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Medicare Advantage Plans May Soon Offer Personal Care Services

Personal Care

(April 10, 2018):  On April 2, the Centers for Medicare and Medicaid Services (CMS) announced an expansion of the benefits that private health plans may offer Medicare beneficiaries under the Medicare Advantage (MA) program in 2019.  In its Final Call Letter for bids from plans that participate in the MA program (“MA plans”) for 2019, CMS expanded the services that plans would be permitted to offer in 2019 as supplemental health related benefits, even if the primary purpose of those benefits includes daily maintenance.  While these benefits are not required to be included in MA plans, plans are provided the latitude to include them if they choose and may very well change the reimbursement landscape for personal care agencies around the country.

I.  Background:

As background, MA Plans are permitted to offer certain benefits that are not included as part of the Medicare fee for service, or Original Medicare, benefits, if those benefits are, among other things, primarily health related.  As discussed in the Final Call Letter, CMS considers an item or service to be primarily health related “…if the primary purpose of the item or service is to prevent, cure, or diminish an illness or injury.”  However, CMS previously has not considered a service to fit within this category if the primary purpose is daily maintenance.

II.  Expansion of Coverage for Personal Care Services:

In the Final Call Letter, CMS recognizes that there is value in certain services that “diminish the impact of injuries or health related conditions and reduce avoidable emergency and health care utilization.”  The Letter does not specify the benefits that would fall under this rubric, but includes as an example, fall prevention devices for individuals at risk high risk for falling and similar products that protect against injury resulting from falls.  The Letter further states that services that diminish the impact of injuries and health conditions and reduce avoidable utilization can be included as supplemental benefits under certain circumstances, even if a significant purpose of the item is daily maintenance.”

As further described in the Letter, “[u]nder the new interpretation, in order … to be ‘primarily health related’ … [an item] must diagnose, prevent, or treat an illness or injury, compensate for physical impairments, act to ameliorate the functional/psychosocial impact of injuries or health conditions, or reduce avoidable emergency and healthcare utilization.”  The intent is to provide plans with the flexibility to offer supplemental benefits that can enhance quality of life and improve health outcomes.

The service must, however, be medically appropriate, recommended by a licensed provider as part of a plan of care, and cannot include items or services that are solely to induce enrollment.  The Letter also indicates that CMS will be issuing more detailed guidance in the future.

As noted, above, while not entirely clear, it is quite possible that MA plans will be permitted to cover personal care services under the revised standards for supplemental benefits.  Indeed, in a press release issued by CMS announcing a draft of the Bid Letter for comment in early February, CMS described the proposal as allowing supplemental benefits to “include services that increase health and improve quality of life, including coverage of non-skilled in-home supports, portable wheel chair ramps and other assistive devices and modifications when patients need them.” (Emphasis supplied.)  While neither the press release accompanying the Final Bid Letter nor the Letter, itself, includes any language specifically referencing these items, the broader language of the Final Letter can certainly be read to permit plans to offer personal care services under certain circumstances.

III.  What Steps Should Your Personal Care Agency Take?

So what can a provider that wishes to offer these services, including personal care services, as part of an MA plan for 2019, do at this point?  First, providers can be watchful for additional guidance from CMS that should be forthcoming.  Second, they can begin to approach the MA plans that cover a significant number of MA subscribers in their service area to discuss both including these items or services as supplemental benefits in the plans’ upcoming bids to CMS for the 2019 year, and to discuss pricing.   In doing so, providers should be prepared with data or other information demonstrating that offering the service will reduce costs without harming patients.  For example, a provider that wished to offer personal home care services would attempt to prepare a cost benefit analysis showing that home visits reduce the incidence for hospital admissions or admissions to skilled nursing facilities. Additionally, if the MA plan is also a provider of Medicaid managed care services, the provider may also include in the analysis the cost/benefit of lowering admissions to the nursing facility long stay side of the equation.  There are other permutations to the analysis, but the key is to begin discussions with the various plans, and to accumulate data that demonstrate both the short term and long-term cost and health benefits of the particular service.

Providers that wish to take advantage of this opportunity should also note that the Bipartisan Budget Act of 2018 expands supplemental benefits for chronically ill enrollees to also encompass benefits that are not primarily health related in certain circumstances beginning in 2020.  This change recognizes the importance of certain social determinants to health status – something that some state Medicaid programs are beginning to recognize as well.  However, this change only affects “chronically ill” beneficiaries and does not begin until 2020, whereas the expanded definition of supplemental benefits in the Bid Letter affects services provided to all MA beneficiaries and begins in 2019.  Additionally, the Final Bid Letter notes that the expanded definition of supplemental benefits in that Letter requires that the benefit address specific illnesses and/or injuries, and reiterates that it will be issuing further guidance on both expansion options in the future.

