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HHS Issues Final Rule to Address Record High Medicare Appeals Backlog

gavel(January 20, 2017): The Medicare appeals backlog has reached its all-time worst. If you’re a healthcare provider or supplier waiting for a hearing before an Administrative Law Judge (ALJ) at the Office of Medicare Hearings and Appeals (OMHA) – the third level of the Medicare appeals process – you’ve likely been waiting years to have your case heard or, at least, you’re expecting such a wait. This wait time has persisted despite that ALJs are statutorily required to issue a decision within 90 days of receipt of a hearing request. The reasons for the backlog depend on who you ask: the American Hospital Association (AHA) and others have contended that the Recovery Audit Program is the “primary culprit in creating and sustaining” the backlog because Recovery Audit Contractors (RACs) “receive a cut of any improper payments they recover […] and can challenge claims going back as far as three years”; the U.S. Department of Health and Human Services (HHS) agrees that the Recovery Audit Program has contributed to the backlog, but believes there are other reasons as well, like an increase in Medicare beneficiaries and a growing practice among some providers to appeal virtually every claim denial through ALJ review (coupled with only modest increases in funding for the agency, thereby limiting their ability to address the growing number of appeals and backlog). In any event, the statistics are astounding:

  • The number of ALJ appeals filed grew 936%, from 41,733 to 432,534, between fiscal years (FY) 2010 and 2014.
  • By the end of FY2014, 767,422 appeals were pending at ALJ.
  • ALJ decisions are issued well after the 90-day statutory deadline: in FY2014, it took OMHA an average of 415 days to process an ALJ appeal; in FY2015, it took OMHA an average of 662 days to process an ALJ appeal; and in FY2016, it took OMHA an average of 877 days to process an ALJ appeal.

The backlog has been a significant source of frustration for healthcare providers and suppliers (and their representatives) stuck in the lingering appeals process – and not just because it takes so long to achieve a final judgment by the Secretary. The delay often has significant financial consequences because Medicare can statutorily recover the alleged overpayment shortly after a second level (reconsideration) appeal decision issues, despite that the appeals process is not over and despite that the first two levels of appeal are littered with problems (e.g., we see chronic misapplication of Medicare coverage and payment rules by appeals contractors at the first two levels of appeal).

Thanks to the efforts of AHA and other plaintiffs who sought relief in court, we may see the backlog resolve over the next few years. On 12/05/2016, the United States District Court for the District of Columbia ordered that the HHS Secretary reduce the backlog according to the following timeline:

  • 30% reduction from the current backlog of cases pending at the ALJ level by 12/31/2017;
  • 60% reduction by 12/31/2018;
  • 90% reduction by 12/31/2019; and
  • 100% reduction by 12/31/2020.

In an effort to meet these mandated backlog reduction timelines, HHS issued a final rule on 01/17/2017 titled “Medicare Program: Changes to the Medicare Claims and Entitlement, Medicare Advantage Organization Determination, and Medicare Prescription Drug Coverage Determination Appeals Procedures”. The final rule includes an assortment of initiatives to reduce the backlog which become effective 03/17/2017, including:

  • Giving select Medicare Appeals Council decisions precedential effect. The final rule provides that designated “Medicare Appeals Council decisions […] have precedential effect and are binding on all CMS components, on all HHS components that adjudicate matters under the jurisdiction of CMS, and on the Social Security Administration to the extent that components of the Social Security Administration adjudicate matters under the jurisdiction of CMS.” This is significant because, currently, even if the Medicare Appeals Council interprets a Medicare authority or provision in a specific way in a decision, that interpretation only applies to the case at hand (even though the decision represents the final decision of the Secretary). In other words, an Appellant can’t contend that the interpretation of a Medicare authority or provision in a previous Medicare Appeals Council matter is binding in their case as well, even if the facts and issues are very similar. HHS hopes the precedential nature of Medicare Appeals Council decisions as of 03/17/2017 will create consistency in the appeals process. It’s possible, though, that the discretion given to the Departmental Appeals Board (DAB) Chair to decide which cases have precedential effect may impact how effective this change will ultimately be.
  • Expanding the pool of adjudicators at OMHA to include attorney adjudicators. An attorney adjudicator is a licensed attorney employed by OMHA with knowledge of Medicare coverage and payment laws and guidance, and authorized to take the actions on requests for ALJ hearing and requests for reviews of QIC dismissals. HHS estimates that the expansion of the pool of adjudicators at OMHA could redirect approximately 24,500 appeals per year to attorney adjudicators who would be able to process these appeals at a lower cost than would be required if only ALJs were used to address the same workload.
  • Creating process efficiencies. These include, for example, allowing ALJs to vacate their own dismissals rather than requiring Appellants to appeal a dismissal to the Medicare Appeals Council and using telephone hearings for certain Appellants.

For more information on these and numerous other initiatives, please refer to the Federal Register. The hope is that the finalization of this rule and the Secretary’s accountability to the District Court – the Court retained jurisdiction of the case to review the quarterly status reports the Secretary is required to prepare and to rule on any challenges to unmet deadlines – will achieve the intended result: complete elimination of the backlog by 2020.

The Centers for Medicare and Medicaid Services (CMS) has taken steps in the past to improve the appeals process, and these steps have not always achieved the intended result. For example, with regard to appeals stemming from a post-payment review, CMS directed redetermination (first level) and reconsideration (second level) appeals contractors – effective August 2015 – to restrict their review on appeal to (in most cases) only the issues alleged by the reviewing contractor (i.e., the contractor that requested the records and issued the initial audit results). The purpose was to avoid a moving ball – where one Medicare contractor alleges one issue and the Appellant addresses it, but then another contractor alleges another issue, requiring the Appellant to then address a different issue with regard to the same claim. However, we have seen the redetermination and reconsideration appeals contractors repeatedly disregard this CMS directive and continue to try and add new denial reasons to the administrative record. We have also seen the initial auditing contractors increasingly allege more than one denial reason, throwing everything but the kitchen sink at providers and suppliers. It seems that Medicare is hoping for at least one denial reason to persist through the appeals process.

Judicial oversight is the difference this time around and could be the key to reducing the backlog. We’ll be monitoring HHS’s progress closely and hoping for expeditious relief for our current and future clients, and healthcare providers and suppliers everywhere.

Sources:

AHA v. Burwell, 2016 U.S. Dist. LEXIS 126840 (D.D.C. Sept. 19, 2016).

AHA v. Burwell, 2016 U.S. Dist. LEXIS 167291, 2016 WL 7076983 (D.D.C. Dec. 5, 2016).

Federal Register, Volume 82, Number 10, Pages 4974-5140, “Medicare Program: Changes to the Medicare Claims and Entitlement, Medicare Advantage Organization Determination, and Medicare Prescription Drug Coverage Determination Appeals Procedures” (01/17/2017). Available at https://www.federalregister.gov/documents/2017/01/17/2016-32058/medicare-program-changes-to-the-medicare-claims-and-entitlement-medicare-advantage-organization.

HHS, “FACT SHEET: HHS Issues Final Rule to Improve the Medicare Appeals Process”.

HHS, OMHA, “Average Processing Time By Fiscal Year” (11/18/2016). Available at https://www.hhs.gov/about/agencies/omha/about/current-workload/average-processing-time-by-fiscal-year/index.html#.

IMG_1897Lorraine Ater, JD is a health law attorney with the firm Liles Parker.  She is also a Certified Medical Compliance Officer (CMCO) and a Certified Medical Reimbursement Specialist (CMRS).  Lorraine represents healthcare providers and suppliers around the country in connection with Medicare audits and appeals.  Liles Parker is a boutique health law firm with offices in Washington, DC; across the State of Texas; and in Baton Rouge, LA.  Need assistance?  For a free consultation, please call: (202) 298-8750.

Home Health Audits: Pre-Claim Demonstration Project Update – Part 1.

(January 9, 2017):  As the Centers for Medicare and Medicaid Services (CMS) has announced, the alleged error rate associated with home health claims has risen from 17.3 % in FY 2013 to 51.38% in FY 2014 and 58.95% in FY 2015.  In light of these increases, CMS has taken steps to address the home health claims error rate.  Section 402(a)(1)(J) of the Social Security Amendments of 1967 authorizes the Secretary for the Department of Health and Human Services (HHS) to develop demonstration projects that:

“[D]evelop or demonstrate improved methods for the investigation and prosecution of fraud in the provision of care or services under the health programs established by the Social Security Act.”

Consistent with this authority, on February 5, 2016, the Centers for Medicare and Medicaid Services (CMS) published notice in the Federal Register that it intended to collect information that would be used by the agency to serve as a:

“[B]aseline estimate of probable fraud in payments for home health care     services in the fee-for-service Medicare program.”  42 U.S.C. 1395b-1(a)(1)(J).

