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Is Your Urogynecology, OB/GYN or Multidisciplinary Practice Prepared for a Medicare Biofeedback Claims Audit or a Pelvic Floor Therapy Claims Audit?

Medicare Audits of CPT Code 90911, Pelvic Floor Therapy Claims are Increasing!(July 12, 2018):  While no medical specialty has completely avoided the scrutiny of law enforcement and government contractors, for the most part, OB/GYNs and Urogynecologists have managed to stay out of the limelight of auditors and investigators tasked with identifying improper billing practices.  Unfortunately, those days appear to be over. Working closely with the staff at the Consolidated Data Analysis Center (CDAC), auditors and investigators at the Department of Health and Human Services (HHS), Office of Inspector General (OIG), have conducted sophisticated data analyses to identify outliers whose billing practices may be an indication of improper billing or fraud.  In recent years, CDAC-supported analyses have led to the successful pursuit of several high-profile Medicare fraud cases against urogynecologist providers and practices for the wrongful billing of biofeedback[1] related claims.  Most recently, the OIG confirmed at the March 2018 Health Care Compliance Association Annual Meeting that biofeedback / pelvic floor therapy claims are currently under review and are an agency enforcement initiative. This article examines the cases that have been brought against providers for the improper billing / fraudulent submission of biofeedback claims for payment, along with steps that your practice should take if your claims are subjected to an audit.

I.  Overview of Biofeedback Therapy:

At the outset, it is important to recognize that the coverage of biofeedback therapy services varies from payor to payor.  Many payors have limited the coverage of biofeedback therapy services to specific conditions and diagnoses.[2]  Generally speaking, biofeedback qualifies for coverage and payment by Medicare when it is used to treat stress and urge incontinence in cognitively intact patients, AS LONG AS the medical documentation shows that “pelvic muscle exercise” training has been attempted and has failed.

Two procedural codes (CPT Code 90901 and CPT Code 90911), are primarily used to code for biofeedback therapy. CPT Code 90901 is a non-specific code that can be used for any modality of biofeedback therapy.  In contrast, CPT Code 90911 is used to bill for Pelvic Floor Therapy training for the treatment of incontinence.

II.  Overview of Pelvic Floor Therapy Training for Urinary Incontinence:

As discussed above, Medicare will only cover biofeedback for the treatment of urinary incontinence when the medical records document that a trial of pelvic muscle exercise training was previously tried and failed.[3]  The Centers for Medicare and Medicaid Services (CMS) has issued National Coverage Determination (NCD) guidance titled “Biofeedback Therapy for the Treatment of Urinary Incontinence (30.1.1).[4]As the guidance notes, biofeedback-assisted pelvic muscle exercise training incorporates the use of an electronic or mechanical device to convey feedback (visual and / or auditory) regarding the muscle tone of a patient’s pelvic floor.  This feedback assists patients with their performance of muscle tone and pelvic muscle exercises.  Notably, CMS has delegated the authority to decide whether or not to cover biofeedback as an initial treatment modality to its contractors.

III.  Recent Pelvic Floor Therapy Claims Enforcement Cases:

  • On July 2, 2018, a Florida-based network of urogynecology practitioners agreed to pay the government $7 million to resolve allegations that network physicians violated the False Claims Act by knowingly billing the Medicare program for services that were inflated or were not provided. More specifically, the government alleged that network physicians performed and improperly billed for lavage treatments and pelvic floor therapy services that were incorrectly appended with a Modifier -25.  A Modifier -25 is intended to reflect the fact that a significant, separately identifiable E/M services was provided by the same physician on the same day as the other procedure at issue (in this case, the lavage and / or pelvic floor therapy services).
  • In June 2018, a California urogynecology practice and its Board-Certified physician entered into a $419,578 settlement agreement with the OIG. The settlement resolves allegations that the physician submitted claims to Medicare for items or services that he “knew or should have known were not provided as claimed or were false or fraudulent.”
  • In February 2018, the Department of Health and Human Services (HHS), Office of Inspector General (OIG) announced an $877,474 settlement with an Arizona practice accused of submitting false and fraudulent pelvic floor therapy claims to the Medicare program for payment.
  • In December 2017, a Virginia-based urogynecology clinic and its Board-Certified physician owner, settled a case with the OIG for $4 million in Civil Monetary Penalties. The OIG also required that the clinic enter into a 3-year Corporate Integrity Agreement which requires that the practice fully comply with a comprehensive set of compliance and regulatory requirements in order to avoid exclusion from the Medicare program.
  • In November 2016, a New Jersey OB/GYN agreed to be excluded from participating in Federal health benefits programs for 20 years as part of his settlement with government. The OB/GYN was also required to pay $25 million to settle False Claims Act allegations.  It was alleged that the OB/GYN submitted thousands of claims for pelvic floor therapy training services to the Medicare and Medicaid programs that were either never provided, or were otherwise false or fraudulent.

IV.  Steps to Take Before Your Practice is Audited:

When is the last time you conducted an internal audit of the medical necessity of your claims, the completeness of your documentation and / or the accuracy of your coding and billing practices?  What did you find?

A well-designed Compliance Program can benefit Urogynecology and OB/GYN practices by speeding up and optimizing the proper payment of claims, minimizing billing mistakes, and reducing the chances that an audit will be conducted by law enforcement or one of the many private contractors now working for CMS. The following seven elements that should be addressed in your Compliance Program include:

  1. Implementing written policies, procedures and standards of conduct;

  2. Compliance program administration;

  3. Screening and evaluation of employees, physicians, etc.;

  4. Communication, education and training on compliance;

  5. Monitoring, auditing and internal reporting systems;

  6. Enforcing standards through well-publicized disciplinary guidelines;

  7. Responding promptly to detected offenses and undertaking corrective action;

Urogynecology and OB/GYN practices should also conduct an organization-specific review in order to identify and address any regulatory risks that may be present.  This baseline audit (also commonly referred to as a “GAP Analysis”) can be utilized to identify problems in need of correction and any potential risk areas that should be incorporated into your Compliance Program. As you review your documentation, try and imagine how it would appear to an outside reviewer.  Can a reviewer fully appreciate the patient’s clinical status and the medical necessity of any biofeedback-related therapy services that you have provided?  Compare your E/M services to the 1995 or 1997 E/M Guidelines – have you fully and completely documented the services at issue?

To be clear, both law enforcement and CMS contractors recognize that a provider’s care and treatment practices may differ in one aspect or another from those of their peers. Moreover, those differences can result in billing practices which might make a provider appear to be an “outlier.”  Just because a provider’s coding and billing practices differ from those of their peers (in the same specialty area), does not necessarily mean that the provider’s practices are improper.  Nevertheless, if your utilization or coding / billing practices result in your clinic being identified as outlier, there is higher likelihood that your claims will be audited.

Be sure and engage any outside reviewers through legal counsel.  Keep in mind, this is not a paper exercise.  If legal counsel is not fully engaged and is not supervising the work, it is doubtful that the result of any review will be privileged.  As a final point in this regard, keep in mind that any overpayments identified must be paid back, regardless of whether the results of the internal audit qualify as privileged.

V.  What Are the Risks You Face if Your Biofeedback / Pelvic Floor Therapy Claims are Audited?

Despite any assertions that a Medicare auditor may state to the contrary — there is no such thing as a “Routine Audit.”[5]   

You never realize how bad your documentation is until your urogynecology or OB/GYN claims are audited. Unfortunately, a physician’s documentation practices often become more relaxed as time goes on – especially when the physician’s claims have not been audited for an extended period of time.  In such situations, both physicians and their staff may fail to fully document the services provided. Specific risk issues identified in recent cases brought by the OIG and, in some cases, the Department of Justice (DOJ) against urogynecology, OB/GYN, and multidisciplinary practices providing biofeedback-related pelvic floor therapy training services include:

