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RACs Are Auditing Your Claims — What Should Physicians and other Medicare Providers Know about Appeals and Recoupment?

July 2, 2010 by  
Filed under Featured, Medicare Audits

(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.

 

Recoupment Timeframes

 

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.

robert_w_lile-150x1501Should you have any questions regarding these issues, don’t hesitate to contact us.  For a complementary consultation, you may call Robert W. Liles or one of our other attorneys at 1 (800) 475-1906.

A Look at RACs — How Should Physicians and Other Providers Respond to a RAC Audit?

June 28, 2010 by  
Filed under Medicare Audits

(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_lile-150x1501Robert 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.

A Look at RACs: What Do Physicians, Home Health, Hospice, and DME Providers Need to Know?

June 25, 2010 by  
Filed under Medicare Audits

RAC Auditors are Reviewing Physician Claims(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.[1]  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.[2]  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_lile-150x1501Robert 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.


[1] Available at http://www.aha.org/aha/content/2010/pdf/Q1RACTracResults.pdf

[2] Available at http://www.racaudits.com/uploads/RAC_Demonstration_Evaluation_Report.pdf.

You’ve got to be kidding. . . more Medicare audits on the way?

March 11, 2010 by  
Filed under Featured, Medicare Audits

(March 11, 2010): Medicare audits can be extraordinarily stressful for your organization.  Are your documentation practices compliant?  If not, you should take immediate steps to address any deficient practices you might have.  New Medicare audits are on the way!

According to the White House, President Obama has announced that he intends to back bipartisan plans to stamp out waste in government-run medical programs for the elderly and needy.  The White House said the new effort to root out improper payments in the Medicare and Medicaid programs could double taxpayer savings over the next three years to at least $2 billion.

I.     The White House is Committed to Fighting Health Care Fraud and Abuse.

As the White House noted, “We cannot afford nor should we tolerate this waste of taxpayer dollars,” The government believes that approximately $54 billion was lost through improper Medicare and Medicaid payments in 2009. Medicare is the government-run program covering elderly Americans and Medicaid is for the country’s poorest.

President Obama is seeking to crack down on waste and fraud as his administration strives to secure an overhaul of the $2.5 trillion healthcare system to contain costs and expand coverage to tens of millions of more Americans.  The action endorses Republican-backed proposals on alleged health care wrongdoers.

II.   Are More RAC-Type Medicare Audits Ahead of Us?

The plan will offer private auditors a share of the money that they recoup in order to encourage them to work harder to uncover improper payments under Medicare and Medicaid.   President Obama is also expected to back bipartisan legislation to expand the ability of government agencies to undertake these so-called payment recapture audits by providing more funds.

As many health care providers will readily attest, over the past year, it appears that there has been a marked increase in ZPIC post-payment Medicare audits, almost all of which are accompanied by demands for extrapolated damages.  Once again, this points to the importance of sefl-assessment and an effective compliance strategy.

III.   Steps You Should Take to Prepare for a Medicare Audit.

If you have not already done so, we strongly recommend that you implement an effective Compliance Plan — one that has been specifically designed to help present the “risks” that your practice face from day-to-day.  Over the years, our firm has represented a number of health care providers around the country in an effort to improper claims denials overturned.  This new risk will increase the likelihood that providers who have not been subjected to ZPIC or RAC audits in the past may now find themselves being examined by RAC-like auditors in the future. 

Coupled with existing audit risks, sole practitioners, small practice groups and clinics will find their coding and billing practice under the spotlight.  Unfortunately, based on recent cases we have handled, it appears that some ZPICs appear to impose their own views regarding what is required, well beyond the four corners of CMS-authorized provisions set out under LCDs and LMRPs covering the services at issue.  Fortunately, when faced with the facts, ALJs have applied a reasonable approach.

We recommend that health care providers carefully review their documentation practices.  How would your documentation look to you if you were in the place of an outside auditor?  In order to lessen the likelihood that ZPICs, PSCs, RACs and other third-party reviewers will deny your claims — you need to fully understand and apply the coverage and payments which apply to your claims / services.  Don’t wait until you are facing a Medicare audit.  Take action now.

robert_w_lile-150x1501Should you have any questions regarding these issues, don’t hesitate to contact us.  For a complementary consultation, you may call Robert W. Liles or one of our other attorneys at 1 (800) 475-1906.

Final Rule Outlining Recoupment Limitations and the Impact on Ongoing Medicare Overpayment Appeals Cases

February 1, 2010 by  
Filed under Featured, Medicare Audits, Recoupment

(February 1, 2010):  Last September, the Centers for Medicare and Medicaid Services (CMS) published its Final Rule addressing limitations on the recoupment of alleged overpayments by its Medicare contractors (e.g. Medicare Administrative Contractors and Qualified Independent Contractors).  This Final Rule finalizes how Medicare contractors are to proceed when pursuing recoupment actions of alleged overpayments owed by a health care provider.   “Recoupment” is defined as the recovery of a Medicare overpayment by reducing present or future Medicare payments and applying the amount withheld against the debt.

Under existing regulations, health care providers may postpone recoupment by engaging in the administrative appeals process.  Prior to passage of the Medicare Modernization Act (MMA), CMS could recoup overpayments, regardless of whether the provider or supplier had filed an appeal challenging an alleged overpayment.  With CMS’ Final Rule in place, limitations have been set on the ability of its Medicare contractors to pursue a recoupment action.  As the Federal Register states:

“This final rule defines the overpayments to which the limitation on recoupment applies, how the limitation works in concert with the appeals process, and sets time limits for recouping overpayments, specifically providing 41 days for a provider or supplier to file the first level of appeal before the contractor can begin recoupment and providing the provider or supplier 60 days to appeal at the second level before the contractor can begin recoupment” (74 Fed. Reg. 47458, 47458 (Sept. 16, 2009)).

Notably, a Medicare contractor may freely initiate recoupment on an overpayment once a reconsideration decision has been rendered, regardless if an Administrative Law Judge (ALJ) appeal has been filed or is going to be filed.

Should a provider elect to delay recoupment, the amount owed will be subject to the Medicare interest rate. This amount varies but is generally quite high. For example, as of January 25, 2010, the interest rate has been set at 11.25 percent.  As such, it is especially important that providers consider the following:

(1) If an overpayment determination is overturned past the reconsideration level of appeals, CMS is liable for interest on recouped overpayments that has accrued.

(2) If a health care provider or supplier takes advantage of the limitation on recoupment and ultimately loses an administrative appeal, the provider is liable for all interest accrued since the original determination, along with the overpayment which remains after going through the administrative appeals process.

While the Medicare interest rate is quite high, it is essential that health providers understand the nuances of the administrative appeals process before rushing to postpone recoupment.  For example, to avoid recoupment after a redetermination appeal decision has been issued, a provider (or its representative) must file for  reconsideration appeal within 60 days.  Should they choose to do so, they will be forfeiting the statutory right to avail themselves of the full 180 period that is permitted to file for reconsideration appeal – merely to avoid the initiation of recoupment.  In some cases, a provider would be better off taking the necessary time (up to 180 days) to ensure that its files are complete and its arguments in support of payment are fully developed prior to filing their appeal.  Filing an incomplete appeal within the 60 day deadline may ultimately harm, rather than help a provider’s chances of prevailing on appeal.

Ultimately, CMS’ Final Rule makes it more important than ever that health care providers undergoing overpayment review get qualified, experienced legal advice to help guide them through the administrative appeals process.

Should you have any questions regarding these issues, don’t hesitate to contact us.  For a complementary consultation, you may call Robert W. Liles or one of our other attorneys at 1 (800) 475-1906.