On June 8, 2016, CMS announced in the Federal Register (81 Fed. Reg. 37598) that five states would be part of the new Pre-Claim Review Demonstration. These states included:  Illinois, Florida, Texas Michigan and Massachusetts.  While the program was implemented in Illinois on August 3, 2016, the rest of the implementation schedule was delayed due to a variety of implementation-related problems.

CMS has recently announced that the Pre-Claim Demonstration Project will be resumed and that it will be implemented in Florida on April 1, 2017.  While no implementation dates have been announced yet for Texas and the remaining test states, Texas home health providers could conceivably be facing this program as early as May 1, 2017.

In addition to providing an overview of the home health Pre-Claim Demonstration Project, this article examines the primary reasons for claims denial identified so far by Illinois home health agencies. In this first article, we are focusing on the denial reasons associated with errors identified with face-to-face and plans of care / certification / recertification documentation.

I. What are Medicare’s Home Health Benefit Requirements?

To qualify for the Medicare Home Health benefit, under 1814(a)(2)(C) and 1835(a)(2)(A) of the Social Security Act, a Medicare beneficiary must meet the following requirements:

  • Be confined to the home at the time of services;
  • Medicare considers the person homebound if:

1) There exist a normal inability to leave the home, and

2) Leaving home requires a considerable and taxing effort.

  • Additionally, one of the following must also be true:

1) Because of illness or injury, the person needs the aid of supportive devices such as crutches, canes, wheelchairs, and walkers; the use of special transportation; or the assistance of another person in order to leave their place of residence; or

2) The person has a condition such that leaving his or her home is medically contraindicated.

  • Under the care of a physician;
  • Receiving services under a plan of care established and periodically reviewed by a physician;
  • Be in need of skilled services;
  • Have a face-to-face encounter with an allowed provider type as mandated by the Affordable Care Act. This encounter must:

1) Occur no more than 90 days prior to the home health start of care date or within 30 days of the start of the home health care; and be related to the primary reason the patient requires home health services and was performed by a physician or non-physician practitioner.

II. Primary Reasons for the Denial of Home Health Claims Identified:

Based on the claims submitted by home health agencies in Illinois thus far, the following reasons for denial have been cited by Palmetto when reviewing agencies’ home health claims:

Denial Reason Code
Face-to-Face Errors


HH01A
The physician certification was invalid since the required face-to-face encounter document was missing (actual clinical note for the face-to face encounter visit for admissions on or after 1/1/15, or the narrative for admissions on or after 4/1/11and before 1/1/15) Refer to CMS IOM Publication 100-02, Chapter 7, Section 30.5.1.1 and 30.5.1.2.


HH01B
The physician certification was invalid since the required face-to-face encounter document was untimely and/or the certifying physician did not document the date of the encounter. Refer to CMS IOM Publication 100-02, Chapter 7, Section 30.5.1.1.2


HH01A
The physician certification was invalid since the face-to-face encounter was not performed by an approved practitioner. Refer to CMS IOM Publication 100-02, Chapter 7, Section 30.5.1.1.1


HH01D
The physician certification was invalid since the required face-to-face encounter was not related to the primary reason for home health services. Refer to CMS IOM Publication 100-02, Chapter 7, Section 30.5.1.2


Denial Reason Code
Plan of Care / Certification / Recertification


HH02A
The Plan of Care was missing. Refer to CMS IOM Publication 100-02, Chapter 7, Section 30.2.


HH02B
The content of the Plan of Care submitted was insufficient. Refer to CMS IOM Publication 100-02, Chapter 7, Section 30.2.1.


HH02C
The Plan of Care submitted was not signed. Refer to CMS IOM Publication 100-02, Chapter 7, Section 30.2.3


HH02I
The Plan of Care submitted was not signed timely by a qualified physician. Refer to CMS IOM Publication 100-02, Chapter 7, Section 30.2.4.
|


HH02D
Missing physician certification/recertification. Refer to CMS IOM Publication 100-02, Chapter 7, Section 30.5


HH02E
The physician certification/recertification submitted does not support skilled need. Documentation in the certifying physician’s medical records and/or the acute/post- acute care facility’s medical records (if the patient was directly admitted to home health) shall be used as the basis for certification of home health eligibility. Refer to CMS IOM Publication 100-02, Chapter 7, Section 30.5 and 42CFR 424.22 (a) and (c).


HH02F
The physician certification / recertification submitted does not support homebound status. Documentation in the certifying physician’s medical records and/or the acute /post-acute care facility’s medical records (if the patient was directly admitted to home health) shall be used as the basis for certification of home health eligibility. Refer to CMS IOM Publication 100- 02, Chapter 7, Section 30.5 and 42CFR 424.22 (a) and (c).


HH02G
The physician recertification estimate of how much longer skilled services are required is missing. Refer to CMS IOM Publication 100-02, Chapter 7, Section 30.5.2.


HH02H
The home health agency generated record contained relevant clinical information addressing the “confined to the home” (homebound) eligibility requirement, which was corroborated by the certifying physician or the acute/post-acute facility documentation, but was NOT signed and dated by the certifying physician. Please have the certifying physician sign and date the relevant HHA-generated information and resubmit. Refer to CMS IOM Publication 100-08, Chapter 6, Section 6.2.3.


HH02J
The home health agency generated record contained relevant clinical information addressing the “need for skilled services” eligibility requirement, which was corroborated by the certifying physician or the acute/post-acute facility documentation, but was NOT signed and dated by the certifying physician. Please have the certifying physician sign and date the relevant HHA-generated information and resubmit. Refer to CMS IOM Publication 100-08, Chapter 6, Section 6.2.3.

III. Lessons to be Learned:

Home health agencies in Florida, Texas, Michigan and Massachusetts should carefully review the denial reasons outlined above and conduct internal audits of your home health claims documentation to determine whether your agency’s documentation is complete.  The experiences of home health agencies in Illinois can be invaluable to your efforts to better ensure the full compliance of your agency with applicable statutory and regulatory requirements.  In future installments of this article, we will examine other reasons for denial seen by Illinois home health agencies.

robert_w_lilesRobert W. Liles, M.B.A., M.S., J.D., serves as Managing Partner at Liles Parker, Attorneys & Counselors at Law. Liles Parker is a boutique health law firm, with offices in Washington DC, Houston TX, San Antonio TX, McAllen TX and Baton Rouge LA. Robert represents home health agencies around the country in connection with Medicare audits and compliance matters. Our firm also represents health care providers in connection with federal and state regulatory reviews and investigations. For a free consultation, call Robert at: 1 (800) 475-1900.

Home Health Pre-Claim Review Demonstration Project Update!

Multiple Patient Record(September 20, 2016): On August 3, 2016, the Centers for Medicare and Medicaid Services (CMS) implemented its “Pre-Claim Review Demonstration” project in Illinois.  This demonstration project effectively requires that Illinois home health agencies submit home health claims for review by the Medicare Administrative Contractor (MAC) or face possible penalties (and be forced to have the claim evaluated through the pre-payment process).  As part of the pre-demonstration project, home health agencies are required to submit a complete set of medical records which show that the claim at issue is associated with medically necessary services, meets applicable documentation requirements, qualifies for Medicare coverage and has been coded and billed correctly.  As the demonstration project has been rolled out in Illinois, many home health agencies have experienced problems with the “affirmation” process.  It has been reported that the MAC has allegedly “missed” documentation that has been submitted and that very few of the claims reviewed have been affirmed by the reviewing contractor.  While CMS has not address these specific points, it has acknowledged that additional refinements in the program are required before expansion can continue. Earlier today, CMS announced that the home health pre-claim review demonstration project is temporarily being placed on hold to allow for additional provider education efforts to be conducted.  These provider educational efforts are expected to focus on the main reasons that pre-claim requests have been “non-affirmed” and the documentation that is required to support a home health claim.  Additional information regarding the home health pre-claim demonstration review project is set out below.

I. Background

Section 402(a)(1)(J) of the Social Security Amendments of 1967[1] authorizes the Secretary for the U.S. Department of Health and Human Services (HHS) to develop demonstration projects that:

“develop or demonstrate improved methods for the investigation and prosecution of fraud in the provision of care or services under the health programs established by the Social Security Act.”[2]

The home health pre-claim review demonstration project was initiated by CMS due to the increase over the last three fiscal years of improper payment rates for home health claims. On June 8, 2016, CMS announced in the Federal Register[3] that five states would be involved in this new project to collect information to compile a “baseline estimate of probable fraud in payments for home health care services in the fee-for-service [FFS] Medicare program.” These five states include Illinois, Florida, Michigan, Massachusetts, and Texas. Furthermore, the goal of the project was to assess the use of pre-claim reviews as a means of reducing Medicare FFS expenditures for home health services by reducing improper payments while maintaining or improving the quality of care experienced by the beneficiary.”[4]

II. Pre-Claim Review Demonstration Process

Under the pre-claim review demonstration process requires home health agencies are strongly encouraged to request a preliminary confirmation of coverage by submitting home health claims and associated clinical documentation, for review after services have begun but before the final claim for services is submitted for payment. The home health pre-claim review process is designed to better help ensure that applicable medical necessity, documentation, coverage, coding and billing rules are met before a claim is submitted to Medicare for payment.