  • Upcoding involving the inappropriate appending of Modifier -25 to a claim payment for a medically unnecessary E/M services  Urogynecologists, OB/GYNs and multidisciplinary physicians should exercise caution when utilizing Modifier -25.  It is important to remember that Modifier -25 has a long and controversial history with respect to Medicare audits and investigations. [6].  In a recent False Claims Act brought by the government, the government alleged that the provider billed the Medicare program for a significant, separately identifiable E/M service, supposedly provided  by the same physician on the same day as lavage and / or pelvic floor therapy services.  The bottom line is simple, if you are billing Modifier -25 in connection with your claims, you should expect to be audited!
  • Failure to provide and document failed pelvic muscle exercise training. Multiple cases brought by the government have denied CPT Code 90911 claims because there was no evidence that prior to trying pelvic floor therapy training, the patient had received a four-week course of failed pelvic muscle exercise training, and the exercise training had failed to remedy the patient’s incontinence issues. CPT Code 90911 audits have regularly found that the required predicate exercise training was not conducted.
  • Failure to properly supervise anorectal manometry diagnostic services. It was alleged that the physician failed to personally supervise the performance of anorectal manometry procedures performed by his medical assistants. Anorectal manometry (CPT Code 91122) testing procedures are used as a diagnostic tool to measure a patient’s anal sphincter pressures. The testing is also used to provide an assessment of a patient’s rectal sensation, rectoanal reflexes, and rectal compliance. When supervising the provision of these services, all of the supervision requirements set forth in 42 C.F.R. § 410.32 regarding diagnostic tests apply.  When billing for services covered by CPT Code 91122, the required Supervision Level is “2.”  In other words, direct supervision requirements apply to services billed under this code. Moreover, under 42 C.F.R. § 410.32, “these diagnostic testing services must be ordered by the physician / nonphysician practitioner who is treating the patient, that is, the physician / nonphysician practitioner who furnishes a consultation or treats a patient for a specific medical problem and who uses the results in the management of the patient’s specific medical problem. Tests not ordered by the physician / nonphysician practitioner who is treating the patient are not reasonable and necessary.”[7]  As a final point, providers should take care to ensure that CPT Code 91122 is not confused with CPT Code 90911.  As LCD 33263 further reflects, “diagnostic testing is not a medically necessary part of physical therapy, rehabilitation, biofeedback, or [an] exercise program.”
  • Billing for services not rendered. There have been multiple instances where law enforcement has alleged that biofeedback / pelvic floor therapy claims were billed to Medicare, when in fact the services were not provided.
  • Billing for therapy services provided by unlicensed and unqualified individuals. The basis for denial is increasingly being cited in audits around the country. It is essential that practices review the applicable LCD requirements to ensure that individuals providing the therapy services meet the qualifications set out in the guidance.  For example, several cases brought by law enforcement have alleged that urogynecology, OB/GYN, and multidisciplinary practices improperly billed for pelvic floor physical therapy services that were provided by an unqualified individual.
  • Failure to properly supervise pelvic floor therapy training services. In one recent case, it was alleged that the physician failed to personally perform or directly supervise pelvic floor therapy services during time periods when he was out of the state or out of the country. Although now superseded, LCD 33631[8] sets out:

“Medicare billable therapy services may be provided by any of the following within their scope of practice and consistent with state and local law: Physician; Non-physician practitioner (NPP) (physician assistants, nurse practitioners, clinical nurse specialists); Qualified physical and occupational therapists, speech language pathologists (for CPT codes G0515 and 97533), and assistants working under the supervision of a qualified therapist; Qualified personnel, with or without a license to practice therapy, who have been educated and trained as therapists and qualify to furnish therapy services only under direct supervision incident to a physician or NPP.” (Emphasis added).

  • Failure to properly document the services provided. Although this reason for denial is among the most frequent we have seen cited in administrative audits, it has also been a component of both Civil Monetary Penalty assessments and False Claims Act cases against urogynecology, OB/GYN, and multidisciplinary practices. Government contractors, the OIG and DOJ often use this deficiency to support their claims that the services billed were not medically necessary.
  • Billing for medically unnecessary services. In multiple instances, defendants were alleged to have provided and billed for diagnostic services that were not reasonable and necessary.
  • Submitted claims for diagnostic services when therapeutic services were provided. For example, in at least one case, the defendants were alleged to have improperly submitted claims for diagnostic electromyography (CPT Code 51784) and diagnostic anorectal manometry (CPT Code 91122) when therapeutic, not diagnostic, services had been provided.
  • Billing for Evaluation & Management services that were never provided.

It is important to keep in mind that if your clinic is audited, the results of the government’s review can lead to:

          An assessment of Civil Monetary Penalties by the OIG;

          Allegations of violations of the False Claims Act by either DOJ or by a whistleblower; and

          Allegations of violations of criminal law.

If your claims are audited, it is essential that you assess your documentation before turning it over to the government.  We typically assess the date of service / claim at issue and submit a comprehensive analysis of the documentation to ascertain whether the claim qualifies for coverage and payment.

VI.  Responding to an Audit:

Should you receive notice of an audit or investigation from a CMS contractor, the OIG or the Department of Justice (DOJ), we strongly recommend that you contact a qualified health care regulatory lawyer before responding to the request.  To be clear, not every CMS contractor audit requires the services of an attorney.  Nevertheless, it is in your best interests to first consult with your attorney.  Every case is different.  The approach you take when responding to an audit will depend, in part, on the claims at issue, the entity conducting the audit and the scope of review.  When we are engaged to handle these audits, several of the steps we take include:

Legal counsel should contact the CMS contractor, the OIG or DOJ and attempt to obtain any additional information regarding the nature and scope of the audit. All requests for medical records and other information must be taken seriously.  You can’t  take the position that a request from a CMS contractor (such as Zone Program Integrity Contractor (ZPIC) or a Uniform Program Integrity Contractor (UPIC)) can be taken less seriously.  Both ZPICs and UPICs are program integrity contractors and will not hesitate to make a referral to OIG or DOJ if evidence of improper billing or fraud is identified.  

We strongly recommend that you limit any direct communications between you and the auditors. Remember, everything you say is evidence.  A quick review of high-profile cases now in the news will confirm that the government won’t hesitate to pursue prosecutions based on obstruction, false statements and similar legal violations other than those based on the substantive claims under review.

Qualified legal counsel should immediately conduct its own assessment of the claims at issue. For instance, in our firm, the attorneys working on your case are also likely to be “Certified Medical Reimbursement Specialist” and / or a “Certified Medical Compliance Officer.”  Make sure that your legal counsel is experienced in assessing the medical necessity, documentation, coding and billing issues in your case.

Work through your counsel to properly and fully respond to a request for documentation.  Always keep a copy of any information shared with the government or its contractors.  Most of the time, you will submit a copy of the medical records requested when responding to the request.  However, in limited instances, a subpoena may require that you turn over the original documents (or send over a mirror image of the electronic records).  If that is the case, be sure and keep a copy!

Legal counsel will try to “get in front of the case.” You need to know about, and prepare to respond to potential problems that the government may raise after reviewing your claims.

VII.  Conclusion:

Don’t wait until you are being audited to review your medical necessity, documentation, coding and billing practices! Urogynecology, OB/GYN, and multidisciplinary practices should take steps now to ensure that an effective Compliance Program is in place and that you and your staff are fully complying with applicable statutory and regulatory requirements.

Robert W. Liles defends health care providers in Medicare pelvic floor therapy claims auditsRobert W. Liles serves as Managing Partner at the health law firm, Liles Parker, Attorneys and Counselors at Law.  Liles Parker attorneys represent health care providers and suppliers around the country in connection with ZPIC audits, UPIC audits, OIG audits and DOJ investigations.  For a free initial consultation regarding your situation, call Robert at:  1 (800) 475-1906.

[1] Biofeedback is a mind–body technique that can be used to train individuals how to modify their physiology for the purpose of improving physical, mental, emotional health. Clinical biofeedback can be assist in managing a patient’s symptoms through stress management training and can assist in the re-education of muscles to help address urinary incontinence. For additional information, see Ment Health Fam Med. 2010 Jun; 7(2): 85–91.

[2] In order to qualify for coverage, biofeedback must be rendered by a qualified practitioner in an office or other facility setting. The Centers for Medicare and Medicaid Services (CMS) has reaffirmed its existing national noncoverage policy for home biofeedback devices in the treatment of urinary incontinence.  For additional information in this regard, please see CMS’s guidance dated March 1, 2002, titled Coverage Decision Memorandum for Home Biofeedback for Urinary Incontinence.”  

[3] A failed trial of pelvic muscle exercise training is defined as “no clinically significant improvement in urinary incontinence after completing 4 weeks of an ordered plan of pelvic muscle exercises to increase periurethral muscle strength.”

[4] National Coverage Determination (NCD) for Biofeedback Therapy for the Treatment of Urinary Incontinence (30.1.1),”  (effective July 1, 2001).

[5] Comprehensive Error Rate Testing (CERT) audits are a limited exception to this general rule.  Pursuant to the Improper Payments Information Act of 2002, CMS is required to estimate the improper Medicare fee-for-service payments made to health care providers each year by Medicare Administrative Contractors (MACs). Consistent with this mandate, CMS utilizes the CERT program to estimate the error rate.  Essentially, the purpose of a CERT audit is to verify whether a Medicare Administrative Contractor is properly paying Medicare claims and has effective edits in place to deny (or place in suspense) claims that for one reason or another may not qualify for coverage and payment.

[6] Use of Modifier 25;

[7] This example of the supervision requirements governing CPT Code 91122 services is set out the Local Coverage Determination guidance issued by First Coast Service Options sets out the supervision requirements See “Anorectoral Manometry and EMG of the Urinary and Anal Sphincters” (L33263).  Applies to services performed on or after October 1, 2016.

