(August 30, 2010): 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.
I. Scope of Responsibility:
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
- Cardiac Procedures
- Cardiovascular Diseases
- Cardiovascular, Other
- Gastrointestinal Disorders
- Musculoskeletal Disorders
- Endocine, Nutritional & Metabolism Disorders
- Kidney & Urinary Tract Disorders, and
- Blood & Immunological Disorders
II. 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.
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.