The pre-claim review process does not create new clinical home health documentation requirements. Rather, home health agencies are only required to submit the same information they currently maintain for payment. As mentioned, they will do so earlier in the process, which will help assure that all relevant coverage and clinical documentation requirements are met before the claim is submitted for payment. CMS contends that the pre-claim review process will not delay care to Medicare beneficiaries and will not alter the Medicare home health benefit.

Home health agencies in one of the five demonstration states have been advised that if they do not submit their claims through the pre-claim review process, those claims will be flagged for prepayment review and will essentially treated like an ADR.  Moreover, after the first three months of the program, even if found to qualify for coverage and payment, CMS intends to reduce payment by 25% on each claim that is not submitted through the pre-claim demonstration review process.

III. Conclusion

The decision by CMS to postpone the implementation of the pre-claim review demonstration in Florida was influenced, in large part, by the advocacy of supportive political and home health industry groups.  The postponement of the pre-claim review demonstration project is a major victory for health care providers in Florida, Michigan, Massachusetts, and Texas. Unfortunately, However, the implementation of the demonstration project is inevitable so providers should continue to prepare for the impact it will have on their health care practice. The exact start dates for Florida, Michigan, Massachusetts, and Texas have yet to be announced, but the dates will be provided on CMS’ website at least 30 days in advance to the implementation. Providers can expect a staggered start beginning with Florida, which provides additional time for preparation.

robert_w_lilesRobert W. Liles, M.B.A., M.S., J.D., serves as Managing Partner at Liles Parker, Attorneys & Counselors at Law. Liles Parker is a boutique health law firm, with offices in Washington DC, Houston TX, San Antonio TX, McAllen TX and Baton Rouge LA. Robert represents home health agencies around the country in connection with Medicare audits and compliance matters. Our firm also represents health care providers in connection with federal and state regulatory reviews and investigations. For a free consultation, call Robert at: 1 (800) 475-1900.

 

 

[1] 42 U.S.C. 1395b-1(a)(1)(J).

[2] Id.

[3] 81 Fed. Reg. 37598.

[4] “Pre-Claim Review Demonstration for Home Health Services in Illinois,” available at http://www.palmettogba.com/Palmetto/Providers.Nsf/files/Workshop_Home_Health_PCR_Workshop_Series.pdf/$File/Workshop_Home_Health_PCR_Workshop_Series.pdf

[5] See the Palmetto GBA website for helpful resources, available at http://www.palmettogba.com/palmetto/providers.nsf/docsCat/Providers~JM%20Home%20Health%20and%20Hospice~Home%20Health%20Pre-Claim%20Review.

ZPIC Audit — CMS Issues New Instructions to its Contractors Regarding the Scope of Claim Appeals

Doc Prescription(October 15, 2015): In an effort to stem the ever-increasing tide of claim appeals, CMS recently issued new guidance to its Medicare Administrative Contractors (MACs) and Qualified Independent Contractors (QICs) regarding the conduct of requests for redetermination and reconsideration, respectively. Effective 08/01/15, MACs and QICs may no longer review claims denied during post-payment audits and develop their own bases for unfavorable appeal decisions. Instead, the contractors are now required to review claims in light of the denial reason set forth by the entity that performed the initial audit. This rule will not be applicable in cases where claims are denied on a post-payment basis because the providers failed to submit medical records.

This guidance should work to the benefit of providers who are subject to sloppy Zone Program Integrity Program (ZPIC) audits and reviews by recovery auditors, MACs, and the Supplemental Medical Review Contractor (SMRC). For example, we often encounter cases where ZPIC audit contractors have erroneously denied claims due to a purported lack of documentation or review claims using a patently unreasonable interpretation of a coverage standard. In years past, the MACs and QICs would simply ignore these flawed denial rationales and develop new bases for their unfavorable decisions. Moving forward, this will no longer be a possibility.

It is important to emphasize that Administrative Law Judges (ALJs) who conduct hearings at the third level of the appeals process are not subject to this rule. Medicare regulations are clear that ALJs are free to conduct de novo reviews of claims and are not bound by the decisions of prior adjudicators / auditors.

Unfortunately, this new directive will not afford any relief to providers who are subject to prepayment reviews of their claims. CMS has made clear that MACs and QICs may still develop their own issues and articulate new reasons for denial in appeals of claims denied on a prepayment basis.

Providers whose claims are reviewed or subjected to a SMERC, RAC or ZPIC audit should contact qualified counsel to ensure that they maximize their chances for success at redetermination and reconsideration given this new guidance.

Bird,Adam-WebAdam Bird is a health law attorney with the firm, Liles Parker, Attorneys & Counselors at Law.  Liles Parker has offices in Washington DC, Houston TX, McAllen TX and Baton Rouge LA.  Our attorneys represent dentists, orthodontists and other health care professionals around the country in connection with government audits of Medicaid and Medicare claims, licensure matters and transactional projects.  Need assistance?  For a free consultation, please call: 1 (800) 475-1906.

HHS-OIG Releases 2015 Mid-Year Update to Work Plan

Medical-Insurance-Audit(June 1, 2015) The U.S. Department of Health and Human Services (HHS), Office of Inspector General (OIG) has once again announced its intentions to report on numerous types of potential fraud, waste, and abuse in HHS programs, as well as on the economy, efficiency, and effectiveness of the programs. The OIG plans to produce 193 reports in the near future, 65% of which will pertain to Medicare and Medicaid.

The OIG will study an array of provider and supplier types, including those that most often attract OIG scrutiny, such as home health agencies (HHAs), hospitals, and durable medical equipment companies. Although the OIG likes to revisit topics and measure progress in fraud, waste, and abuse prevention, it has announced the following new topics:

  • Intensity-modulated radiation therapy (IMRT) is an advanced mode of high-precision radiotherapy that uses computer-controlled linear accelerators. The OIG will review hospital outpatient payments for IMRT.
  • Hospital preparedness. The OIG will evaluate hospitals’ preparedness for public health emergencies resulting from infectious diseases, such as Ebola.
  • Access in competitive bid areas. There are anecdotal reports that competitive bidding within the Medicare program for some durable medical equipment (DME), prosthetics, orthotics, and supplies has curtailed access by beneficiaries. The OIG will study whether this proposition is true.
  • Clinical diagnostic laboratory tests. In anticipation of new Medicare payment rates for clinical diagnostic laboratory tests in 2017, as mandated by the Protecting Access to Medicare Act of 2014, the OIG will analyze payments for such tests in 2014. It will look at the top 25 tests according to expenditure.
  • The OIG will report whether inpatient rehabilitation facilities (IRFs) have complied with the parameters of the IRF Prospective Payment System. In addition, the OIG will review whether documentation by IRFs has been compliant.
  • ACO use of EHR. Accountable care organizations (ACOs) promote accountability of hospitals, physicians, and other providers for patients, coordinate care, and encourage investment in infrastructure and redesigned care processes. The OIG will review the extent to which providers participating in ACOs use electronic health records (EHR) and will identify best practices and challenges to interoperability (the extent to which information systems can exchange data and interpret the shared data).
  • Overview of Part D. The OIG will summarize previous audits, legal opinions, and investigative work on the Medicare Part D program for drugs. It also will provide recommendations to improve oversight by the Centers for Medicare & Medicaid Services (CMS), Plan Sponsors, and the Medicare anti-fraud contractor.
  • Opioid trends. Opioid diversion and abuse and Part D fraud are perceived to be growing problems. In its upcoming report, the OIG will describe trends in billing for opioids and other drugs from 2006 to 2014, including trends associated with pharmacies.
  • Drug rebates. The Federal Government receives a share of drug rebates under Medicaid. The Affordable Care Act (ACA) increased rebates for Medicaid outpatient drugs.  The OIG will examine whether the States have been correctly reporting rebates.
  • T-MSIS. The Transformed Medicaid Statistical Information System (T-MSIS) is a repository of data about Medicaid and the Children’s Health Insurance Program to assist CMS in various areas, including program integrity. The OIG will determine whether the States report properly to the T-MSIS.

In addition to the above new topics, the OIG will study numerous other ways in which providers and suppliers may provide substandard care or receive payments to which they are not entitled. For example, it will examine hospice billing for general inpatient care. With respect to a DME item of great concern to the OIG—power mobility devices (PMDs)—the OIG will determine whether CMS can save money if Medicare beneficiaries rent certain PMDs over 13 months, rather than purchase them. Also, the OIG will continue to review payment rates for ambulatory surgical centers (ASCs).  One question is whether there is a disparity between ASC rates and those for hospital outpatient departments performing the same services.