[8] For example, the supervision requirements governing these services is set out the Local Coverage Determination guidance issued by National Government Services, Inc. See “Outpatient Physical and Occupational Therapy Services,” (L33631). Applies to services performed on or after January 1, 2018.

Seven Elements of a Payable Claim are an Essential Tool When Preparing for a ZPIC Audit

September 21, 2012 by  
Filed under Home Health & Hospice

(September 21, 2012):  Each year, our attorneys and paralegals review and assess literally thousands of Medicare claims which have been audited (and denied) by Zone Program Integrity Contractors (ZPICs) and other contractors working for the Centers for Medicare and Medicaid Services (CMS).  As intensive ZPIC audits continue, it is essential that health care providers review their processes to better ensure that services provided fully comply with applicable coverage, coding and billing requirements.  While defending physicians and other health care providers in ZPIC audits and government reviews, we have identified a relatively straight-forward approach for determining whether a particular claim qualifies for coverage and payment.  Generally, we refer to this approach as an examination of the Seven Elements of a Payable Claim.Notably, this has proven to be extremely helpful tool when developing an effective Compliance Plan for a client.  As set out below, physicians and other non-hospital health care providers can often use this approach to determine whether specific services billed to Medicare, Medicaid, and/or private payors should be paid.

I.  Seven Elements of a Payable Claim:

A discussion of the seven elements which must be carefully assessed for each and every claim is provided below:

Element #1: Medical Necessity — In addressing this element, a treating health care provider should ask the following question: Were the services administered medically necessary?”

When considering this question, it is important to keep in mind that the medical necessity is essentially a “standalone” determination, separate from each of the other elements.  In other words, a physician may find that a specific course of treatment is medically necessary in light of a patient’s clinical profile and needs.  Nevertheless, just because a certain treatment regime is medically necessary does not mean that it will be covered by one or more payors.  Over the years, we have seen numerous instances where a physician determined that a course of treatment was medically necessary but it was not covered by Medicare, Medicaid, or a private payor plan.

We believe that this element constitutes the most important question to be answered by a provider.  Services which are not medically necessary should never be performed.  However, a provider may choose to provide medically necessary services regardless of whether he or she anticipates a payor to find that the care qualifies for coverage and payment.

Element #2: Services Were Provided The second issue addressed is whether the services at issue were actually provided.

As you can imagine, regardless of the fact that services ordered were medically necessary, the services must actually be administered in order for those services to be billed and paid.  Absent clear, unambiguous evidence that services were provided, they should not be submitted for reimbursement.  Equally important, services must actually be provided at a level of quality consistent with Medicare’s expectations or the expectations of the covering payor.

Element #3 No Statutory Violations Are the services “tainted” by any statutory or regulatory violation, such as the Stark Law, federal Anti-Kickback or a False Claims Act violation?

When examining whether a claim is “payable,” you need to remember that even though the medical service at issue may have been medically necessary and qualified for payment, if it is the result of an illegal activity, it will be tainted and will likely not qualify for payment.  Therefore, when you are reviewing a service or claim, you must consider whether there is any indication of possible statutory or regulatory violations.  For instance, is there any evidence that the service or claim is linked in any way to a breach of the federal Anti-Kickback Statute or Stark’s prohibition against improper self-referrals?  Similarly, is the service or claim associated with a possible violation of the civil False Claims Act?  The bottom line is fairly straight-forward: it is insufficient to merely show that a claim appears to meet the payor’s basic billing rules.  Rather, a broad view of the service or claim should be made to better ensure that it is not otherwise non-payable due to a statutory breach.

Element #4:  Meets all Coverage Rules – Do the services meet Medicare’s coverage requirements?

The next point to be addressed when auditing a claim is to determine whether or not it is covered under a payor’s plan.  It is important to keep in mind that a service or claim can be medically necessary yet still not qualify for coverage and payment.   Ultimately, every service or claim, regardless of whether the beneficiary is a Medicare, Medicaid, or private plan participant, must be examined to see if it qualifies for coverage.

In making coverage determinations, CMS has interpreted the phrase reasonable and necessary to reflect that the item or service in question is safe and effective and not experimental or investigational.[1]  CMS stated that the relevant tests for applying these terms are whether the item or service has been proven safe and effective based on authoritative evidence, or alternatively, whether the item or service is generally accepted in the medical community as safe and effective for the condition for which it is used.[2]  A device is investigational if it has not been approved by the Food and Drug Administration (FDA) through a premarket approval process or the “510(k) certification process.”[3]  Additional guidance to be reviewed includes any applicable National Coverage Determination rules, and any relevant Local Coverage Determination provisions:

National Coverage Determination Rules (NCDs):  In its most general form, the Secretary of the U.S. Department of Health and Human Services (HHS) may articulate “reasonable and necessary” standards through formal regulations that have the force and effect of law throughout the administrative process.[4]  More specifically, the Secretary may publish a formal administrative ruling in the Federal Register setting forth how Medicare statutes and regulations are to be applied in particular circumstances.[5]  These regulations and administrative rulings are binding at all stages of the administrative process.[6]  The first type of formal regulations are publications known as National Coverage Determinations (NCDs).[7]  NCDs are national policy statements that grant, limit, or exclude Medicare coverage for a particular item or service and apply nationally to all Medicare beneficiaries who meet the criteria for coverage.[8]  More precisely, NCDs are determination[s] by the Secretary with respect to whether or not a particular item is covered nationally by Medicare.[9]  NCDs conditions for which a service is considered to be covered (or not covered) and are usually issued as a program instruction.[10]  NCDs are often published detailing how a particular patient population may or may not receive Medicare reimbursement for a covered item or service.[11]  Thus, NCDs relate only to issues of coverage.  NCDs do not reflect a determination of the amount of payment made for a particular item or service.[12]  Moreover, any interested party, including beneficiaries, may make an external request for a new NCD.[13]  Most of these external requests, however, are made by organizations such as drug, device, or medical product manufacturers or by professional medical organizations, providers, or suppliers.[14]  In addition, CMS may make its own internal request if it determines that an NCD is “in the interest of the general health and safety of Medicare beneficiaries.”[15]   Importantly, because of the judicial deference given to the Secretary in making his or her coverage determinations, all requirements set forth within an NCD are binding on coverage determinations made by Medicare Administrative Contractors (MACs) and Administrative Law Judges (ALJs) during the appeals process.[16]  Finally, the Secretary may further define when and under what circumstances services may be covered (or not covered) under the reasonable and necessary standard through coverage provisions in interpretive manuals.[17] Manual instructions are often issued in the form of program memoranda, such as the “Medicare Program Integrity Manual.”

Local Coverage Determinations  (LCDs) The Secretary of HHS may also delegate its responsibilities, under section 1395y (a), to Medicare contractors.[18]  Therefore, in the absence of an NCD, MACs are responsible for promulgating their own reasonable and necessary coverage determinations.[19]  These determinations are published as Local Coverage Determinations (LCDs).  LCDs are defined as determination[s] by a [contractor] under. . . part B. . . respecting whether or not a particular item or service is covered. . . in accordance with section 1395y(a)(1)(A).”[20]  MACs make these coverage determinations by applying the Act and federal regulations, as well as additional guidance provided by CMS in the form of Rulings, Medical Manual Provisions, and other forms of guidance.[21]  In fact, the vast majority of coverage decisions are made at the local level by clinicians who work with the MACs during the claims review process.[22]  CMS’ Medicare Program Integrity Manual (PIM) outlines how LCDs are to be promulgated.  Each LCD must reflect local medical practice within the contractor’s jurisdiction and must be supported by substantial medical evidence.[23]  MACs develop LCDs by considering medical literature, the advice of medical societies and consultants, public comments, and comments from the Medicare provider community.[24]  Like NCDs, an LCD’s coverage guidance on whether an item is medically “reasonable and necessary” means that the item is safe and effective and not experimental or investigational as determined by the FDA approval process.[25]  The contractor must also ensure that LCDs are consistent with the Medicare statute, regulations, NCDs, and other applicable federal guidance.[26]  The PIM also requires that contractors engage in a notice and comment process before publishing coverage policies.[27]  Unlike NCDs, ALJs and the Medicare Appeals Council (Appeals Council)—not to be confused with the Medicare Administrative Contractor (MAC)—are not bound by LCDs or CMS program guidance, such as program memoranda and manual instructions.[28]  However, they will give substantial deference to these policies if they are applicable to a particular case.[29]  This deference is due to interpretations that arise under a complex and highly technical regulatory program,” where even “the identification and classification of relevant criteria necessarily require significant expertise, and entail the exercise of judgment grounded in policy concerns.”[30]  If either an ALJ or the Appeals Council declines to follow a policy in a particular case, the ALJ and/or Appeals Council decision must explain the reasons why the policy was not followed.[31]  An ALJ or Appeals Council decision to disregard that policy applies only to the specific claim being considered and does not have precedential effect.[32]  Furthermore, an LCD made by one MAC is not binding on the other Medicare contractors across the country.[33]  The Secretary of HHS is also responsible for overseeing the evaluation of new LCDs to determine whether they should be adopted nationally and to what extent can consistency be achieved among LCDs.[34]  Because LCDs are established by each individual MACs, variances between LCDs are common.  Notably, while assessing common coverage and documentation requirements from one region to another, we have found that the differences between one LCD and another can be significant.  Finally, if there is no NCD or LCD in place, contractors may make individual claim determinations,” including whether a particular item or service meets the statutory requirement of being reasonable and necessary”.[35]