We would also note that all MA plans are required to have compliance programs in place that meet the seven elements of an effective program.  Under this program, they are also responsible for providing certain training for providers under their programs, as well as for the compliance of those providers.  While Liles Parker attorneys, and in fact, virtually all knowledgeable health care attorneys, have long counseled their clients on the importance of establishing and maintaining effective compliance programs, and while some segments of the industry are required to maintain such programs by law, any entity that wishes to contract with MA plans to provide health care related services almost certainly will be required by the plan to maintain a compliance program.  Thus, any entity that wishes to take advantage of the expanded coverage of services under the Final Bid Letter should be prepared to demonstrate that it has an effective compliance program.

With respect to providers of personal care services, there are a number of areas of vulnerability.  One major such area is ensuring that aides actually perform the services for which a program is billed.  Several years ago, there were a number of investigations and prosecutions where aides were alleged to have colluded with clients to defraud the Medicaid program by failing to provide the service for which the aides were paid, and paying the client a portion of the payments.  There are mechanisms to monitor this type of activity; however, it is a major risk area for home care agencies and should be addressed in any compliance program.

IV.  Conclusion:

In short, the Final Bid Letter for 2019 presents the possibility of expanding the services that certain MA plans will cover, including the possibility of covering personal care services.  However, providers that wish to contract with MA plans for these services should be taking the actions described, above. Liles Parker attorneys have extensive experience in assisting clients throughout the health care industry, including home care and home health, in responding to new government and payor initiatives, including establishing and maintaining an effective compliance program.

Personal CareMichael Cook, J.D., is a Partner at the firm Liles Parker, Attorneys & Counselors at Law.  Mr. Cook represents nursing home, assisted living, home health and personal care clients in regulatory matters.  Anyone interested in discussing the material discussed in this article should feel free to contact Michael Cook at 202-298-8750 or       







OIG Scrutinizes Medicaid Personal Care Services and Issues Report Outlining Vulnerabilities.

OIG Report on Medicaid Personal Care Services(November 21, 2012): On November 15th, the Department of Health and Human Services, Office of Inspector General (OIG) issued a report on Medicaid personal care services entitled “Personal Care Services, Trends, Vulnerabilities, and Recommendations for Improvement – a Portfolio”, Report No. OIG-12-12-01 (Report).  The Report purports to synthesize a number of prior reports and makes recommendations to improve program vulnerabilities that OIG has detected in its prior audits, evaluations and inspections of personal care services (PCS). The OIG indicates that it has previously found significant and persistence compliance, payment and fraud vulnerabilities.  It also emphasizes the seriousness of its concerns by noting that Medicaid costs for PCS’s increased 35% from 2005 to 2011.  Specifically, OIG notes that it has produced 23 audit and evaluation reports from 2006 through 2012 focusing on PCS’s.

I.  Overview of Problems Identified in the OIG’s Report on Medicaid Personal Care Services Fraud:

The OIG Report has identified the following concerns and program deficiencies:

  1. Improper payments linked to a lack of compliance with various requirements including State requirements, lack of documentation to demonstrate that services had been provided, services having been provided while beneficiaries were in institutional stays that, themselves, were reimbursed by Medicare or Medicaid, or services that were provided by staff who did not meet State qualification requirements;
  2. Inadequate controls to ensure appropriate payment and quality including inadequate controls over the prior authorization processes, lack of prepayment controls and edits, inconsistent standards and monitoring of PCS attendants, and inadequate billing practices to substantiate the delivery of services; and
  3. Increasing concern over fraud in the delivery of PCS including conspiracies between beneficiaries and PCS attendants to submit claims for services not provided or not covered, with a special concern over self-directed services.

Although not mentioned in the report, there have been recent reports of convictions for other types of fraud involving kickback arrangements.  In this regard, OIG noted that as of 2010, state Medicaid Fraud Control Units (MFCUs) had more open investigations of PCS fraud than any other type of services – more than 1,000 investigations nationwide.

The Report also makes a number of recommendations to CMS for revising requirements for PCS’s that include more standardized regulation of qualifications, expanding federal requirements and guidance, more sharing of data , and other modifications.  CMS agreed with one of the recommendations – better sharing of data suitable for identifying overpayments, while either rejecting or providing qualified acceptance of others.