Many of the studies pertain to Medicaid. For example, the OIG will review dental services under the Early and Periodic Screening, Diagnostic, and Treatment benefit for children. The OIG noted:  “In recent years, a number of dental providers and chains have been prosecuted for providing unnecessary dental procedures and causing harm to Medicaid children.  In addition, children’s access to dental services has been a longstanding Medicaid problem.” Also, States must terminate Medicaid providers who have been terminated by Medicare or by other State Medicaid programs. States must suspend a Medicaid provider if there are credible allegations of fraud against that provider. The OIG will review whether the States have followed these directives.

In addition to its stewardship over all HHS programs, the OIG will review key areas of ACA implementation, including emerging marketplace issues, Medicaid expansion and services, Medicare payment and delivery reform, program integrity, and public health program reform. The OIG will further look at HHS funds under the American Recovery and Reinvestment Act of 2009. In particular, it will review HHS’ award of incentive payments to providers for meaningful use of EHR. Some hospitals, including critical access hospitals, will be audited to determine whether they have conducted a security risk analysis of their EHR.

Gloria Frank_051815_0016-2Gloria Frank, Esq. is a health law attorney with the firm, Liles Parker, Attorneys & Counselors at Law.  Liles Parker has offices in Washington DC, Houston TX, McAllen TX and Baton Rouge LA.  Our attorneys represent dentists, orthodontists and other health care professionals around the country in connection with government audits of Medicaid and Medicare claims, licensure matters and transactional projects.  Need assistance?  For a free consultation, please call: 1 (800) 475-1906.

The full OIG work plan may be located at http://oig.hhs.gov/reports-and-publications/archives/workplan/2015/WP-Update-2015.pdf.

The Medicare Appeals Process is Broken

Doctor-Red-Tape(May 5, 2015): As the health care providers and suppliers we represent can easily attest, there are serious problems plaguing the current Medicare administrative appeals process. Rubber-stamp denials by contractors[1] at lower levels of appeal, the failure of Medicare contractors to apply the correct coverage rules and requirements when assessing a claim, and lengthy delays in obtaining a hearing before an Administrative Law Judge (ALJ) are just a few of the problems facing health care providers who appeal the denial of their Medicare claims.

I.  The Medicare Appeals Process is Broken:

On April 28, 2015, the Senate Finance Committee conducted a hearing entitled “Creating a More Efficient and Level Playing Field: Audit and Appeals Issues in Medicare.[2] Committee Chairman, Senator Orin Hatch, set the focus of the hearing in his opening statement. Several of Senator Hatch’s comments included:

“CMS has, of course, taken steps to identify and recover improper payments, including hiring contractors to conduct audits of the more than one billion claims submitted to the Medicare program every year.  These auditors have recovered billions for the Medicare program – over $3 billion in 2013 alone.  However, the increase in audits has led to a seemingly insurmountable increase in appeals, with a current backlog of over 500,000 cases, evidenced by this chart.

This increase in appeals has resulted in long delays for beneficiaries and providers alikeThere are so many appeals that the Office of Medicare Hearings and Appeals can’t even docket them for 20 to 24 weeks.  In FY 2009, most appeals were processed within 94 days.  In FY 2015, it will take, on average, 547 days to process an appeal – far too long for beneficiaries to find out whether their medical services will be covered or for providers to find out if they will be

Additionally, large portions of the initial payment determinations are reversed on appeal. The HHS Office of Inspector General reported that, of the 41,000 appeals that providers made to Administrative Law Judges in FY 2010, over 60 percent were partially or fully favorable to the defendant. 

Such a high rate of reversals raises questions about how the initial decisions are being made and whether providers and beneficiaries are facing undue burdens on the front end.  On the other hand, we need to recognize that ALJs have more flexibility in their decision-making than Medicare contractors do.” (emphasis added).

As this testimony suggests, the current system of administrative appeals is broken. Unfortunately, many health care providers are finding their organizations facing bankruptcy (primarily through mandatory recoupment) long before the provider has an opportunity to argue the merits of their case before an ALJ.

II.  The Current ALJ Hearing Backlog Has Increased 10-Fold in Two Years:

As Senator Ron Wyden noted during the Senate Finance Committee hearing, increases in the number of Medicare claims audits performed by CMS contractors have resulted in a ten-fold increase in the number of appeals cases ultimately being filed with the Office of Medicare Hearings and Appeals (OMHA). As Senator Wyden testified, the number of cases filed with OMHA in Fiscal Year (FY) 2011 was 60,000. By FY 2013, the number of filings had risen to 654,000.

III. What Does the Future Look Like?

A number of proposals intended to alleviate the current appeals backlog have been proposed by OMHA and included in the President’s proposed FY2016 budget. Unfortunately, a number of these proposals will likely result in additional hardships for small and mid-sized health care providers and providers. During the Senate Finance Committee hearing, OMHA’s Chief Administrative Judge outlined these proposals, which include:

Provide Office of Medicare Hearings and Appeals and Departmental Appeals Board Authority to Use RA Collections. This proposal would expand the Secretary’s authority to retain a portion of Recovery Audit (RA) program recoveries for the purpose of administering the recovery audit program and will allow RA program recoveries to fully fund the appeals process for RA related appeals at the OMHA and the DAB.

Comments: We recognize that the primary purpose of this proposal is to fund additional ALJ slots and support positions and to reduce the massive backlog of cases currently pending at OMHA. Nevertheless, we believe this proposal would create a conflict of interest for the OMHA. ALJ’s are supposed to give health care providers and suppliers a fair hearing and issue a ruling based on the merits. Under this proposal, the OMHA would essentially benefit (through the receipt of additional funding) from each ruling in which it ruled that an RA program denial was justified.  

Establish a Refundable Filing Fee. This proposal would institute a refundable per claim filing fee for providers, suppliers, and Medicaid State Agencies, including those acting as a representative of a beneficiary, at each level of appeal. Appeals filed by beneficiaries or representatives of beneficiaries other than providers, suppliers, and Medicaid State Agencies would be exempt from the fee. Fees will be returned to appellants who receive a fully favorable determination. Under current law, there is no administrative fee paid to the adjudicating entity for filing an appeal. A filing fee would encourage those who frequently file to more carefully assess the merits of their appeals before filing.

Comments: As discussed during the hearing, much of the current backlog can be traced to appeals filed by a relatively small number of providers. The purpose of this proposal is to encourage providers to conduct a careful review of claims denials before automatically filing an appeal. Unfortunately, this proposal will disproportionally affect small health care providers and providers, for whom a limited number of claims represent a significant portion of their overall revenues. Moreover, if enacted, a per-claim filing fee would be charged at each level of appeal.   This proposal will adversely impact small and mid-sized health care providers who wish to assert their appeal rights. Moreover, by discouraging the filing of appeals, the overall error rate of small and mid-sized providers will rise, making them an even larger target for Zone Program Integrity Contractor (ZPIC) and Medicare Recovery Auditor (RA)[3] data-mining efforts.

Sample and Consolidate Similar Claims for Administrative Efficiency. This proposal would allow the adjudication of large numbers of appeals through the use of sampling and extrapolation techniques without appellant consent. Additionally, this proposal would authorize the consolidation of similar appeals into a single administrative appeal at all levels of the appeals process for purposes of adjudicative efficiency. This provision would also require that all appeals that were included within an extrapolated overpayment or were consolidated previously would remain a part of the extrapolated or consolidated file on appeal.

Comments: Once again, this proposal is intended to streamline the appeals process and reduce the current backlog by consolidating similar claims into a single appeal. We are concerned with this proposal for several reasons. First, it places the responsibility for deciding what constitutes a “similar claim” in the hands of the CMS contractor. Past experience has shown that ZPICs and Program Safeguard Contractors (PSC) may fail to properly stratify samples prior to calculating estimated extrapolated damages.  

Remand to Redetermination Level upon Introduction of New Evidence. This proposal would require remand of a Medicare appeal to the first level of review at CMS when new documentary evidence is submitted into the administrative record at the second level of appeal or above. The proposal would include exceptions to mandatory remands if the basis for the submission is that new evidence was provided to the lower level adjudicator but erroneously omitted from the record, or an adjudicator denies an appeal on a new and different basis than earlier determinations. This proposal provides a strong incentive for all evidence to be produced early in the appeals process and to ensure the same record is reviewed and considered at the second and subsequent levels of appeal.

Comments: While we generally support this proposal, we are concerned that if abused by a CMS contractor, it could lead to significant delays in having a case heard by an ALJ. During this period of delay, the alleged overpayment would continue to accrue interest (at a rate far above the current market rate of interest), thereby making it even harder for a health care provider or supplier to make periodic payments on the debt while they are working their way through the appeals process.