Challenging NCDs and LCDs:  When a beneficiary is confronted with a denied claim and wishes to challenge that denial, the beneficiary has the option of pursuing review through the claims appeal process, seeking review of the applicable LCD or NCD, or both.[36]  However, any challenge to an NCD or LCD is distinct from the general Medicare claims appeal process set forth in 42 U.S.C. § 405(g).[37]  In fact, challenging these determinations permits an aggrieved beneficiary to seek review of an entire policy or provision rather than just a specific claim denial.[38]  Nevertheless, when the LCD review process was created, the existing claims appeal procedures remained unaltered.  As a result, a beneficiary who wishes to challenge an NCD or LCD still has access to a de novo review by ALJ or to federal district court review, if necessary.[39]  When challenging an NCD or LCD, ALJs and the Appeals Council are responsible for reviewing the reasonableness of these determinations under certain guidance.  In determining whether LCDs or NCDs are valid, the adjudicator must uphold a challenged policy (or a provision or provisions of a challenged policy) if the findings of fact, interpretations of law, and applications of fact to law by the contractor or CMS are reasonable based on the LCD or NCD record and the relevant record developed before the ALJ or the Appeals Council.[40]  As previously indicated, NCDs are determinations promulgated by the Secretary and are therefore given substantial deference when challenged.  Nevertheless, the administrative appeals process affords this same level of deference to LCDs, despite the fact that these determinations are published by independent, private MACs.  42 C.F.R. § 405.1062(a) affirms that ALJs and the Appeals Council are not bound by LCDs or CMS program guidance, such as program memoranda and manual instructions but will also give substantial deference to these policies if they are applicable to a particular case.  In doing so, the ALJs or the Appeals Council must apply the same “reasonableness standard” when conducting a challenge to an LCD as it does to an NCD.[41]  What exactly constitutes a “reasonableness standard”?  In Subject: NCD Complaint—Intraocular Lens (CMS Ruling 05-01),[42] the Appeals Council acknowledged a complaint challenging an NCD that barred coverage of presbyopia-correcting intraocular lenses (PC-IOL) inserted after cataract surgery.  After reviewing the NCD Record and the challenger’s contentions, the Board upheld the validity of the NCD.[43]  The Board outlined its standard of review for an NCD appeal and acknowledged that Section 1869(f)(1)(A)(iii)(I) of the Act limited its review of an NCD “to evaluat[ing] the reasonableness” of the NCD.[44]  Section 1869(f)(1)(A)(iii)(III) also provides that the Board “shall defer only to the reasonable findings of fact, reasonable interpretations of law, and reasonable applications of fact to law by the Secretary.”[45]  The Board recognized that this reasonableness standard required it to uphold the challenged NCD “if the findings of fact, interpretations of law, and applications of fact to law” by CMS are reasonable based on the NCD record and the relevant record developed before it.[46]  The Board also noted that federal regulations provide a two-stage process for reviewing a challenged NCD.  First, if it found the NCD record to be complete and adequate to support the validity of the NCD, it would issue a decision to uphold the NCD.  This would effectively end its review process.  On the other hand, if the Board found that the NCD record was incomplete and inadequate to support the validity of the challenged NCD, it would conduct a review process that permitted discovery and evidence submission, as well as a formal hearing, if necessary.[47]  “Policy Articles” are closely related to LCDs, though they are distinct documents.  While LCDs contain only the reasonable and necessary language, Policy Articles contain any non-reasonable and necessary language a Medicare contractor wishes to communicate to providers.  These Articles essentially provide additional details for coverage requirements and reimbursement procedures.  And while Policy Articles are not LCDs, the Appeals Council has recognized a “long-standing practice to afford some deference” to these articles published by the MACs.[48]  Ultimately, while challenges to the specific claims denials and challenges to the various coverage determinations follow different administrative appeals processes, the adjudicatory entities all afford the Secretary’s decisions substantial deference due to the complex nature of the Medicare program.  As a result, beneficiaries have a significant hurdle in trying to overturn any adverse decision.

          To be clear, there is no “silver bullet” that can be used by a health care provider to avoid the scrutiny of contractors and law enforcement.  Every small- and mid-sized provider should expect to be audited.  Rather than wait for such an eventuality, your organization should affirmatively review its operations, coding, and billing practices to ensure that its practices fall within the rules.

Element #5Full and Complete Documentation – Have the services rendered been properly and fully documented?

It is essential that you pull each and every regulatory issuance, along with any guidance issued by the state which sets out the documentation requirements associated with a particular service or claim.  After auditing literally thousands of claims, we have found that over a majority of the health care providers we have audited have never fully researched and reviewed applicable  documentation requirements.  As clinical reviewers of both Medicare and Medicaid, Recovery Audit Contractors (RACs) and ZPICs are quick to states in hearings before an Administrative Law Judge, “If it isn’t documented, it didn’t happen.”   When made during a hearing by a RAC or ZPIC, this point is quite effective—it is extremely difficult for a provider to prove that a service was provided if there is insufficient documentation of the work conducted in the patient’s medical records.  Therefore, research, review, and confirm the precise documentation requirements to be met, then ensure that you take the time to fully and accurately document the work you have performed.

ZPIC auditors are excellent at identifying one or more ways in which your claims do not meet applicable coverage requirements.  While you may very well disagree with their assessments, especially in “medical necessity” determinations (when you file a request for redetermination appeal and later, a request for reconsideration appeal), you will find that your MAC and your Qualified Independent Contractor (QIC) agree with the ZPIC’s denial decision.  Rather than endure significant costs and stress when defending against an overpayment assessment, you need to take steps to avoid a denial in the first place.  To that end, health care providers should ensure that clinical staff members are fully trained and educated regarding Medicare’s documentation, coding, and billing processes.

We recognize that “perfect documentation” is neither required nor realistic to expect from your clinical staff.  Nevertheless, using published reports of other cases, you can show your clinicians that ZPICs  enforce a strict application of Medicare’s documentation and coverage requirements.  Through education and training, your clinical staff will understand why it is imperative that they review, understand and comply with:

  • Any applicable National Coverage Determinations (NCDs).
  • Any applicable Local Coverage Determinations (LCDs).
  • Any Local Medical Review Policies (LMRPs).
  • The Medicare Policy Benefit Manual (MPBM).
  • The Medicare Program Integrity Manual (MPIM).
  • Any statutory provisions which cover the services.
  • Finally, any additional relevant guidance issued by Medicare which relates to the services at issue must also be carefully reviewed.

Element #6: Proper Coding – Were the services rendered correctly coded?

Unfortunately, even if the foregoing rules have been met, it is quite simple to make a coding mistake, therefore invalidating the claim.  The coding rules are both complicated and dynamic, potentially changing from year to year.  We recommend that you either engage a qualified third-party billing company to assist you with coding and billing or ensure that your in-house staff members handling these duties are experienced and provided regular opportunities for updated training.

Element #7: Proper Billing Practices – Were the services rendered correctly billed to Medicare?

As a final requirement, health care providers must ensure that the services or claims performed fully meet Medicaid and Medicare’s billing rules.  Once again, you need to ensure that your staff is properly trained to handle the organization’s billing responsibilities. As you review your billing practices, you should abide by the following:  First, “If it doesn’t belong to you, give it back.”  Conversely, “If you don’t owe the money, don’t automatically throw in the towel.”  One of the attorneys in our firm is regularly asked to speak at provider conventions around the country.  For years, we have told health care providers If it doesn’t belong to you, give it back.”  This simple concept covers a lot of ground when it comes to Medicare overpayments and is the single best policy you can employ as a good, compliant corporate citizen.

In summary, in order to qualify for payment, a claim must meet each of the seven components set out above.