II.  What Should Personal Care Services Providers Do?

The real takeaway for providers of these services is an understanding that these services are coming under increasing scrutiny and State and Federal oversight – especially from State Medicaid auditors, MFCUs, and US Attorneys’ offices.  As such, providers should familiarize themselves with the findings and recommendations of the Report, CMS’ responses, and recent reported cases of convictions or settlements.  It is critical that they develop or ensure that their own compliance programs, including internal and external audits and service monitoring processes incorporate those findings and protect against the conduct that has drawn scrutiny.

Michael CookLiles Parker attorneys have had considerable experience and success in representing PCS providers.  Our team has successfully worked to assist PCS providers in obtaining favorable decisions that exempted several PCS’ from being required to obtain CONs as a condition of retaining their licenses, Medicaid coverage issues, and eliminating entirely provider liability for a major audit disallowance.  Additionally, Liles Parker attorneys have significant experience in assisting providers in establishing and auditing effective compliance plans and programs. Anyone seeking further assistance in this area should contact Michael Cook at 202-298-8750.

Medicaid RACs to Increase Enforcement Efforts

Medicaid RACs Auditing Claim(May 23, 2012): Recent efforts by CMS to improve Medicaid audit performance have resulted in procedural changes for Medicaid Integrity Contractors (MICs) and financial incentives for Medicaid Recovery Audit Contractors (Medicaid RACs) to increase their audit efforts and effectiveness. RACs have long been regarded as “bounty hunters” within the Medicare/Medicaid and healthcare provider communities. These entities essentially “eat what they kill”; therefore their profitability ultimately depends on their ability to identify overpayments.  RACs receive a percentage of any overpayment recovery they obtain based on contingency fee rates established by each state under the Medicaid RACs final rule, issued September 16, 2011.  On June 1, 2011, CMS increased the contingency fee for Medicaid RACs who identify overpayments by Durable Medical Equipment (DME) home health providers by 5%, increasing the Medicaid RAC maximum contingency fee from 12.5% to 17.5%.  CMS finally gave notice of this fact on February 24, 2012 when it announced that the Medicaid maximum RAC contingency fee for non-DME claims would remain at 12.5%, while DME claims would be paid at the higher rate of 17.5%.  By authorizing this rate change, CMS has given Medicaid RACs additional monetary incentive to focus on DME providers in finding Medicaid overpayments. The result will be even more pressure on DME providers to follow the law.  Remember that government contractors have a duty to report and refer suspected fraudulent activity.

For example, DOJ recently indicted a DME provider in South Texas who pled guilty to a felony charge of conspiracy for violating the federal Anti-Kickback Statute:

“The federal anti-kickback statute prohibits individuals and entities from knowingly and willfully paying or offering to pay, as well as soliciting or receiving remuneration (money or things of value) in return for the referral of patients for medical services or items which are benefits under a federal health care program, such as Medicare or Medicaid. A violation of the statute is a felony offense.”

The DME service provider’s owner now faces up to 5 years in federal prison and a $250,000 fine.  DME providers should, at a bare minimum, make sure they have supporting documentation for all ordered equipment and supplies from the referring physician they do business with.  This would include diagnostic information, supporting medical tests, and physician orders for medically necessary equipment and supplies.  Such documentation is essential to supporting your DME claims in the event of a RAC audit or law enforcement investigation.

Richard PecoreLiles Parker is a full service health law firm, providing assistance and representation with Medicaid and Medicare compliance concerns, government audits and appeals, and other health law matters.  Should you have any questions, please contact Richard Pecore at 713-432-4747 for a free consultation.


Medicaid MIC Audits to Increase

Medicaid MIC Audits are Expected to Increase.(May 15, 2012): Recent efforts by CMS to improve the performance of Medicaid MIC audits have resulted in procedural changes for these contractors and new financial incentives for Medicaid Recovery Audit Contractors (MRACs).  These new procedural changes are intended to improve the effectiveness of MRAC audits.  The recent U.S. Department of Health and Human Services (HHS) Office of the Inspector General (OIG) report entitled “Early Assessment of Audit Medicaid Integrity Contractors”, issued on 03/19/12, revealed that MICs underwent a learning curve during their startup audit efforts in 2010 and after identifying several problems, the Medicaid Integrity Program (MIP) is now poised to significantly improve its audit presence and its ability to target and identify healthcare waste, fraud and abuse.

I.  State-Administered Medicaid MIC Audits Have Been Largely Ineffective:

The OIG’s report indicated that initial MIC audits in state-administered Medicaid programs were largely ineffective, but identified correctable issues associated with the application and analysis of Medicaid data.  As a result, significant improvements in Review and Audit MIC capabilities to identify audit overpayments can soon be expected.