Increase Minimum Amount in Controversy for ALJ Adjudication of Claims to Equal Amount Required for Judicial Review. This proposal would increase the minimum amount in controversy required for adjudication by an ALJ to the Federal district court amount in controversy requirement ($1,460 in 2015). It would also clarify the circumstances under which claims can be aggregated to meet the amount in controversy limit.

Comments: This proposal is intended to filter out small claims appeals that are currently contributing to the ALJ hearings backlog. We generally do not oppose this proposal. However, we have seen a number of cases where a Medicare Administrative Contractor (MAC) and / or a Qualified Independent Contractor (QIC) has broken an appeal into discrete claims and issued separate decisions for each claim. This could lead to the dismissal of appeals later in the case for failure to meet the amount in controversy requirement.

Establish Magistrate Adjudication for Claims with Amount in Controversy Below New ALJ Amount in Controversy Threshold. This proposal would allow OMHA to use attorney adjudicators to resolve those appeals that meet the current ALJ amount in controversy threshold ($150 in 2015) but fall below the amount currently required to file an appeal in federal district court ($1,460 in 2015), reserving ALJs for development of a record in more complex cases involving higher amounts in controversy, which have the potential for appeal to federal district court. Decisions of a Medicare Magistrate could be appealed to the DAB, but would not meet the amount in controversy required to be appealable to federal district court.

Comments: As with several of the other proposals, this recommendation would tend to adversely impact small to mid-sized health care providers and suppliers, effectively taking away their right to bring in federal court if they disagree with the denial of a claim that fails short of the new amount in controversy.

Expedite Procedures for Appeals with No Material Fact in Dispute. This proposal would allow OMHA to issue decisions without holding a hearing when there is no material fact in dispute and the decision is governed by a binding authority. These cases include, for example, appeals in which Medicare does not cover the cost of a particular drug or the ALJ cannot find in favor of an appellant due to binding limits on authority. This proposal would increase the efficiency of the Medicare appeals system and result in faster adjudications of appeals at the ALJ level of appeal.”

Comments: This proposal would effectively permit the OMHA to dismiss appeals it believes would be covered by one or more “binding authorities.” In doing so, a health care provider or supplier would be unable to effectively challenge an ALJ’s beliefs in this regard, thereby depriving the provider of an opportunity to show the ALJ why particular claims are not covered by a binding authority. 

IV.  Conclusion:

Small to mid-sized sized health care providers and suppliers are again slated to be adversely impacted by pending proposals to the current Medicare administrative appeals process. As you will recall, an earlier remedy of CMS to address the current case hearing backlog was to offer hospitals a “settlement” if they would drop their appeals. Physicians, small practices, dentists, home health agencies, hospices and other non-hospital providers were not given this option. We remain concerned that the current proposals will only further reduce the ability of small and mid-sized providers to contest the improper denial of Medicare claims by ZPICs, PSCs and RAC.

Robert Liles represents health care providers in RAC and ZPIC appeals.Robert W. Liles, JD, MS, MBA serves as Managing Partner at Liles Parker, Attorneys and Counselors at Law. Robert represents home health agencies of all sizes around the country in connection with a full range of ZPIC prepayment reviews, postpayment audits and suspension actions. He also handles home health False Claims Act cases. For a complimentary consultation, please call Robert at: 1 (800) 475-1906.

Ismail Cropped 14Attorney Ismail Laher focuses on solving complex issues for Health Care Providers. Mr. Laher assists clients to better understand their option strategically on on a a wide variety of issues in civil and criminal proceedings, complex civil litigation, compliance audits & reviews, practice management and strategic client counseling. He also serves in the role of General Counsel on an as needed basis. Mr. Laher is a graduate of Harvard Business School and Georgetown Law  and was previously an associate attorney with Jones Day law firm in their Washington, DC office.  Mr. Laher focuses his practice on regulatory compliance oversight, practice management and strategic client counseling. He can be reached directly at 202-596-7863 or at ext 111 at the office 202-298-8750.

[1] Private contractors working for the Centers for Medicare and Medicaid Services (CMS).

[2] A video of the April 28, 2015 hearing, along with written witness statements, are available online at: http://www.finance.senate.gov/hearings/hearing/?id=d29af43d-5056-a032-526a-1de427f91aeb

[3] Previously referred to as Recovery Audit Contractors (RACs) by CMS.

Home Health Enforcement: Are Additional Program Integrity Initiatives on the Horizon?

Doctor-Greeting-Patient-in-

Physician Face-to-Face Encounter with Patient

(April 22, 2015): Late last month, the Department of Health and Human Services, Office of Inspector General (HHS-OIG) released its 2015 “Compendium of Unimplemented Recommendations” (Compendium). Published annually, the Compendium sets out the top 25  program integrity issues previously identified by HHS-OIG that are expected to “most positively impact HHS programs in terms of cost savings and /or quality improvements” [1] when ultimately implemented.

 In past years, HHS agencies responsible for implementing these previously-identified problem areas have typically made significant efforts to address HHS-OIG’s recommendations. Not surprisingly, the Medicare home health program is again listed in this “hit list” of areas susceptible to fraud and abuse by unscrupulous providers.

I.  Home Health Face-to-Face Examinations Remain a Significant Problem:

As the Compendium sets out, home health care and treatment services have long represented a program integrity concern for HHS-OIG. Under the Affordable Care Act (ACA), the Centers for Medicare and Medicaid Services (CMS) were given a number of expanded authorities and tools designed to assist the agency (and its contractors) in preventing and detecting instances of health care fraud and abuse. Not surprisingly, inadequate and / or incomplete home health documentation remains one of HHS-OIG’s primary concerns, particularly when it comes to the qualifying encounter between a Medicare patient and his or her treating physician. CMS implemented a requirement that a face-to-face encounter, setting out the reason(s) why home health is required, must be properly documented and certified as medically necessary by the patient’s physician. As mandated under the ACA, the requirement to properly document that a compliant face-to-face encounter was conducted by the patient’s certifying physician is a condition of payment.

II.  Deficient Face-to-Face Certifications Can Place Your Home Health Agency in Jeopardy:

Unfortunately, the fulfillment of requirement remains elusive. In a number of recent home health cases we have handled, the Zone Program Integrity Contractor (ZPIC) conducting the audit has asserted that the face-to-face certification completed by the patient’s treating physician has either been deficient or, in some case, completely absent from the medical record. As HHS-OIG has noted in its 2015 Compendium, in prior years, CMS oversight of the face-to-face problem has been minimal. HHS-OIG has estimated that approximately $2 billion in payments for home health services should not have been paid due to the fact that the associated face-to-face encounters conducted did not meet Medicare’s documentation requirements.

III.   What Should Our Home Health Agency do to Comply with Medicare’s Face-to-Face Requirements?

Not surprisingly, home health agencies have expressed concern and frustration over the face-to-face issue. From a business standpoint, home health agencies rely on referrals of patients from community physicians. If a face-to-face encounter is not fully or properly documented by a certifying physician, any Medicare payments resulting from the referral will likely be denied in an audit by a ZPIC. Agencies are therefore required to carefully review each face-to-face certification for completeness and accuracy prior to admitting a patient.

Despite repeated efforts by CMS to provide clarification to home health agencies (and the certifying physicians they work with) regarding what the agency expects and requires in order for a face-to-face certification to be compliant, clear assistance has been an elusive goal. Within the last month, CMS has published the following guidance on face-to-face certification requirements:

  • 03/09/15: “. . . CMS is developing a list of clinical elements within a suggested electronic clinical template that would allow electronic health record vendors to create prompts to assist physicians when documenting the home health (HH) face-to-face encounter for Medicare purposes. Once completed by the physician, the resulting progress note or clinic note would be part of the medical record.  The current draft of the electronic clinical template is available in the Downloads section below. Comments can be sent to HomeHealthTemplate@cms.hhs.gov. In addition to developing an electronic clinical template for documenting a home health face-to-face examination, CMS is developing a paper clinical template. To see information about the home health paper clinical template, see home heath (HH) paper clinical template.
  • 03/23/15: In reviewing the transcript, CMS realizes that inaccurate information was provided related to HHA documentation to support certification for home health services.  Per 42CFR 424.22 (a) and (c), the patient’s medical record must support the certification of eligibility and documentation in the patient’s medical record shall be used as a basis for certification of home health eligibility.  Therefore, reviewers will consider HHA documentation if it is incorporated into the patient’s medical record and signed off by the certifying physician.   More guidance will follow regarding the review of home health claims shortly.  CMS apologizes for the confusion. (emphasis added). The Open Door Forum scheduled for April 8, 2015 @ 1:00pm (EST) is our last scheduled call to discuss the draft Home Health Templates.  An updated version of the draft templates will be posted prior to the Open Door Forum.”
  • 03/30/15: Previously, CMS announced it would conduct an Open Door Forum on the Home Health Electronic and Paper Clinical Template on April 8, 2015 and May 6, 2015 @ 1:00pm (EST) to discuss the draft.  We are now combining these calls and will have one final scheduled call on Tuesday April 28, 2015 at 1:30pm (EST).   An updated version of the draft templates will be posted prior to the Open Door Forum.  We appreciate all the comments we have received and are considering the comments as we revise the draft template.  While we will not be replying directly to questions received in the mailbox, we will try to address the most common issues during the Open Door Forum call.  Please continue to offer your concerns and suggestions as we appreciate your feedback.  The deadline to submit comments is 8:00pm (EST) on May 5th. Comments can be sent [to] HomeHealthTemplate@cms.hhs.gov

