Don’t Take ZPIC or RAC Extrapolation Calculations at Face Value – Can Their Results Be Readily Reproduced?

(July 14, 2010): Imagine a ZPIC, PSC, or RAC handing you a claim analysis rife with alleged errors, an indecipherable list of statistical formulae, 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 can and should carefully assess the contractor’s actions, use of formulas and application of the RAT-STAT 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 Partial Hospitalization, Evaluation and Management, Home Health, Physical Therapy, Surgical 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 games changes.  The question is – “How can you go about fighting an extrapolation calculation?”

One method is to show that the contractor’s auditor failed to identify a Statistically Valid Random Sample (SVRT).  Among the first steps is you should take is to retain experienced legal counsel to review the Medicare contractor’s actions.  Notably, there are a multitude of legal arguments which may be asserted (depending on the specific facts in your case).  Our firm has worked with several outstanding statistical experts over the years, each of which has a proven track record of analyzing the contractor’s actions and identifying any flaws made by the ZPIC or PSC when extrapolating damages.

Notably, Section 3.10.4.2 of CMS’ Medicare Program Integrity Manual establishes that the contractor is obligated to fully document the statistical methods an auditor employs:

“The PSC or ZPIC BI [Benefit Integrity] unit or the contractor MR [Medical Review] unit shall identify the source of the random numbers used to select the individual sampling units. The PSC or ZPIC BI unit or the contractor MR unit shall also document the program and its algorithm or table that is used; this documentation becomes part of the record of the sampling and must be available for review.” (emphasis added)

“The PSC or ZPIC BI units or the contractor MR units shall document all steps taken in the random selection process exactly as done to ensure that the necessary information is available for anyone attempting to replicate the sample selection.” (emphasis added)

ZPIC and PSC statisticians must be able show their work to the extent that a reviewer can attempt to “replicate” their actions and determine whether or not the steps taken were consistent with accepted principles and practices of statistical sampling.  The failure of a ZPIC or PSC statistician to fully and properly document his actions may serve as the basis for seeking to invalidate the extrapolation. The calculation of a valid statistical sample and the extrapolation of damages by ZPIC and PSC statistician is a highly complex process. After handling many extrapolated damages cases, we have found that few ZPIC or PSC statisticians fully meet their obligations to document the steps taken and / or conduct the process in a proper fashion, consistent with accepted statistical sampling procedures.  Should your practice or clinic find that it is facing an extrapolated Medicare audit, it is strongly recommended that you engage qualified, experienced counsel to represent you in the process.  Your legal counsel can then engage a qualified statistician to assess the contractor’s actions.

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.

What is Causing the Spike in Partial Hospitalization Overpayment Actions?

(June 30, 2010): Are Partial Hospitalization Programs (PHPs) and Community Mental Health Centers (CMHCs) being unfairly targeted in the Administration’s push to identify and recover allegedly improper Medicare payments?

In May 2010, the Office of the Inspector General of the HHS (HHS-OIG) published an assessment of the Program Safeguard Contractors (PSCs) overpayment collections that identified only 2 overpayment referrals for partial hospitalization claims in 2007. These referrals accounted for only $403,935 of approximately $835 million in overpayment referrals — less than 0.1% of the total.  Yet, we are aware of far more overpayment cases involving CMHCs (many of which are in the Southern region) making their way through the administrative appeals process right now.

After carefully reviewing the data, it is our belief that CMS has taken action to address HHS-OIG’s unimplemented recommendations regarding the agency’s concerns about partial hospitalization claims.   Dating as far back as 1998, HHS-OIG has pushed for stronger oversight of these programs.  For at least the last three years (2007, 2008, and 2009), HHS-OIG’s compendium of unimplemented recommendations has included dramatic findings as to the scope of supposed partial hospitalization program billings and the potential savings that could be derived from focusing on this area.  For instance, in 2007 and 2008, the agency reported:

“’Partial hospitalization’ services, which may be provided by both hospitals and community mental health centers, have been particularly troublesome…. We estimated that payment error rates for partial hospitalization in community mental health centers were as high as 92 percent.” (Emphasis added).

HHS-OIG estimated that ensuring the appropriateness of Medicare payments for mental health services would yield $725 million in savings in 2007.  This figure increased to $1.44 billion in 2008 and 2009.

Again in 2009, HHS reiterated its findings, saying,

“We believe that CMS still needs to monitor partial hospitalization services provided by community mental health centers, which we consider particularly vulnerable. We will continue to monitor CMS’s efforts to ensure that mental health services are medically necessary and reasonable and are accurately billed.” (Emphasis added).

While neither CMS nor HHS-OIG have commented on the “spike” in cases brought against CMHCs, it appears clear that partial hospitalization claims are currently being reviewed by contractors around the country for possible overpayments.

To be clear, we take exception with these findings.  After representing many CMHCs around the country, it has become apparent that many of the reviewers conducting reviews of partial hospitalization claims have little or no experience assessing these specialized services.  As a result, we are quite concerned that CMHCs are now being targeted.  We strongly recommend that CMHCs conduct periodic reviews of both applicable LCD provisions and their billing practices to ensure that partial hospitalization services are being appropriately ordered, documented and billed.

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.