The federal government’s share of Medicaid spending for 2010 was $271.4 billion, with the various states accounting for the remaining $133.9 billion.  As set out in CMS’ 2010 Actuarial Report, overall Medicaid spending totaled $404.9 billion. CMS projected $22.5 billion in improper payments through its Medicaid Payment Error Rate Measurement, discussed in the HHS Agency Financial Report for 2010.

The OIG report found that of the 370 pre-screened MIC audits that had been conducted or were still ongoing in the first 6 months of 2010, 81% were either unable or unlikely to identify overpayments.  From January 1, 2010 through June 30, 2010, the OIG found that, “Only 11% of assigned audits were completed, with findings of $6.9 million in overpayments, $6.2 million of which resulted from seven completed collaborative audits involving Audit MIC’s, Review MIC’s, States and CMS.”

Moreover, CMS spent approximately $30.5 million on Review and Audit MICs in 2010, with $17.2 million going to Audit MICs. The government has enjoyed success on the Medicare side with increased contractor audits by RACs and ZPICs, and is now looking to improve its initially disappointing performance on the Medicaid side and increase its $6.9 million total in overpayment recoveries.

II.  MIC Auditors Have Done a Poor Job Identifying Targets:

The OIG report found that Medicaid MIC audits were hindered by poor target identification algorithms in their data analysis software and mistakes in the Review MICs’ application of State Medicaid program policies and data, bearing in mind that each state’s program policies and data are unique.  The OIG made a number of suggestions for improved application and analysis, with the result being that providers should expect largely improved overpayment identification by MICs in the future.

Significantly, the OIG found that $6.2 million of the $6.9 million dollars identified as overpayments in 2010 resulted from 7 of 8 collaborative audits conducted between Audit MICs, Review MICs, State MICs and CMS.  Of the 42 MIC audits studied, these 7 collaborative audits identified 90% of the overpayments for that period, with only $700,000 coming from the remaining 35 MIC audits.

III. Final Remarks:

OIG recommended that CMS expand its collaborative audit efforts with State Medicaid administrative agencies, and improve its audit target selection in states that choose not to collaborate with the federal government in improving identification of waste, fraud and abuse by Medicaid providers.

Richard PecoreLiles Parker is a full service health law firm, providing assistance and representation with Medicaid and Medicare compliance concerns, government audits and appeals, and other health law matters.  Should you have any questions, please contact Richard Pecore at: (713) 432-4747 for a free consultation.

Medicaid Therapy Services in Texas Must Comply With HHSC Rules.

Medicaid Therapy Services Audit(May 2, 2012): Recognizing that many Medicaid therapy services in the state are not in compliance with fraud, waste, and abuse laws, Tom Suehs, the Executive Commissioner for the Texas Health and Human Services Commission (HHSC), issued a reminder last week. Specifically, the Commissioner identified several violations of Texas law in recent months, most notably in South Texas, which prompted such a response.

The Commissioner primarily identified the fact that Medicaid therapy services providers in South Texas were providing services to children without the presence or consent of the child’s parent or legal guardian. This practice violates a Texas law, which prohibits services provided to a child under the age of 15 unless a parent, legal guardian or other properly authorized adult accompanies the child.  The intent of the law is to make sure that an adult can verify that the services were, in fact, provided, and to ensure the safety of the child from medically unnecessary, or even dangerous, procedures.

In addition, transportation of children to and from medical procedures paid through Medicare or Medicaid by providers or those with which they have a business relationship may raise serious concerns, and may possibly implicate the Federal Anti-Kickback Statute, among other laws. Notably, this is a criminal statute. Because of the severity of punishments for non-compliance, it is imperative that Medicaid therapy services providers in Texas, especially South Texas, ensure that their practices fully comply with all applicable rule, regulations, and other guidance.

Implementing an effective compliance plan means more than simply downloading a model plan off of the Internet – instead, an effective compliance plan is one that is individualized to your practice, recognized by your employees, and followed on a daily basis. This may include the use of a gap analysis to assess your documentation practices and evaluate your business relationships for any signs of impropriety. Remember, the government is looking for these things, and they will most likely find them. You need to make sure that your practice can undergo and withstand an audit or other scrutiny.

Robert LilesLiles Parker is a full-service health law firm focusing on regulatory compliance and representing providers in health law and business matters. Our attorneys are highly skilled in designing and implementing effective Compliance Plans for all types of health care providers, including providers of Medicaid therapy services. Moreover, our attorneys are experienced in handling an array of complex health law matters, including the appeal of alleged overpayments to Medicaid. For more information on how we can assist your practice in developing an effective dental compliance plan, call Robert W. Liles, Esq. Robert is a Managing Partner at the Firm and can be reached at 1 (800) 475-1906. Call him today for a free consultation.