And, finally, last week CMS posted the following:

  • 04/17/15: “The new version of the draft Home Health Electronic Clinical Template and the new draft Paper Template have been developed.  We have removed the old versions to minimize confusion.  The next and final Open Door Forum to discuss this draft template will take place on Tuesday, April 28, 2015 at 1:30 p.m. (EST).  Please submit comments regarding this draft template via e-mail to HomeHealthTemplate@cms.hhs.gov.  We value all of the comments submitted and consider each one, but we cannot guarantee all questions will be addressed during the Open Door Forum call.  We will try to address the most common issues/concerns received.  CMS will continue to accept comments sent to the e-mail address even after the call.  Stakeholders are encouraged to submit questions or comments as quickly as possible.  Once a draft of the template is completed, the template will undergo the required Paperwork Reduction Act (PRA) approval process.  A release date for the template cannot be determined until the PRA process is complete.  Once released in its final approved format, the use of this documentation tool will be voluntary.” (emphasis added).

As reflected in the agency’s multiple posts, the face-to-face issue is a lot more complicated that it may have seemed at first blush, when first included in the ACA as a “condition of payment.”

IV.  Conclusion:

While we appreciate CMS’ repeated efforts to provide definitive guidance on what the agency and its ZPICs expect in terms of documentation and medical necessity, home health providers and their referring physicians are continuing forward, in the hopes that clear instructions will ultimately be provided on this critical requirement. Unfortunately, the government’s ongoing confusion in this area has not precluded Health Integrity, AdvanceMed and other ZPICs around the country from conducting home health audits and denying claims based on the contractor’s assertion that the required face-to-face certification was deficient.

During this interim period, in order to avoid face-to-face denials, home health agencies should continue to carefully review all certifications completed by referring physicians for completeness and accuracy. While changes to prior face-to-face templates issued by CMS will undoubtedly be forthcoming, it remains the responsibility of each agency to review each certification in light of the guidance CMS has issued thus far and to proceed cautiously with each admission.

Robert Liles represents health care providers in RAC and ZPIC appeals.Robert W. Liles, JD, MS, MBA serves as Managing Partner at Liles Parker, Attorneys and Counselors at Law. Robert represents home health agencies of all sizes around the country in connection with a full range of ZPIC prepayment reviews, postpayment audits and suspension actions. He also handles home health False Claims Act cases. For a complimentary consultation, please call Robert at: 1 (800) 475-1906.

[1]Department of Health and Human Services, Office of Inspector General (HHS-OIG), “Compendium of Unimplemented Recommendations” Page I, (March 2015). https://oig.hhs.gov/reports-and-publications/compendium/files/compendium2015.pdf

Ismail Cropped 14Attorney Ismail Laher focuses on solving complex issues for Health Care Providers. Mr. Laher assists clients to better understand their option strategically on on a a wide variety of issues in civil and criminal proceedings, complex civil litigation, compliance audits & reviews, practice management and strategic client counseling. He also serves in the role of General Counsel on an as needed basis. Mr. Laher is a graduate of Harvard Business School and Georgetown Law  and was previously an associate attorney with Jones Day law firm in their Washington, DC office.  Mr. Laher focuses his practice on regulatory compliance oversight, practice management and strategic client counseling. He can be reached directly at 202-596-7863 or at ext 111 at the office 202-298-8750.

“Piercing the Corporate Veil”: How Owners Can Be Liable For Business Debt

March 13, 2015 by  
Filed under Medicare Overpayments

Corporate BoardroomOwners of healthcare companies often wonder whether they could be held personally liable for overpayment claims when facing ZPIC and MAC  contractor audits. This rarely happens, but one way for these contractors to collect overpayment demands is by piercing the corporate veil.  A healthcare provider usually has one or more individual owners. The owners need to organize the provider into an entity such as a corporation or Limited Liability Company (LLC). This is specifically done to limit each individual owner’s personal liability. Owners of incorporated health care providers can only be found personally liable for their companies’ debts to the Centers for Medicare & Medicaid Services (“CMS”) in certain very narrow circumstances, one of which is “piercing the corporate veil.”

I.  “Piercing the Corporate Veil”

The legal doctrine of piercing the corporate veil allows creditors to reach through the corporate structure and collect their debts from shareholders or similar owners. This doctrine is not unique to healthcare. In fact it is a potential way for all creditors to collect debts from individual entity owners.

CMS and its contractors rarely seek to pierce the corporate veil, and courts also tend to disfavor the practice. Veil piercing depends on facts that by their nature are difficult to prove in court. The burden of proving the facts is always on the creditor. Even though it may be difficult for a creditor to prove these facts exist, it is still important to know how a creditor could pierce a healthcare corporation’s “veil” to prevent individual owner liability. Creditors must prove specific factors to justify imposing liability on owners for a provider’s debts to CMS, including the following:

  1. Defective Incorporation: If the legal statutory requirements for organizing the corporation or LLC are not met, no corporation exists to shield owners from liability.
  2. Ignoring the Separateness of the Corporation: Entering into contracts and otherwise transacting business variously in a corporate name and an individual name can justify piercing the corporate veil. Commingling corporate and individual assets, transferring assets between the provider and an owner without formalities, or transferring assets between the provider and a sister company, can also suggest the owners did not respect the separate nature of the entity, potentially allowing CMS to pierce the corporate veil.
  3. Significant Undercapitalization: A corporation must have a reasonably sufficient amount of capital to pay its expected debts. Undercapitalization is grounds to impose liability on the owners.
  4. Excessive Dividends or Other Payments to Owners: When owners are actually working for a corporation, they can usually pay themselves fair compensation, as long as it is clearly characterized as salary or wages. However, additional dividends and other non-compensation distributions can only be safely taken out by an owner to the extent the distributions reflect profits. If an owner takes non-compensation distributions exceeding profits, these distributions constitute a return of capital and can give rise to an undercapitalization claim by a corporate creditor. If such distributions are made when the corporation is insolvent, the creditors’ claims against the owner will be almost impossible to defend.
  5. Misrepresentation and other Unfair Dealings with Creditors: Deceptive practices such as dishonesty, false statements to corporate creditors, and asset concealment can make owners liable for corporate debts.
  6. Absence or Inaccuracy of Records: If corporate records are missing or inaccurate, this can form a basis to pierce the corporate veil, especially if they hinder a creditor’s collection efforts against the provider.
  7. Failure to Maintain Ongoing Legal Requirements: Each state’s statutes impose annual franchise fees and report-filing requirements on corporations and similar entities. These usually have grace periods and cure provisions, but if they are neglected long enough the corporation or LLC will legally cease to exist, resulting in owner liability.

II.  Case Example

In United States v. Bridle Path Enterprises, Inc., a Massachusetts federal district court held the owners of a home health agency personally liable for the provider’s Medicare overpayment debt. The provider, Bridle Path, made payments toward the overpayment until they sold all of their assets to another provider. At the time of the sale, $64,807.84 was outstanding on the overpayment liability. The United States sought to hold Bridle Path’s owners personally liable for the Medicare overpayment, using the piercing the corporate veil doctrine. Due to the number of checks Bridle Path wrote to its owners, their home health agency, and their real-estate holding company, the court found that the owners did not treat Bridle Path as a separate corporate entity and pierced the corporate veil to hold the owners liable for the Medicare debt.

 III.  Conclusion

If any of the factors above exist, CMS and its Medicare contractors can seek to pierce a healthcare provider’s corporate veil and collect debts from the provider’s owners. These circumstances are not typical for health care providers and are easily avoided by maintaining personal owner dealings separate from all entity business.  Do your practice’s day-to-day operations expose you to unnecessary liability?  If your business was assessed a huge fine and forced into bankruptcy, are you 100% confident that you, as the owner, will be free of individual liability?  If you have any questions about this or any other health law issue, call 1-800-475-1906 for a complimentary consultation.

