DME Audits are Back! Are Your Claims Compliant?

ZPICs are Conducting DME Audits

(December 22, 2015): The number of durable medical equipment (DME) audits conducted by Zone Program Integrity Contractors (ZPICs) and Program Safeguard Contractors (PSCs) have surged in recent years. Medicare contractors have gradually increased their scrutiny of DME suppliers’ claims. This has resulted in increased postpayment audits of DME suppliers’ claims and associated overpayment demands made against DME suppliers. A previously unenforced standard is being enforced: DME suppliers are responsible for maintaining patient medical documentation that establishes the medical necessity for the DME item. In addition to the documents traditionally required to be maintained by DME suppliers – i.e., physician (or dispensing) orders, Detailed Written Orders (DWO), Certificates of Medical Necessity (CMN), DME Information Forms (DIF), and proofs of delivery (POD) – DME suppliers are also expected to obtain and review supporting medical documentation from the ordering physician, including office visit progress notes, radiology reports, and so on. Yes, you heard that correctly – even though DME suppliers are not themselves allowed to decide whether a DME item is medically necessary for a specific beneficiary, they are required to obtain and assess patient medical documentation from the ordering physician to ensure that the documentation supports the medical necessity for the DME item ordered prior to distribution of that item. If DME suppliers do not secure and maintain this medical documentation, they can and are being held liable for DME supplies they have distributed which has been found non-covered because the documentation on record with the DME supplier does not support the medical necessity for the DME item distributed to the patient.

ZPICs and other Medicare program integrity contractors have been actively enforcing this rule through postpayment audits. For example, the number of DME audits initiated by Health Integrity, LLC, the ZPIC for Zone 4 (which includes Colorado, New Mexico, Oklahoma, and Texas); and TriCenturion, Inc. in its capacity as the PSC for DME Jurisdiction A (which is comprised of Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, New Jersey, New York, Pennsylvania, Rhode Island, Vermont, and Washington, DC), have increased over the past year and will be rising in 2016.

I. Medicare guidelines expressly require that DME suppliers maintain sufficient documentation to establish the medical need for the DME item ordered. ZPIC audits of DME claims will be focusing on this mandate.

Most DME suppliers understand that there are certain fundamental pieces of “supplier documentation” that they are required to maintain as a condition of payment. Medicare guidelines, for example, provide that DME suppliers must have on file a dispensing order, a DWO, a CMN (if applicable), a DIF (if applicable), and a POD for each DME item the supplier distributes. However, fewer DME suppliers are aware of the requirement that they must maintain sufficient ordering provider medical documentation from the patient’s medical record. Medicare guidelines provide that, “The supplier should also obtain as much documentation from the patient's medical record as they determine they need to assure themselves that coverage criteria for an item have been met.” This language may at first blush seem permissive. However, the Medicare guidelines leave no room for doubt that the supplier is required to maintain this medical documentation, or else risk liability for any overpayment associated with the claim: “ If the information in the patient's medical record does not adequately support the medical necessity for the item, the supplier is liable for the dollar amount involved unless a properly executed ABN of possible denial has been obtained.” (emphasis supplied). Therefore, if you are not doing so already, you need to institute a policy whereby you collect medical records immediately upon receipt of a physician order. It is our strong recommendation that you do not distribute an item unless and until you have received the necessary medical records. The time-consuming nature of this task and the delay in distribution of the DME item is far less painful than the probable extrapolated overpayment demand resulting from a postpayment medical review audit that will likely take years and significant financial resources to defend against.

II. Time is the enemy -- If you fail to secure the requisite ordering physician documentation prior to the distribution of the DME item, it will be much more difficult to secure down the line.

The nature of postpayment auditing is that the claims can be quite old, sometimes as old as four years (or even longer if fraud or similar fault is suspected!). If a DME supplier has not been vigilant about collecting medical records, this could pose a real problem. There are two major issues that DME suppliers face in this regard: (1) physicians are unwilling or cannot produce the medical documentation when it is requested after so much time has passed; and (2) physicians do produce the medical documentation requested but the documentation blatantly does not support the medical need for the DME item that was supplied. In regard to the latter, an example of this type of situation is where a patient has been prescribed a back brace for low back pain or lumbago but the medical record associated with the date of the order does not discuss back pain or back-related issues and does not even reference the order for the back brace. Believe it or not, we have seen this type of situation over and over again. In either scenario, there is nothing the DME supplier can really do to rectify the missing or deficient medical records. The DME supplier, and not the physician, is then stuck with the liability if a Medicare contractor audits your DME claims and determines the claims are non-covered.

III. The Office of Inspector General’s Work Plan for Fiscal Year 2016 highlights renewed interest in adequate DME supplier documentation. DME audits will be a focus in the upcoming year.

The United States Department of Health and Human Services (HHS) Office of Inspector General (OIG) recently released its Fiscal Year 2016 Work Plan. This annual publication identifies new and ongoing investigative, enforcement, and compliance activities HHS-OIG has decided to allocate resources to. For 2016, HHS-OIG has added the review of Medicare Part B payments for orthotic braces to its agenda. Specifically, HHS-OIG intends to determine whether DME suppliers’ claims were medically necessary and were supported in accordance with Medicare requirements because prior OIG work indicated that some suppliers were billing for items that were medically unnecessary “ or were not documented in accordance with Medicare requirements”. (emphasis supplied). There are also ongoing agenda items pertaining to power mobility devices and nebulizer machines (and related drugs) to ensure supplier compliance with Medicare requirements. Based on the Work Plan, DME suppliers should expect that postpayment medical review audits will continue, if not increase, this coming fiscal year.

IV. DME audits are here to stay but there are a number of steps a supplier can take to reduce their level of risk.

DME audits in 2016 aren't mere speculation — they are a certainty. Fortunately, even though this requirement is burdensome, there are steps DME suppliers can take to mitigate their risk. These include,

  • Instituting a policy whereby you collect patient medical records immediately upon receipt of a physician order. As discussed previously, you should not distribute a DME item unless and until you have received the necessary medical records. Again, the time-consuming nature of this task and the delay in distribution of the item will be far less painful than the probable extrapolated overpayment demand based on a contractor’s audit that will likely take years and significant financial resources to defend against.
  • Educating your team, including your local representatives, regarding the documentation that you need on file in order to distribute an item.
  • Educating the provider community about what you need in order to process a DME item for distribution.
  • Hiring a third-party like a health care attorney to audit a sample of your claims on an annual basis (or more frequently, depending on the size of your company and the types of DME items your company distributes).
  • Regularly checking up on and reviewing payor guidance. For example, you should regularly be searching the Medicare Local Coverage Determination database for guidance on all Current Procedural Terminology codes billed by your company.

Implementing these measures will be critical to the ongoing success of your company.

Lorraine Ater, JD is a health law attorney with the firm, Liles Parker, Attorneys & Counselors at Law. She is also a Certified Medical Compliance Officer (CMCO) and a Certified Medical Reimbursement Specialist (CMRS). Lorraine represents DME suppliers and a wide variety of health providers around the country in connection with Medicare, Medicaid and private payor audits. Liles Parker is a boutique health law firm with offices in Washington DC, Houston TX, McAllen TX and Baton Rouge LA. Need assistance? For a free consultation, please call: 1 (800) 475-1906.