The Current CMS Initiative on Reducing Hospital Admissions is Here!

The Current CMS Initiative on Reducing Hospital Admissions is Now Here.(April 23, 2012): According to the Director of the Centers for Medicare & Medicaid Services (CMS) Medicare-Medicaid Coordination Office, more than 1800 entities have expressed interest in a CMS initiative that will provide $128 million over 4 years to entities to reduce hospital admissions and readmissions from nursing facilities for dual-eligibles (patients with both Medicare and Medicaid coverage). According to the CMS announcement, the Agency will partner with “enhanced care & coordination providers” to implement evidence-based interventions to reduce hospitalizations. Organizations eligible to apply for these grants include physician practices, care management organizations, and other public and not-for-profit entities.

The Center for Medicare & Medicaid Innovation (CMMI) Fact Sheet lists past demonstrations that have reduced avoidable hospitalizations through the use of nurse practitioners in nursing facilities to manage residents’ medical needs. Presumably, this refers to the EverCare demonstration project which was held several years ago. Additionally, the Fact Sheet discusses strategies such as implementing quality improvement and communication tools for changes in resident status and condition. Letters of intent are due to CMMI byApril 30, and proposals are due by June 14.

Private insurers also are expected to implement a variety of partnerships and strategies with nursing homes and other post-acute providers. For example, earlier this year Aetna announced an agreement with Genesis HealthCare, a large post-acute company, to establish an incentive arrangement if the company is able to reduce hospital readmissions.

We also anticipate a number of other types of innovative arrangements between nursing homes, insurers, and other providers and organizations, including managed care organizations, to develop strategies and incentives to provide more efficient care to post-acute patients, including managed care patients.

Michael CookMichael Cook recently presented to the American Health Lawyers Association Conference on Long Term Care and the Law on the topic of “Opportunities and Challenges to Managed Care Contracting for Post-Acute and Long Term Care Providers During and After Health Care Reform.” Providers and other entities desiring assistance in responding to incentives posited by the Affordable Care Act and CMMI should contact Michael Cook at (202) 298-8750. Michael has substantial experience in assisting post-acute providers and others in structuring innovative care delivery mechanisms to respond to the delivery systems reform incentives.  

Proposed Medicaid Payment Rates are a Potential Game Changer

Proposed Medicaid Payment Rates are a Game Changer!(May 24, 2011): On May 6, CMS proposed to amend its rules governing the adequacy of provider Medicaid payment rates.  This proposed rule, may be the most important regulatory action to protect providers and beneficiaries from draconian rate reductions since the repeal of the Federal standard known as the Boren amendment, in 1997.  Currently, Federal rules require states to provide only minimal notice to providers and the public, and to develop and maintain only minimal information before making any significant changes to their Medicaid payment methodologies.  The proposed rules, if adopted, would appear to require states to monitor the adequacy of current Medicaid payment rates, provide significantly more information to CMS about any proposed payment rate decreases, and to signify a far more active role for CMS in addressing the adequacy of Medicaid payment rates than it has taken since the enactment and repeal of  the Boren amendment.

Specifically, prior to 1990, Federal law required states to pay hospital, nursing home, and several other provider categories at their “reasonable costs” or for nursing home, at rates that were reasonable cost related.  For all other provider types, states were required to pay at rates that were consistent with efficiency, economy, and quality of care, and sufficient to enlist enough providers so that care and services are available to Medicaid beneficiaries at least to the extent that such care and services were available to the general public.  During this period, at least with respect to hospitals and nursing homes, CMS and its predecessor component agencies took an active role in approving changes to state payment methodologies under Medicaid.

In 1990, Congress enacted the Boren amendment.  The Boren amendment required states to pay hospitals and nursing homes at rates that were reasonable and adequate to cover the costs that must be incurred by efficiently and economically operated providers.  During the period in which the Boren amendment was in effect, the United States Department of Health and Human Services (‘HHS”) and its principal operating component that ran the Medicaid program at the Federal level, construed their role to be extraordinarily minimal, and in essence, to simply ensure that states made certain advance findings before changing their Medicaid payment rates.  Except in the most extreme cases, the Federal government did not perceive its role as looking behind these findings to determine their substantive adequacy, and Medicaid payment rates for these classes of providers were predominantly the product of negotiation between the states and providers.