Robert W. Liles is a health care attorney experienced in handling prepayment reviews and audits.The attorneys at Liles Parker, Attorneys & Counselors at Law represent health care suppliers and providers around the country. We specialize in regulatory compliance reviews, Medicare audits, HIPAA Omnibus Rule risk assessments, privacy breach matters, and State Medical Board inquiries. If you have any questions about healthcare provider liability, contact us at (800) 475-1906.

Administration’s FY 2016 Budget Proposal Includes Changes to Recovery Audit Procedures

Recovery Audit Program

RAC Audit changes coming in 2016

(2/27/15)  On February 2, 2015, President Obama released his fiscal year 2016 budget proposal. This latest proposal affects a significant number of Federal health care programs and includes over $1 trillion allocated to the U.S. Department of Health and Human Services (“HHS”). More than 85 percent of HHS’s budget is devoted to programs that fall under the purview of the Centers for Medicare & Medicaid Services (“CMS”).

 I.  Administration Goals

The administration’s primary health care focus is expanding access to care and providing higher quality of care. It attempts to accomplish this goal through a series of budget increases coupled with a greater emphasis on efficient practices. For example, the budget proposes several reforms to the Medicare program that purport to save roughly $423.1 billion over the next 10 years.

Moreover, the FY 21016 budget continues to prioritize cutting waste, fraud, and abuse in the Medicare and Medicaid programs. As outlined in HHS’ budget brief, the President’s proposal includes $201 million in investments in program integrity for FY 2016 and $4.6 billion over ten years. These investments include continuing to fund the full Health Care Fraud and Abuse Control discretionary cap adjustment, increasing mandatory Medicaid Integrity Program funding, and providing more funding to recovery auditors to undertake more corrective actions that will help reduce improper payments. In total, program integrity investments are estimated to yield roughly $21.7 billion in savings to Medicare and Medicaid over ten years. In addition, the Budget supports efforts to monitor and prevent fraud, waste and abuse in the private health insurance market including the Health Insurance Marketplace

II.  Reforming the Medicare Appeals Process

Health care providers should pay particular attention to the budget proposals that affect an area that has caused significant frustration over the last several years: Medicare and Medicaid contractors and appeals.

In December 2013, the Office of Medicare Hearings and Appeals (“OMHA”) declared that it would stop assigning administrative law judge (“ALJ”) appeals. The Medicare appeals system had become severely backlogged with pending appeals, due in large part to a significant increase in Recovery Audit Contractor (“RAC”) reviews of claims. CMS tried to alleviate this backlog through a RAC Audit “Pause”. This pause would allow RACs to complete their remaining claim audits and allow CMS to continue to refine and improve the Recovery Audit Program. Nevertheless, frustration with the arduous Medicare appeals process led three hospitals and the nation’s largest hospital association to sue HHS. In a subsequent effort to address the backlog and resulting delays, CMS presented a global settlement offer to hospitals to resolve certain backlogged claims on during Labor Day 2014.

As part of its ongoing efforts to improve the efficiency of the Medicare appeals system – and to reduce the backlog of appeals awaiting adjudication at OMHA – HHS proposes additional funding, administrative actions, and legislative proposals. For example,

  • $36 million is allocated for CMS to engage in discussion with providers to resolve disputes and additional funding for greater participation in ALJ Hearings at OMHA;
  • $270 million is allocated for OMHA, of which $140 million is in budget authority and $130 million is from legislative proposals. This figure constitutes a $53 million increase from FY 2015.

The Budget also expands adjudicatory capacity in new field offices in order to address the backlog for a number of appeals and maintain the quality and accuracy of its decisions. It also includes a package of legislative proposals that provide new authority and additional funding to address the backlog.

            A summary of the Medicare appeals process reforms is as follows:

  • Provide OMHA and Departmental Appeals Board (“DAB”) Authority to Use Recovery Audit Contractor Collections – this would allow program recoveries to fully fund related appeals at OMHA and the DAB;
  • Establish a Refundable Filing Fee – a refundable, per claim filing fee for providers, suppliers, and State Medicaid agencies, including those acting as a representative of a beneficiary, at each level of Medicare appeal, would be instituted. This filing fee would allow HHS to invest in the appeals system in hopes of improving responsiveness and efficiency. Notably, these fees would be returned to appellants who receive a fully favorable appeal determination;
  • Establish Magistrate Adjudication for Claims with Amount in Controversy Below New ALJ Amount in Controversy Threshold – appealed claims below the federal district court amount in controversy threshold ($1,460 in CY 2015 and updated annually) would be heard by attorney adjudicators. This would allow ALJs to hear claims that are more complex and/or include higher dollar amounts.
  • Expedite Procedures for Claims with No Material Fact in Dispute – OMHA could issue decisions without holding a hearing if there is no material fact in dispute;
  • Increase Minimum Amount in Controversy for Administrative Law Judge Adjudication of Claims to Equal Amount Required for Judicial Review – the minimum amount in controversy required for adjudication by an ALJ would be increased to the Federal Court amount in controversy requirement ($1,460 in 2015). Appeals not reaching the minimum amount in controversy will be adjudicated by a Medicare magistrate;
  • Remand Appeals to the Redetermination Level with the Introduction of New Evidence – appeals where new documentary evidence is submitted at the second level of appeal or above would be remanded down to the first level of review. This could incentivize appellants to include all evidence early in the appeals process and ensure the same record is review and considered at subsequent levels of appeal; and
  • Sample and Consolidate Similar Claims for Administrative Efficiency – the Secretary HHS could adjudicate appeals through the use of sampling and extrapolation techniques. Additionally, the Secretary would be authorized to consolidate appeals into a single administrative appeal at all levels of the appeals process. Parties who are appealing claims included within an extrapolated overpayment, or consolidated previously, will be required to file one appeal request for any such claims in dispute.

III.  Conclusion

HHS insists that these proposal will allow OMHA to alleviate the ongoing backlog of appealed claims within the Medicare appeals system. However, these measures are not addressing one of the most significant problems with the entire process – the contractors themselves. No where in the budgetary proposals has HHS identified measures that would address the problem areas that RACs are historically known to create. For example, RACs are still reimbursed on a contingency fee arrangement. This arrangement create adverse incentives whereby RACs pursue (and generally deny) as many claims as possible. Yet, the contractors are not punished for adverse results that may be later overturned at any one of the appeals levels, in particular at the ALJ stage.

Has your hospital, practice, Home Health Agency, Hospice, DME Company, or PT / OT / ST Clinic been audited by a RAC or Zone Program Integrity Program (ZPIC)? Liles Parker regularly counsels health care providers on how best to proactively prepare for an audit and mitigate audit risks. As long as RACs are incentivized to pursue as many claims as possible, the likelihood of an audit of your practice is not “if” but “when.” If you have any questions or concerns regarding any ongoing – or future – RAC or ZPIC audit, please do not hesitate to give us a call at 1 (800) 475-1906.

Saltaformaggio, RobertRobert Saltaformaggio, Esq., serves as an Associate at Liles Parker, Attorneys & Counselors at Law.  Liles Parker attorneys represent dental practices around the country in connection with Medicaid audits by federal and state agencies and CMS-engaged specialty contractors.  The firm also represents dental providers in connection with HIPAA Omnibus Rule risk assessments, privacy breach matters, State Dental Board inquiries and regulatory compliance reviews.  For a free consultation, call Robert at:  1 (800) 475-1906

Recent Developments in Individual Liability for Medicare Overpayment Claims

New Rules and Risks to Individual Owners for Claims against their Companies by CMS and Federal Contractors

By David P. Parker[1], Washington, DC

Affordable care actSummary: Medicare recently finalized regulations allowing enrollment as a Medicare provider to be denied if any owner or control person of the enrolling provider is affiliated with another provider which owes money to Medicare. These regulations are based on sections of the 2010 Affordable Care Act (the “ACA”). They provide CMS an indirect means to penalize individual owners for unpaid debts owed to Medicare by their provider companies, but are more narrowly written than the ACA requires, and are likely only a 1st step in implementing the screening required by the ACA.

Background

This article is an update of an earlier article on this website addressing individual liability for Medicare overpayment claims, originally published in April 2012. That article examined the liability that individual owners of provider companies can have for Medicare overpayment claims against their providers, and advised that although CMS and Medicare contractors have limited means to collect providers’ overpayment balances from their owners, they may in the future punish the owners indirectly by sanctioning other provider companies they own. Portions of the Workplan published by HHS’s Office of Inspector General in 2011 clearly pointed in that direction.

Recent Development

The Secretary of Health, Education and Welfare published a Final Rule[2] amending Medicare Regulations at 42 CFR 405, 424 and 498 effective Feb 3, 2015. The Final Rule conformed closely to the Proposed Rule published April 29, 2013, despite substantial public comment. While this Final Rule included regulation changes on a number of Medicare topics, of interest here is the provision allowing CMS and its contractors to deny enrollment in Medicare programs to a provider if any owner previously owned another provider having unpaid debts owed to Medicare.

