the number of solo physicians and small providers groups who have been subjected to pre-payment and post-payment audits of their Medicare billings.
In the case of post-payment reviews, the vast majority of Medicare audits we have worked on have included the statistical extrapolation of damages by ZPICs and PSCs. We expect RACs to follw suit as the number of their audits increase. In defending a post-payment audit, it is essential that you examine the statistical methodology utilized and identify any flaws in the contractor’s approach. We have successfully convinced both Qualified Independent Contractors (QICs) and ALJs to invalidate statistical extrapolations based on mistakes in the process committed by the ZPIC or PSC. Arguments can be legal and / or methodology-based. In many cases, it is necessary to engage the assistance of a qualified statistical expert. Should you succeed – be ready to defend this decision before the Medicare Appeals Counsel (MAC). Over the past year, practically every invalidation of the statistical extrapolation of damages was appealed to the MAC by the Administrative QIC (AdQIC).
Health care providers must be proactive in their efforts to better comply with applicable Medicare coding and billing practices. Should your practice be placed on pre-payment audit or have its post-payment Medicare claims reviewed, we recommend that you immediately contact your health care attorney for assistance.
Robert W. Liles and other Liles Parker attorneys have extensive experience representing health care providers around the country in large Medicare administrative overpayment appeals cases. We would be happy to discuss your case, give our initial assessment and provide client references for you to call. Should you have questions regarding RAC, ZPIC or PSC audit processes, you may contact us for a complimentary consultation. We can be reached at 1 (800) 475-1906.
(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.