When states attempted to change their payment methodologies to pay at rates that provider groups considered inadequate, providers would generally challenge those methodologies by bringing actions in Federal and State courts, and would frequently succeed either in those actions, or by using the Boren amendment standard to negotiate an acceptable alternative.  One of Liles Parker’s attorneys was involved extensively in representing providers and their trade associations in a number of those actions.

As part of the Balanced Budget Act of 1997, Congress repealed the Boren Amendment, and replaced it with a limited standard for providing public notice.  Thus, the only provision that governed most provider payment levels was the “equal access” standard at section 1902 (a)(30)(A).  This provision requires states to assure that payments are consistent with efficiency, economy, and quality of care, and sufficient to enlist enough providers so that care and services are available to the general population.

Since 1997, HHS has continued its “hands off” role in its involvement with state payment methodologies.  Also, there has been a significant amount of litigation over whether the equal access provision provides a Federal cause of action for providers to challenge states in the manner in which they set their Medicaid payment levels.  For the most part, providers have been left at the mercy of state regulators and legislatures.

More recently, as a result of the economic downturn, states have contemplated far more draconian rate reductions.  Also, in 2009, Congress created the Medicaid and CHIP Payment and Access Commission (“MACPAC”) to study and make recommendations on beneficiary access under the Medicaid and CHIP programs.  Finally, under the Accountable Care Act, beginning in 2014, a significant number of new beneficiaries will fall under the ambit of the Medicaid program.

In the May 9 proposed rule, CMS is proposing to require states to collect and publish far more information in determining whether their payment rates are consistent with efficiency, economy, and quality of care and sufficient to enlist enough providers so that care and services are available under Medicaid to the extent that they are available to the general public.  Additionally, CMS appears to be proposing to take a far more active role than it has since 1990 in approving or disapproving state plan amendments that would decrease payment rates for providers.

The proposed rule, if adopted, would appear to offer potentially the first effective vehicle in years to provide hospitals, nursing homes, and other providers with any leverage at the Federal level to address grossly inadequate payment rates and draconian rate reductions under the Medicaid program.  It may also provide a vehicle under which providers can access the Federal courts.  As such, the proposed rule could be one of the most significant rule making actions in years for providers that serve a large portion of Medicaid beneficiaries as well as for their trade associations.

For these reasons, providers and their trade associations should consider seriously submitting comments to the proposed rule.  To be considered, comments must be considered by no later than July 5, 2011.

Liles Parker attorneys have extensive experience with Medicaid payment issues.  Michael Cook has more than 30 years experience in negotiating and litigating the adequacy of Medicaid provider rates.  As a former HHS legal counsel, Michael has extensive knowledge and expertise working on both sides of this issue.  Anyone seeking additional information on this issue should contact Michael Cook at (202) 298-8750 or, for a free consultation.

HHS Publishes Proposed Rules on Medicaid RACs

November 30, 2010 by  
Filed under Medicaid

Medicaid RACs(November 30, 2010):  The United States Department of Health and Human Services (“HHS”) recently published a Proposed Rule applying the Recovery Audit Contract (RACs) process to claims under the Medicaid program.  As background, the RAC process has been a part of the Medicare program since 2005, first as a demonstration project from 2005 – 2008, and then extended to the entire nation effective no later than January 1, 2010.

I. Overview of the Medicare RAC Program:

 Under the Medicare RAC program, HHS retains private contractors for a post payment review process to identify over and under payments on a contingency fee basis.  There are two types of reviews – data mining, which involves simply reviewing data to identify improper payments, and complex reviews, which require reviews of medical records to determine the “legitimacy” of a payment.  To date, HHS has contracted with four RACs – one covering each of four national regions.  HHS pays the RAC a contingency fee based upon a percentage (currently ranging from 9 – 12.5 percent) of the amounts of overpayments that the Federal government recovers and underpayments that HHS repays providers based upon the RAC review.  Overpayment recoveries have far exceeded underpayments that the program has reimbursed providers.

The process was highly controversial during the demonstration, and HHS implemented a number of changes for the national roll out.  Among others, HHS:  shortened the look back period; set limits on the number of records that the RACs could request at any one time; precluded RACs from retaining their contingency fee payments where the provider prevailed at any stage of the appeals process; required RACs to receive approval from HHS, and publish, the types of claims that they were reviewing; and required RACs to retain physicians as medical directors.  Despite theses changes, the process still requires providers to expend substantial amounts of increased administrative expenditures to accommodate these reviews.

II.  Medicaid RAC Programs are Now Required by Law:

Although several States have conducted RAC type audits under their Medicaid programs, most have not.  However, as part of the health care reform legislation, Congress required all States to establish a Medicaid RAC program by December 31, 2010.[1] See §6411 of the Patient Protection and Affordable Care Act.