II.     Handling Deficiencies:

The likelihood that your practice or organization will be subjected to a Medicare or Medicaid audit is increasing every day.  As a participating provider in one or more federal health care programs, you have an affirmative obligation to ensure that your claims are properly provided, documented, coded, and billed.  Unfortunately, many health care providers have never researched and reviewed the proper rules covering the care and treatment services they provide.  When conducting a “gap analysis” of your organization, a sample of your claims is an important proactive step you can take to help ensure that your current practices are fully compliant with applicable laws and regulations; such analyses do not have to be statistically significant.  Should you identify deficiencies, remedial steps should be taken (immediately) so that future claims for care and treatment will meet all applicable requirements.  Keep in mind—any identified overpayments must be repaid promptly to the government in order to avoid possible False Claims Act liability.

III.    Final Thoughts:

We strongly recommend that you foster a corporate culture which encourages coding and billing compliance.  ZPICs and RACs have increased their audit activities dramatically in numerous areas of the country.  Your organization’s compliance with federal and state regulations, coupled with a consistent message to your employees, is essential. Establishing good intake and records management procedures, and continuing employee education and training efforts, can greatly facilitate the adoption of an ethical, compliant corporate culture.

Robert W. Liles defends health care providers in Medicare auditsRobert W. Liles represents health care providers in Medicare post-payment audits and appeals, and similar appeals under Medicaid. In addition, Robert counsels clients on regulatory compliance issues, performs gap analyses, conducts internal reviews, and trains healthcare professionals on various legal and compliance issues. For a free consultation, call Robert today at 1 (800) 475-1906.

[1] 54 Fed. Reg. 4302-02 at 4304 (Jan. 30, 1989) and United States ex. rel. Colquitt v. Abbott Laboratories, 2012 WL 1081453, 29 (N. D. Tex. March 30, 2012); 42 C.F.R. § 411.15(o).

[2] 60 Fed. Reg. 48417-01 (Sept. 19, 1995).

[3] Under the § 510(k) certification process, a manufacturer must submit to the FDA a premarket notification submission, commonly known as a 510(k) notice, before a device may be introduced into interstate commerce.  21 U.S.C. § 360(k); 21 C.F.R. § 807.81 (2010).  The 510(k) notice must include, among other things, proposed labeling sufficient to describe the device, its intended use, and the directions for its use; a statement indicating the device is similar to or different from other products of comparable type in commercial distribution; and a statement that the submitter believes, to the best of the submitter’s knowledge, that all information in the 510(k) notice is truthful and accurate, and that no material fact has been omitted.  21 C.F.R. § 807.87(e)-(h), (k).

Along with the 510(k) notice, a manufacturer must submit a “510(k) summary,” which “shall be in sufficient detail to provide an understanding of the basis for a determination of substantial equivalence [to previously cleared devices].”  Id. § 807.92(a).  Among the information that must be contained in a 510(k) summary is “[a] description of the device …, including … the significant physical and performance characteristics of the device, such as device design, material used, and physical properties.”  Id. § 807.92(a)(4).  The 510(k) summary must also include “[a] statement of the intended use of the device … including a general description of the diseases or conditions that the device will diagnose, treat, prevent, cure, or mitigate.” Id. § 807.92(a)(5).

[4] Willowood of Great Barrington, Inc. v. Sebelius, 638 F.Supp. 2d 98, 105 (D. Mass. 2009); 42 U.S.C. §§ 1395ff(a)(1), 1395hh.

[5] 42 C.F.R. § 401.108.

[6] 42 C.F.R. §§ 401.108(c), 405.1063.

[7] 42 U.S.C.

AdQIC: A Brief Refresher on the Role This Contractor Plays.

(June 15, 2012): If you have ever been involved in a Medicare postpayment audit, or even a prepayment audit, you may have heard of the “QIC” – the Qualified Independent Contractor. This contractor for the Centers for Medicare & Medicaid Services (CMS) is responsible for adjudicating reconsideration appeal requests from appellants still unhappy with a redetermination decision. As background, when a Medicare claim is denied (either initially or after a ZPIC or RAC review), there are several levels of administrative appeal available to a health care provider. These include:

1. Redetermination Appeal.
2. Reconsideration Appeal.
3. Administrative Law Judge (ALJ) Appeal.
4. Medicare Appeals Council Review.
5. Federal District Court Review.

I.  Recent Findings in QIC Report:

A recent report promulgated by a QIC indicated that the vast majority of appellants in Medicare post-payment appeals decide “throw in the towel” and effectively stop their appeal efforts if they lose at the  2nd level (the reconsideration oe “QIC” level of appeal).  As we discuss later, this is often not a good appeals strategy.  However, if appellants do choose to go further, they may later be confused by another CMS contractor, known as the “AdQIC” – the Administrative Qualified Independent Contractor. While Q2 Administrators currently serves as both a QIC and as the AdQIC, these two contracts have very different roles and responsibilities.

II.     Responsibilities of the QIC:

As previously discussed, QICs serve as the mid-level adjudicator in Medicare post-payment appeals. They accept reconsideration appeal requests filed by appellants, gather relevant documents from the appellants and from the lower-level Medicare Administrative Contractor (MAC) who conducted the redetermination review, and actually adjudicate whether the claims qualify for coverage and payment under Medicare’s program rules. Notably, like MACs and ZPICs, they are bound by both National Coverage Determinations (NCDs) and Local Coverage Determinations (LCDs). In addition, QICs may review the propriety of a statistical extrapolation, if one was conducted in the case being reviewed.  Once the QIC issues a reconsideration decision, an appellant may appeal to an ALJ, at which time the QIC then forwards (or at least is supposed to) all of its records to the ALJ for use in those proceedings.

III.     Responsibilities of the AdQIC:

The AdQIC serves a very different purpose than the QIC.  The AdQIC only starts its work after an ALJ has made his or her decision in a case.  While an AdQIC is supposed to “effectuate” the decision of an ALJ (which presumably refers to the AdQIC coordinating the decision with CMS, the relevant ZPIC, and the relevant MAC to either pay monies back to the provider which are owed as a result of the ALJ decision, or modify the amount due from the provider because of a decision), the AdQIC has effectively become the government’s appellate unit and appears to be reviewing nearly every ALJ decision to determine if there is any error or misapplication of the facts by the ALJ.  If there is, the AdQIC may make a referral to the Medicare Appeals Council for the Council to review the case “on its own motion.” This is especially true if some of the issues found favorably for a provider involve the extrapolation or one of the many waiver provisions contained in the Social Security Act. While providers have a chance to rebut the AdQIC’s referral, the Council will often take notice of the AdQIC’s action and choose to review a case. The case may then be reversed, upheld, or remanded back to the ALJ for further proceedings and clarification. This can add considerable time and expense to appeals and take what appears a victory for the provider and completely reverse it. As a result, you should take it seriously when the AdQIC contacts you.

IV.     Appeal Strategies for Providers:

Prior to appealing a claim, we believe that a health care provider should first carefully assess the services at issue and determine whether they were medically necessary, properly administered and should, in fact, have been paid.  If not, the health care provider should not pursue an appeal.  If the health care provider believes that these services should have been paid, the provider should keep in mind that the appeals process is a long, drawn-out process.  Moreover, it is essential to remember that the first time a provider will have an opportunity to “tell his side of the story” is at the ALJ level of appeal.  Prior to that point, only the administrative file is considered by reviewers at the redetermination and reconsideration levels of appeal.  As a result, in most instances, a provider’s best chance of success is at the ALJ level, which is the first chance the provider gets to speak with an actual person, instead of merely sending in documentation and written arguments in support of payment. While the QIC may be an “independent” contractor, it has been our experience that they tend to strictly apply the rules and are not readily willing to overturn decisions made by lower reviewers. As a result, while providers may occasionally win some claims at the QIC level, their best opportunity to present their case remains at the ALJ level.

To be clear, providers should not just assume that an ALJ will rule in their favor.  The ALJs we have practiced before are extremely knowledgeable and experienced in practically every area of Medicare practice.  Providers will likely find that the ALJ hearing their case has already thoroughly read their casefile and is prepared to ask the provider a number of tough questions.  Further complicating matters is the fact that in most cases involving over $100,000 a representative of the ZPIC will also be present during the ALJ hearing presenting the reasons why the claims were denied.  Despite these challenges, the ALJ level of appeal is a health care provider’s best opportunity to identify out any points missed by other reviewers and explain why the services at issue should be paid.  As you can imagine, the administrative appeals process has become quite complicated.  If your practice is subjected to a significant post-payment audit, we recommend that you contact a qualified health attorney for assistance.

Robert Liles is the managing member of Liles Parker PLLC, a Washington D.C.-based health law and business transactions firm. Robert represents clients in Medicare and Medicaid administrative appeals, fraud and abuse issues, Compliance Plan drafting and implementation, and training of healthcare professionals in legal issues which might affect them. For a complimentary consultation about your case, call today at 1-800-475-1906.