Specific Provisions

Medicare Regulations at 42 CFR 424.530(a)(6) have now been amended to allow CMS to deny a provider or supplier’s enrollment in the Medicare program if

(a)       The enrolling provider or supplier, or any of its owners was previously the owner, directly or indirectly, of another Medicare enrolled provider or supplier;

(b)       the other provider or supplier’s Medicare enrollment has been terminated or revoked;

(c)       the owner left the provider or supplier with the Medicare debt within 1 year before or after that provider or supplier’s enrollment termination or revocation;

(d)       the Medicare debt has not been fully repaid; and

(e)       CMS determines that the uncollected debt poses an undue risk of fraud, waste, or abuse. In making this determination, CMS considers the following factors:

(1) the amount of the Medicare debt;

(2) the length and timeframe that the enrolling provider or supplier or its owner was an owner of the prior entity;

(3) the percentage of the enrolling provider, supplier, or owner’s ownership of the prior entity;

(4) whether the Medicare debt is currently being appealed; and

(5) whether the enrolling provider, supplier, or owner thereof was an owner of the prior entity at the time the Medicare debt was incurred.

A denial of Medicare enrollment under this paragraph can be avoided if the enrolling provider, supplier or owner agrees to a CMS-approved extended repayment schedule for the unpaid debt, or repays it in full.

Narrowed Scope of New Regulation

As discussed below, the statutory language authorizing the new regulation targets all owners of providers who are debtors to Medicare. The resulting regulation, however, contains a provision which limits it effect only to certain owners. This is the requirement that the authority to deny enrollment exits only if the owner left the provider or supplier with the Medicare debt within 1 year before or after that provider or supplier’s enrollment termination or revocation. In this context, the verb left means ceased to be an owner. So, if the owner in question divested himself of his ownership more than a year before the Medicare enforcement process terminates the overpaid provider’s enrollment, or keeps his ownership at least a year after termination of enrollment, both of which are plausible circumstances in an overpayment situation, the authority to deny enrollment will not apply. This requirement was not remarked on by the numerous commenters during the proposal period, or otherwise discussed in any CMS releases; and it is unobvious why it was included.

Subjective Element in Regulation

The 5th element required to authorize denial of enrollment, namely CMS determines that the uncollected debt poses an undue risk of fraud, waste, or abuse is clearly subjective. CMS’s comments in the Final Rule release explain that this is meant to allow enrollment to proceed if the debt or the ownership in the debtor provider are small, or if similar exonerating circumstances exist. These factors are listed in the regulation as subjects of CMS’s subjective consideration without being hard requirements, to allow CMS discretion in the matter. More notably, however, this text tracks the actual authorizing language of the Federal statute quoted below, which phrased the authority as a subjective determination.

Statutory Authority; Disclosure and Screening Requirements in Statute

The authority to deny enrollment because of an affiliated provider’s debt to Medicare is part of Section 6401[3] of the Affordable Care Act[4], which requires Medicare providers and suppliers to disclose any current or previous affiliation (directly or indirectly) with those who owe money to Medicare. Specifically, it provides

(A) DISCLOSURE.—A provider of medical or other items or services or supplier who submits an application for enrollment or revalidation of enrollment …shall disclose (in a form and manner and at such time as determined by the Secretary) any current or previous affiliation (directly or indirectly) with a provider … or supplier that has uncollected debt, has been or is subject to a payment suspension under a Federal health care program, has been excluded from participation under [Medicare], the Medicaid program … , or the CHIP program under title XXI, or has had its billing privileges denied or revoked. [emphasis supplied]

Section 6401 authorizes denial of enrollment based on these disclosures with the following language:

(B) AUTHORITY TO DENY ENROLLMENT.—If the Secretary determines that such previous affiliation poses an undue risk of fraud, waste, or abuse, the Secretary may deny such application. Such a denial shall be subject to appeal in accordance with paragraph (7).

In addition to requiring disclosure of affiliated providers with debts to Medicare, Section 6401 also requires Medicare to conduct certain screening of providers and suppliers. The statute does not state what providers and suppliers must be screened for, but merely gives examples. It requires that

Such screening—

(i) shall include a licensure check, which may include such checks across States; and

(ii) may, as the Secretary determines appropriate based on the risk of fraud, waste, and abuse described in the preceding sentence, include—

(a) a criminal background check;

(b) fingerprinting;

(c) unscheduled and unannounced site visits, including pre-enrollment site visits;

(d) database checks (including such checks across States); and

(e) such other screening as the Secretary determines appropriate[5].

Other parts of Section 6401(a)(3) make clear that the screening is to apply to enrolling providers, previously enrolled providers, and during any periodic revalidation of enrollment.

Affiliated Debt Disclosure via Form 855

The CMS Final Order release mentions that CMS Form 855 is the form affected by this regulation. This is the multi-use form required to be filed by providers for initial enrollment, to report changes of certain organization information including ownership, to request CMS approval of any change of ownership, to re-validate enrollment or terminate it. Form 855 is the obvious place to require the disclosure mandated by ACA Sec. 6401. As of this writing (February 20, 2015) Form 855 contains no questions about debts owned by other providers and suppliers under common ownership with the signer of the form. Very probably such a question will be added, but even without it CMS could probably rely on its own ability to “connect the dots” between information already called for in this form, and data it has on providers and suppliers which owe it money, to learn of any debts owed by affiliates.

In this regard, the existing language of Form 855 requires that all direct and indirect owners of each provider and supplier be identified by name and Taxpayer Identification Number, or (as applicable) Social Security Number. If the owners are enrolled in Medicare themselves, their NPI and enrollment numbers are required. With this information in CMS’s hands from the enrolling provider or supplier, it must be a simple matter to conduct database searches comparing it with the identifiers of providers and suppliers owing money to Medicare, to determine if any of the enroller’s affiliates are among these debtors. If a connection is established this way, the enrollment denial rules in the regulation could then be applied to deny the enrollment.

Practical Application of New Regulation

As of this writing, there is no public report of any application of the new provisions of 42 CFR §424 to an actual provider enrollment situation, so no one knows how strictly it will be enforced once a debt to Medicare owed by an affiliate of an enrolling provider is identified. Particularly, it is not known how the factors in the subjective 5th element of the new provision will be interpreted, for example, what dollar amounts of affiliate debt, or what ownership percentages in the debtor, will be judged too small to “pose an undue risk of fraud, waste and abuse.” It will also be instructive to learn if such judgments will be made by enrollment contractors or an organ of CMS.

Future Enforcement Against Owners of Debtors to Medicare

What is clear is that this new regulation and authority is not the final step in CMS efforts to sanction owners and affiliates of overpayment debtors. Considering the portions of ACA Section 6401 requiring screening of existing as well as enrolling Medicare providers and suppliers, it is likely that future regulations will authorize revocation of enrollment of existing providers and suppliers under common ownership with such debtors. The database searches mentioned above could be conducted on the owner identification information CMS already maintains on its current enrollees, comparing it to the identifiers of providers and suppliers owing Medicare money, to terminate their enrollment when a connection is found, and thus extend Medicare’s efforts to punish owners of debtors to its program. We note that the current-year Work Plan published by CMS’s Office of Inspector General provides, under a section captioned “Provider Eligibility”,

We will determine the extent to which and they way in which CMS and its contractors have implemented enhanced screening procedures for Medicare providers pursuant to the ACA, § 6401[6].

This new regulation, and the clear announcements by CMS officials, suggest that efforts by the agency and its contractors to reach beyond its debtor companies, and sanction their owners and affiliates, will continue.

David Parker 5 croppedDavid Parker practices in the business transaction and healthcare areas. In the health law area, Mr. Parker represents providers in Medicare, Medicaid, and private payor administrative proceedings involving overpayment, revocation and other audit matters, and buyers and sellers in healthcare related transactions. He also gives advice on False Claims Act, Stark, and Anti-Kickback Statute issues.  For a free consultation, call:  1 (800) 475-1906.

[1]. David Parker is a founder and managing member of Liles Parker PLLC, a health care law firm in Washington D.C. Mr. Parker was formerly a partner at Dickstein Shapiro in Washington, DC, and before that the in-house general counsel of Allied Capital, a publicly-traded group of companies in Washington.

[2]. The Final Rule was published Dec 5, 2014 in Vol. 79, No. 234 of the Federal Register at page 72500.

[3]. Now codified at 42 USC §1395cc(j).

[4]. Public Law 111-148 enacted March 23, 2010. It may be noted that the provision of law under discussion was enacted 2 years before this writer’s article predicting it, but like much of that statute, was completely unknown to the writer or the public at the time.

[5]. ACA §6401(a)(3).

[6]. HHS OIG Work Plan, FY 2015, Medicare Program section, pg. 22.

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