The proposed rules require that States submit a state plan amendment (“SPA”) by the December 31, 2010 deadline.  However, recognizing that responses to the proposed rule are not even due until January 10, 2010, the proposal also indicates that States are not required to implement the program until April 1, 2011.  The proposal also recognizes that some States may need to change their State laws to implement the RAC program, and thus states that HHS may grant exceptions in certain areas, albeit on a limited basis.

The proposed rules would grant substantial flexibility to states in how they establish their RAC programs.  However, the rules provide that the fees States pay Medicaid RACs for overpayments and underpayments combined may not exceed the amounts that the State collects from overpayments.  This means that both the States and RACS will be strongly incentivized for the RACs to find over, as opposed to under, payments.

III.  Medicaid RAC Appeals:

The rules require the State to establish an appeals process for providers to dispute overpayments identified by the RACS.  However, the preamble to the proposed rules would require states to return the Federal match for an overpayment that is identified even if the State does not recover that overpayment from the provider.  If this is construed to require the State to return the Federal share of overpayments that the RAC identifies even if the provider prevails on appeal, this would place a strong disincentive for the State to establish a vigorous and unbiased appeal process.  Similarly, it is unclear whether HHS would recover the Federal portion of identified overpayments even in those cases where the State otherwise would have settled a claim in this process.

Further, it is not clear whether HHS will attempt to recover the share of the entire identified overpayment, even if it is clear that the provider would have been entitled to a partial payment if the claim had been properly submitted, e.g. in States that pay hospital providers under a DRG system, hospital transfer cases, or cases where the RAC concludes that a hospital case that was billed as an inpatient admission should have been billed as observation.  Absent such authorization, the State would avoid payment for even the portion of treatment that its RAC concluded was legitimate and actually provided, albeit mistakenly claimed.

Under the proposed rules, it appears that States would have substantial flexibility in designing their programs.  Thus, it would behoove providers and their trade associations not only to submit comments on the proposed Federal rules (which are due on January 10, 2010), but also to become involved in the development of the State process.  Liles Parker attorneys have had success in the past in assisting providers in one State to change the process in an analogous circumstance, to, among other things:  shorten the period for which claims were reviewed; assist providers in convincing the State to implement a routine process to minimize the chance that record requests would be lost; limit the number of medical records that could be requested; limit reveries to the difference between amounts that were claimed and those that could have been claimed under the RAC’s analysis; the qualifications of RAC staff that review medical necessity claims; and establishing the specific criteria that would be used to review medical necessity issues.

Also, providers will want to discuss with their States a number of other issues such as the extent to which physician judgment will be relied upon in second guessing medical necessity and treatment decisions, the process that will be used to challenge Medicaid RAC determinations, and the extent to which the State will increase Medicaid payments for the added administrative expense involved in staffing up for these reviews.  This is especially critical under the Medicaid program, where State payments often are far below the cost of providing the service as a result of deficient appropriations.

Finally, providers will need to develop their internal processes for ensuring that requests for records are properly tracked and timely processed, and for appealing appropriate cases.

Liles Parker attorneys have extensive experience in all of these areas and are prepared to assist providers and their trade associations in commenting on the proposed Federal rules, assisting in negotiations with States on the development of their Medicaid RAC programs, and appealing overpayment determinations.  Providers wishing to discuss these issues should contact Michael Cook at (202) 298-8750.

[1] Congress also expanded the Medicare RAC program to parts C (Medicare Advantage) and D (Medicare Outpatient Prescription Drug program) of Medicare.  We will address these changes in a later issue.


HHS-OIG Issues Report on Improper Claims for Nonemergency Transportation Services

OIG is Concerned About Improper Claims for Nonemergency Medical Transportation Services(September 6, 2010):  The Department of Health and Human Services, Office of Inspector General (OIG) recently issued its report examining the costs of nonemergency transportation services reimbursed by Medicaid.  Pursuant to 42 C.F.R. § 431.53, Texas and other States are required to ensure that Medicaid patients have transportation to medical facilities and providers to obtain covered Medicaid services.

In Texas, the Texas Health and Human Services Commission has contracted with the Texas Department of Transportation to administer this nonemergency transportation program. The Department of Transportation has subcontracted with various private transportation providers to provide these services.

I.  OIG’s Findings Regarding Nonemergency Transportation Services:

Upon audit, OIG found that one transportation provider had allegedly provided nonemergency transportation services for which the Texas Health and Human Services Commission had improperly claimed reimbursement by Medicaid.