100 Involved in Health Care Fraud Arrests

Update (May 3): In total, 107 individuals were charged yesterday in connection with a health care fraud scheme comprising $452 million in false billing. 91 of the accused have been arrested and are in custody.

(May 2, 2012): News outlets are reportingHealth Care Fraud Arrests that approximately 100 people have been arrested and charged with one or more health care fraud schemes involving false billings to Medicare, Medicaid, and other federal health care programs. These health care fraud schemes allegedly resulted in approximately $450 million in fraudulent billings, one of, if not the largest, such busts in the history of federal health care programs. The report goes on to state that arrests were made in seven major metropolitan areas as a  result of an investigation over several months into these issues. CBS is reporting that over 50 of the individuals arrested were in Miami, Florida. Other arrests were made in Los Angeles, Houston, Detroit, Chicago, Tampa Bay, and Baton Rouge. In Baton Rouge, authorities are saying that these arrests were not just the result of several months of investigation, but a capped a six year long process to uncover fraudulent activities. Many of those arrested were allegedly involved in schemes related to the provision of mental health services or home health services.

I. Law Abiding Providers Should Take Note:

Health care providers in the cities where these health care fraud busts occurred should be wary. While HHS-OIG and DOJ have allegedly rooted out criminals from the Medicare program, these events cast a bad light on all providers in these regions. It has been our observation that after a large health care fraud bust such as this, the Zone Program Integrity Contractor (ZPIC) or Recovery Audit Contractor (RAC) for each region enhances their auditing efforts of similar providers. The ZPICs in these regions include SafeGuard Services (Los Angeles, Miami and Tampa), AdvanceMed Corporation (Baton Rouge) and Health Integrity (Houston). All of the ZPICs are capable, aggressive, and will critically audit a provider’s claims for both technical deficiencies and lack of medical necessity issues.

II.  It is Essential That You Develop and Implement an Effective Compliance Program:

Despite the federal government taking health care fraud wrongdoers off of the streets, ZPICs and RACs will likely step up enforcement efforts for other providers. It is therefore imperative that you establish and follow an effective compliance plan in your practice or facility as soon as possible. You should conduct a gap analysis to review your documentation practices, business operations, and relationships with referral sources, suppliers, and other providers. These issues are too important at this point to ignore. Moreover, if you have received a letter from a ZPIC or RAC, it is not something to fool around with or ignore. These entities will often review a sample of claims, deny many or all of those claims, and then extrapolate those findings onto a one or two year universe. This results in alleged overpayments to providers, sometimes in the millions of dollars. If you have received one of these letters, call us today to learn more about the process and your rights and responsibilities.

Liles Parker is a full-service law firm with offices in Washington, DC, Baton Rouge, Houston, and San Antonio. We provide nationwide representation of health care providers in a variety of administrative and other matters, including administrative appeals of ZPIC, RAC, MAC, MIC and Medicaid RAC overpayment determinations. In addition, we provide compliance plan drafting and implementation, compliance training for office staff, and mock audits. For more information, call us today at 1 (800) 475-1906 for a free consultation.

Lose Your Appeal at Reconsideration? Consider an ALJ Hearing

If you lose a Medicare appeal at Reconsideration, you can file for an ALJ Hearing.(June 18, 2011): As a review of the last several quarters of Medicare appeals statistics reflects, an overwhelming percentage of Medicare providers appealing alleged overpayments through the Medicare administrative appeals process have chosen to “throw in the towel,” so to speak, when they have lost at the reconsideration level.  As you will recall, at the reconsideration level, Medicare claims are assessed by a Qualified Independent Contractor (QIC) selected by the Centers for Medicare & Medicaid Services (CMS) to hear the second level of administrative appeals.

According to statistics kept by Q2 Administrators, the contractor selected to serve as the Administrative QIC (AdQIC), most Medicare providers have chosen not to appeal claims denials issued by the QIC at the reconsideration level.  Nationwide, in the last eight quarters, the percentage of Part B QIC cases not being appealed has risen to an astounding 86%. This trend is also occurring in Part A QIC cases, where the numbers of non-appealed cases have grown from roughly half to 75%

The purpose of this article is to examine possible reasons why Medicare providers have chosen not to appeal claims denials to the Office of Medicare Hearings and Appeals (OMHA) to be heard by an Administrative Law Judge (ALJ).  We also examine points to be considered by providers if choosing to be represented by legal counsel in the ALJ hearing process.

I.  The Third Level of Appeal: ALJ Hearing:

For 2011, if at least $130 remains in controversy following a QIC’s denial decision at the reconsideration level, a Medicare provider may request an ALJ hearing within 60 days of receipt of the reconsideration denial decision. ALJ hearings are intended to be non-adversarial proceedings aimed at determining the facts so that questions of coverage and payment may be properly addressed.  It has been our experience that the ALJ level of appeal is a provider’s best opportunity to present its arguments in support of coverage and payment.

ALJ hearings are usually held by video-teleconference or by telephone, but you may also ask for an in-person hearing. While an ALJ hearing is the third level of the administrative appeals process, it is the first time that a provider is given an opportunity to testify, clarify points missed by reviewers at lower level of appeal and answer any questions that may be raised by the ALJ.

 II.  Why Are Most Medicare Providers Not Appealing Reconsideration Denials? 

When facing an overpayment determination levied by a Zone Program Integrity Contractor (ZPIC), a Recovery Audit Contractor (RAC) or in some instances a Medicare Administrative Contractor (MAC), the first question to be addressed by a Medicare provider is:

“Based on the record and the facts, should we have been paid for the services rendered and / or the products / devices provided to this Medicare beneficiary?” 

The answer to this question isn’t always as easy as it may initially seem.  Were the services medically reasonable and necessary?  Did you properly document the services? When faced with this question, the basic rule we recommend that providers follow is fairly simple – if it doesn’t belong to you, give it back.  In such a situation, a provider should examine the various reasons why the claim allegedly does not qualify for coverage and payment and should take steps to better ensure that any deficiencies are remedied. Additionally, any other overpayments noted must be promptly repaid to the government, with the 60 day period mandated under the Affordable Care Act (ACA).

In cases where a provider (or their representative) contends that a claim does, in fact, qualify for payment, it typically appeals an overpayment assessment issued by a ZPIC, RAC or MAC.  Nevertheless, as previously discussed, the vast majority of providers who lose an appeal at the reconsideration level choose not to further appeal the denial. In speaking with Medicare providers, the primary reasons for not appealing any further include:

  • Cost / benefit considerations. By the time a provider reaches the ALJ level, the provider has already endured the time, expense and frustration of unsuccessfully arguing its case through two levels of appeal.  By this time, many providers conclude that the amount in controversy does not justify the time and expense of further appealing the QIC’s denial to the ALJ level.
  • Many providers are intimidated by the hearing process and do not feel comfortable participating in an ALJ hearing.  Despite the fact that ALJ hearings are typically conducted by teleconference, the process can still be quite intimidating.  ALJs almost always place testifying providers and their designated “experts” under oath before taking their testimony.  Additionally, if a provider has introduced new evidence into the record, it will be required to show “good cause” for its admission at this late stage of the proceedings.  Finally, most providers find that the ALJ handling their case is quite knowledgeable and typically has extensive experience analyzing coverage requirements and assessing the adequacy of a provider’s documentation.  Providers who have failed to adequately prepare for the hearing are likely to find that the process can be quite difficult.
  • The ALJ hearing process has become considerably more complicated due to the participation of ZPIC personnel. Over the past year, the ALJ hearing process has become quite complicated when dealing with large, “big box” overpayment cases.  For instance, in cases when damages have been extrapolated, it is quite common for representatives of the ZPIC who issued the initial denial decision to attend the hearing as a “participant.”  When this occurs, ZPIC representatives often include an attorney representing the ZPIC, a statistician who will be prepared to support the extrapolation applied in the case, and a clinician (typically a Registered Nurse) who will testify why the claims allegedly do not qualify for coverage.
  • In cases where a provider’s third-party biller has agreed to handle claims appeals, few billers have agreed to pursue a denial past the reconsideration level of appeal.    

III.  Consequences of Not Filing for ALJ Hearing:

Assuming that no extended repayment plan has been established and the alleged overpayment has not already been repaid, the MAC will initiate recoupment of the alleged overpayment 30 days after the QIC issues its denial decision. Unfortunately, this will occur regardless of whether a request for ALJ hearing is filed in a timely fashion.

Should a provider choose not to further appeal, its important to recognize that its “claims denial ratio” will increase.  As the government and its contractors increasingly rely on “data mining” when identifying potential targets for audit, providers with a high error rate will likely find their practices subject to further scrutiny.

 IV.  Don’t Give Up on Properly Billed Claims – Consider Your Options:  

As Medicare claims audit and assessment efforts increase (through CMS’ use of ZPICs, PSCs and RACs), health care providers will be under increasing pressure to ensure that all statutory and regulatory medical necessity, documentation, coding and billing requirements are met.  Despite a provider’s best efforts to remain compliant, it may find that its practice or clinic is alleged to have been overpaid by a Medicare contractor. Should that occur, we strongly recommend that you retain qualified, experienced legal counsel to represent your interests as early in the appeals process as possible.

Should you choose to handle the appeal yourself and lose at the reconsideration level, contact experienced legal counsel before deciding to discontinue the appeal.  Depending on the facts, you may find that it is both cost-effective and advisable to have your case handled at the ALJ level by experienced legal counsel.  When retaining counsel,  there are several important questions that you should ask:

  • How much of your law practice involves health law issues?

  • Please describe the extent of your experience handling large, complex administrative appeals of denied Medicare claims.

  • Please describe your experience in challenging statistical extrapolations applied to an alleged overpayment in a case.

  • How often have you responded to AdQIC appeals of favorable ALJ decisions?

  • How often have you handled MAC appeals?

  • Can you provide provider references?

Hopefully, your practice will not face a large administrative appeal of denied Medicare claims.  However, should such an event occur, you need to be ready to respond to the contractor’s audit.

V.  Conclusion:

 In addition to representing a wide variety of providers in the administrative appeals process, our Firm has been retained by a number of other law firms to assist them with large, complex administrative appeals.  After representing health care providers for many years in administrative hearings, involving literally tens of thousands of claims, it has been our experience that the ALJ level of appeal is the single best opportunity that a provider has to present its arguments in support of payment.

 While there are no guarantees in litigation, working with qualified clinical personnel, experienced legal counsel can effectively present a provider’s arguments to an ALJ assigned to hear the provider’s case.  Keep in mind, the trier of fact is an attorney – not a clinician or a consultant. Experience, coupled with an in-depth knowledge of the statutory and regulatory requirements at issue, may prove essential in proving your case. The ALJs we have practiced before have been attentive, knowledgeable, willing to listen to the provider’s viewpoint, and perhaps most importantly, fair If facing an ALJ hearing, consider the benefits of retaining experienced counsel when considering your options.

ALJ Hearing AttorneyRobert W. Liles, J.D., M.B.A., M.S. serves as Managing Partner at Liles Parker, Attorneys & Clients at Law.  Liles Parker attorneys have extensive experience representing Home Health, Hospice, CMHC, DME, Ambulance, Physician Practices, Nursing Homes, SNFs, and PT / ST / OT Therapy providers in the Medicare administrative appeals process. Our attorneys also work with providers to help better ensure that their Compliance Program addresses applicable statutory and regulatory requirements.   Need assistance?  Call us for a complimentary initial consultation.  We can be reached at:  1 (800) 475-1006.

The Medicare Administrative Appeal Process

The Medicare Administrative Appeal Process is Complicated.(March 25, 2011): Zone Program Integrity Contractors (ZPICs) have established themselves as the preeminent audit tool of the Centers for Medicare and Medicaid Services (CMS), surpassing both Recovery Audit Contractors (RACs) and Medicare Administrative Contractor (MAC) Benefit Integrity units.  Unfortunately, many health care providers and suppliers wait until notice of an audit has been received to conduct an objective assessment of their coding, billing and business practices.  After the ZPIC audit and appeals process has been initiated, a provider’s options for correcting any identified deficiencies are limited, at best. For this reason, we strongly encourage providers to engage qualified health care counsel to direct a gap analysis of your organization’s practices. Through this process, you will be in the best position to identify and correct problems before an audit has been initiated.  The process for filing a Medicare administrative appeal is outlined below.  Please keep in mind that the procedures discussed are only a brief overview of your obligations as a provider if you want to properly appeal the wrongful denial of one or more Medicare claims by a ZPIC or other CMS program integrity contractor.

I.  How Are ZPIC Audits Initiated?

ZPIC audits of your Medicare claims can be generated in a number of ways, such as data-mining, which is a method used to identify aberrant billing patterns. A provider may be targeted based on the number of patients he or she is allegedly seeing each day, the frequency that a specific Code Procedural Terminology (CPT) code is billed, or countless other factors examined by a contractor when assessing coding and billing practices. Alternatively, a provider may be reviewed as a result of a complaint filed by a former employee, a dissatisfied patient, or even a competitor. Regardless of the source, once a provider is targeted and an audit has been initiated, it is imperative that the provider diligently work to address any operational, coding, or billing concerns that may be identified.

While the nature of a contractor’s initial contact with a Medicare provider can vary (it often is made by a telephone call, an unannounced site visit, or a letter), at some point in the process, a provider will receive a written request for information from the contractor. In past years, the request was primarily focused on supporting medical documentation related to specific claims for services or devices billed to Medicare. This focus has seemingly changed over the years. Although many requests continue to seek only supporting medical documentation, we have seen an appreciable increase in the number of requests for business records sent out by Medicare contractors. These requests often seek copies of contracts, medical director agreements, lists of former employees, and accounting records. Essentially, these document requests are meant to provide the contractor with an accurate picture of the provider’s business and referral relationships. Should the contractor identify any questionable relationships, they will then refer their findings to the Inspector General of the Department of Health and Human Services (OIG) or the Department of Justice (DOJ) for further review and consideration.

In postpayment audit cases, once a ZPIC has concluded its review, it will send out a letter detailing its findings.  A second letter from the provider’s assigned MAC will follow.  The MAC letter constitutes a formal “demand letter” for the amount of the overpayment that is allegedly owed.

II.  The Extrapolation of Damages is Now Commonplace:

Extrapolation is the process of using statistical sampling in a review to calculate and project or extrapolate alleged overpayments made in connection with Medicare claims. Medicare contractors seek out errors in a purported “statistically relevant sample” of the provider’s Medicare claims and then calculate and apply the “error rate” to the entire universe of claims covering a given period of time. This long-standing practice allows Medicare contractors to substantially inflate the monetary demands on their audit targets while actually avoiding review of each of the Medicare claims in the universe for which they are seeking recoupment or offset.

The practice dates back twenty years to a decision by the HHS to authorize the use of statistical sampling in lieu of engaging in onerous claim-by-claim reviews. In Chaves Cnty. Home Health Servs. v. Sullivan, the Court of Appeals for the District of Columbia Circuit upheld extrapolation as within the Secretary’s discretion.

A ZPIC’s use of extrapolation can be a surefire way of destroying a provider’s practice, and the reliance of ZPICs on statistical sampling only seems to be growing. This makes it essential for providers to involve experienced counsel and qualified experts as soon as possible in cases where damages have been extrapolated.

III.  Filing a “Rebuttal”:

Before filing for redetermination appeal, a provider may prepare and file a rebuttal letter within 15 days of the date of the overpayment decision letter. The purpose of a rebuttal letter is solely to argue why any proposed recoupment action by the contractor should not take place. The rebuttal process is generally limited to ZPIC and RAC overpayment actions.

Compliance Officers should try to file a rebuttal within the deadline imposed. Unfortunately, we have seen instances where a demand letter was held a week before it was mailed, thereby giving the provider approximately a week within which to file its rebuttal. In a recent case, the MAC cited an incorrect due date for the rebuttal to be filed and failed to indicate where the rebuttal was to be sent. In any event, once a rebuttal is filed, don’t hold your breath. In recent years, Medicare contractors have only issued a formal response to a handful of rebuttals filed on behalf of providers, despite the fact that many of these filings outlined legitimate arguments why a provider’s future claims should not be subject to rebuttal. Nevertheless, many providers are understandably anxious about filing a rebuttal in a timely fashion. Therefore, we encourage Compliance Officers to immediately begin work on this filing in order for it to be timely filed with the MAC.

Regardless of whether you choose to file a Rebuttal or not, please keep in mind — the filing of a Rebuttal is NOT the same as filing for a Medicare administrative appeal!  Should you confuse the processes and fail to file for administrative appeal in a timely fashion your untimely appeal will be dismissed.

Timeframes, both for recoupment and filing appeals, are very strict, and you should ensure that you meet these deadlines.

IV. Filing for Redetermination Appeal:

The first level of appeal in the Medicare administrative appeals process is a “redetermination” appeal. At this level, the MAC will conduct a de novo review of both the auditing contractor’s (ZPIC’s, or RAC’s) determination and the provider’s arguments in support of payment. Under the Code of Federal Regulations, “any request for redetermination must be filed within 120 calendar days from the date a party receives the notice of the initial determination.”  To preserve your appeal rights, you must ensure that an appeal is received by the MAC well within the 120 day deadline. Additionally, the appeal should be sent by USPS Express Mail, Federal Express, or any other method whereby it may be tracked and documented to have been received by the MAC.