As set out in OIG’s report, Nonemergency Medical Transportation Costs in the State of Texas, 35 of the 100 sampled nonemergency transportation claims sampled were found by the auditors to be unallowable or partially unallowable.  Reasons for denial included:

  •  Nonemergency transportation was allegedly provided by drivers who did not have a criminal background check or who had a prohibited criminal history on file with the subcontractor.
  • The Medicaid beneficiary allegedly cancelled the transportation request in advance of the trip or was a “no-show” at the origination address.
  • The Medicaid beneficiary allegedly did not receive a Medicaid-covered health care service on the transportation date.
  • The Medicaid claims were paid at a premium rate applicable for transportation between two counties when the transportation was actually provided within the same county.

II. Recommendations:

In light of these findings, we recommend that providers review their practices to ensure that these and other specific risk areas regularly encountered in the provision of nonemergency transportation services are incorporated in their Compliance Plan and assessed as part of the provider’s recurring compliance review activities.  In this heightened enforcement environment it is essential that ambulance and nonemergency transportation providers continue to take steps to ensure that all applicable statutory and regulatory provisions are met.

Liles Parker attorneys have represented both ambulance and non-emergency transportation providers reimbursed by Medicare and Medicaid.  Should your transportation company be audited, give us a call. For a free consultation call:  1 (800) 475-1906.

HHS-OIG Reports that Four Medicaid Audit Error Types Accounted For 95% of the Net Improper Medicaid Overpayments

Four Medicaid Audit Error Types Accounted for 95% of Medicaid Overpayments

(April 20, 2010): The Department of Health and Human Services, Office of Inspector General (OIG) recently released its report on Medicaid Audits “HHS-Analysis of Improper Payments Identified During the Payment Error Rate Measurement Program Reviews in 2006 and 2007 (A-06-09-00079).” As set out in the report, four types of medical review errors accounted for 95% of the net improper Medicaid overpayments during 2006 and 2007.  A breakdown of the Medicaid audit error findings are set out in the report is detailed below.  OIG examined a total of 1,356 medical review errors and 202 data processing errors.


I.  Medicaid Audit Error Findings:

Of the medical review errors analyzed by OIG, the agency found that four types accounted for 78% of the errors and 95% of the net improper Medicaid overpayments. The four error types included:

Error Type #1:  Insufficient documentation (37.4%);

Error Type #2:  No documentation (25%);

Error Type #3:  Services that violated State policies  (12.9%); and

Error Type #4:  Medically unnecessary services (2.4%).

The 1,356 medical review errors included 23 service categories, six of which accounted for 67 percent of the errors and 95 percent of the net improper Medicaid overpayments. The six service categories included:

Category #1:  Nursing facilities;

Category #2:  Inpatient hospitals;

Category #3:  Home and Community-Based Services waivers;

Category #4:  Intermediate care facilities for the mentally retarded;

Category #5:  Prescribed drugs; and

Category #6:  Physician practices.

II.  Medicaid Audit Error Types of Data Processing Problems:

Of the 202 data processing errors OIG analyzed, four types accounted for 78 percent of the errors and 64 percent of the net improper Medicaid overpayments. The four error types included:

Error Type #1: Pricing errors,

Error Type #2: Non-covered services errors,

Error Type #3: Rate cell errors for managed care claims, and

Error Type #4: Errors in the logic edits of claim processing systems.

The 202 data processing errors represented 18 service categories, six of which accounted for nearly 73 percent of the errors and 79 percent of the net improper Medicaid overpayments. The top six service categories included:

Category #1: Inpatient hospitals

Category #2: Nursing facilities,

Category #3: Capitated care,

Category #4: Prescribed drugs,

Category #5: Physicians, and

Category #6: Outpatient hospital.

III.  Estimated Financial Impact (Federal Only):

For 2006, CMS estimated that the Federal share of the improper payments paid was $6.6 billion.  This increased considerably, to $18.6 billion in 2007 (Federal share only).  OIG has recommended that CMS provide States with similar analytical data to help them address these improper payments.

IV.  Final Remarks:

LWith the passage of the recent Health Care Reform legislation, CMS has been authorized to expand the RAC program to Medicaid.  Now, more than ever before, it is essential that providers carefully analyze their operations, coding and billing practices in order to ensure that Medicaid billings meet applicable regulatory and statutory requirements.

Healthcare LawyerRobert W. Liles, Esq. serves as Managing Partner at Liles Partner.  Robert and several of our other attorneys have extensive experience working on Medicaid cases.  Should your physician practice or clinic find itself facing a Medicaid audit or investigation, give us a call for a complementary consultation.  We can reached at: 1 (800) 475-1906.