V.  Filing for Reconsideration Appeal:

A provider may file for reconsideration appeal with the Qualified Independent Contractor (QIC) within 180 days of the date of receipt of a MAC’s redetermination decision letter. The date of receipt of the notice is presumed to be five calendar days after the date of the notice, unless there is evidence to the contrary.  You should ensure that your request for reconsideration addresses each reason why you contend the MAC’s redetermination decision was incorrect. Additionally, the request for reconsideration appeal should clearly set out the provider’s arguments in support of payment. Finally, it is imperative that all relevant supporting documentation and arguments to be asserted should be forwarded to the QIC as part of the provider’s request for reconsideration appeal. The failure to forward supporting documentation to the QIC will likely result in the information being excluded from consideration at the ALJ level of appeal unless “good cause” for admission is shown.

VI.  Filing for ALJ Appeal:

A health care provider (or his or her representative) must request an ALJ hearing within 60 days of the QIC’s reconsideration decision. Always keep in mind that the court will be conducting a de novo review. In other words, the judge will review the entire record and is not bound by previous decisions, even if those rulings are in your favor.  It is essential that a request for an ALJ hearing be filed in a timely fashion. It is extraordinarily difficult to show “good cause” for a late filing.

VII.  Final Remarks Regarding the Medicare Administrative Appeal Process:

The administrative appeal process grows more complicated each year.  We strongly recommend that you obtain professional assistance if your alleged overpayment is substantial.  For more information on the timing of an appeal, please review the Liles Parker “ZPIC Audit and Appeals Process” Chart. Click here: ZPIC Audit and Appeal Process Chart

Robert W. Liles defends health care providers in Medicare auditsRobert W. Liles, J.D. serves as Managing Partner at Liles Parker, Attorneys & Counselors at Law.  Mr. Liles has extensive experience representing health care providers and suppliers in Medicare administrative appeal actions.  For a free consultation on your case, give us a call.  We can be reached at:  1 (800) 475-1906.

Health Data Insights Begins Medical Necessity Reviews

Health Date Insights is Conducting Medicare Audits, Focusing on Medical Necessity Issues(August 30, 2010): Health Data Insights (HDI), the Centers for Medicare & Medicaid Services (CMS) Recovery Audit Contractor (RAC) responsible for auditing health care providers in Region D, has announced it will immediately begin reviews on previously approved projects which involve the medical necessity of selected inpatient DRG payments.  A complete list of the medical necessity “issues” currently being examined by HDI can be found on its Website.



I.  Scope of Responsibility:

RACs, such as HDI, contract with the CMS to perform post-payment reviews of Medicare claims to find overpayments (and theoretically, underpayments in return for a percentage (from 9 percent to 12.5 percent) of the amounts recovered. Put simply, they “eat what they kill.” HDI was awarded responsibility for handling Region D audits.  Region D consists of 17 States and 3 U.S. territories (Alaska, Arizona, California, Hawaii, Iowa, Idaho, Kansas, Missouri, Montana, North Dakota, Nebraska, Nevada, Oregon, South Dakota, Utah, Washington, Wyoming, Guam, American Samoa and Northern Marianas).  HDI’s contingency fee contract award dollar amount is 9.49% according to CMS.  The 29 DRGs where HDI will be examining “medical necessity” requirements, include certain procedures related to:

  • Nervous System Disorders

  • Respiratory

  • Cardiac Procedures

  • Cardiovascular Diseases

  • Cardiovascular, Other

  • Gastrointestinal Disorders

  • Musculoskeletal Disorders

  • Endocine, Nutritional & Metabolism Disorders

  • Kidney & Urinary Tract Disorders, and

  • Blood & Immunological Disorders

II.  Provider Concerns:

A continuing concern of health care providers is that the RAC determinations of medical necessity will be performed by personnel with little, if any, specific knowledge of the specific claims at issue. Given the RAC business model, providers remain worried that audits will not reflect a fair and reasonable application of applicable coverage requirements. This is especially worrisome in light of the fact that approximately 41 percent of overpayments in the demonstration project were due to medical necessity determinations.

III. Audit and Appeal Considerations:

As set out CMS’ June 2010 reported entitled “The Medicare Recovery Audit Contractor (RAC) Program — Update to the Evaluation of the 3-Year Demonstration,” as of 03/09/10, the cumulative number of claims with overpayment determinations identified by RACs has grown to 598,238.  Notably, only 76,073 of these overpayments were appealed by health care providers.  Of the claims appealed, over half were decided in favor of the health care provider.  Interestingly, HDI had one of the highest number of claims denials overturned on appeal, in favor of the appealing provider. Four basic steps to be taken when preparing for a RAC audit include:

(1)  Monitor issues of interest to the government and its contractors.  Are the services you provide currently under scrutiny by RACs and other Medicare contractors?  You should keep abreast of current enforcement initiatives and mistakes made by other providers.  Learn from their mistakes. 

(2)  Know where your current weaknesses are and fix them.  This typically requires that you conduct an internal audit of your coding, billing and operational practices.  Take care when engaging an outside “consultant.”  We have seen numerous cases where the consultant conducts an internal assessment and identifies multiple problems with the provider’s prior and current practices. Unfortunately, few consultants consider the fact that their adverse report to the provider will likely not be privileged.  As a result, if the provider is ever investigated, the report could easily serve as a roadmap for the government. Prior to conducting an internal audit – call your attorney!   

(3)  Know your rights. If your practice is audited, know your rights both during the audit and once the audit results are issued by the contractor.  There is a fine line between exercising your rights as a provider and being perceived by a contractor as refusing to cooperate in their review.  You should immediately call your attorney to clarify which actions must be taken if your practice is subjected to a site visit by a Medicare contractor.  The best practice would be for you to call your attorney today and discuss how you should respond in the event of a site visit.  CMS takes allegations of non-cooperation very seriously.  Should the contractor argue that you refused to cooperate in their efforts, you could find the action taken by the contractor is to seek a revocation of your Medicare number.  This is an especially sensitive issue.

(4)  Have a firm understanding of how the Medicare appeals process works.  Depending on the amount in controversy, you may choose to handle Medicare claims denials internally.  As the use of data-mining increases, Medicare contractor reliance on provider profiling will continue to increase.  While mere errors or mistakes should be returned to the government (or not appealed is properly denied by the contractor), should you find that claims were improperly denied, we recommend that you appeal such denials. RACs and other Medicare contractors will likely focus on providers with high error rates. 

While every case is different, health care providers should consider the following when faced with a RAC audit:

  • The scope of RAC audits is expanding.  In the past, hospitals and other “low-hanging fruit” were the focus of HDI and other RACs around the country.  As a result, some physicians, small practice groups, clinics and other smaller providers have grown complacent in their compliance efforts.  This is a mistake, as more issues are identified and approved, the RACs will be expanded the scope of their reviews.  Now is the time to get your practice in order.
  • ZPICs and PSCs continue to represent a greater danger to small physician practices and health care provider groups. Zone Program Integrity Contractors (ZPICs) and Program SafeGuard Contractors (PSCs) are not subject to the time, audit and service scope limitations imposed on RACs.  The implementation of effective compliance efforts will help reduce the likelihood of liability should the practice be audited by a ZPIC, PSC or RAC.
  • Beware of “canned” consultant solutions.  As a search on Google will readily attest, consulting firms around the country are touting the latest RAC audit “tool” or audit response “template.”   We recommend that you exercise caution when retaining any organization that “guarantees” results or seeks to dissuade you from engaging legal counsel support.
  • Retain experienced health care counsel. Under the current appeal structure, there is a significant likelihood that your case will eventually be heard by an Administrative Law Judge (ALJ).  Importantly, ALJs are lawyers — not typically clinicians.  In defending your case, it is strongly recommended that you retain legal counsel, regardless of whether you ultimately decide to work with a consultant or employ a clinician as an expert witness.  Legal counsel will be best situated to understand and argue the various legal arguments which may prove essential in winning your case.

While RACs have not represented much of a threat to individual physicians and small practice groups in the past, the future is likely to be quite different.  Physicians must already contend with audits by ZPICs, PSCs, Medicaid Integrity Contractors (MICs), Medicaid Fraud Control Unit (MFCU) investigators and Comprehensive Error Rate Testing (CERT) contractors.  The expansion of the RAC program will further increase the need for statutory and regulatory compliance.  Physicians and small practice groups and organizations should avoid the misconception that their limited size and / or relative billings will keep them “off the radar,” thereby limiting their chances of being audited.

IV.  ZPICs and PSCs are Continuing to Rely on Statistical Sampling in an Effort to Extrapolate Damages:

In our practice, we have seen a marked increase in the number of solo physicians and small providers groups who have been subjected to pre-payment and post-payment audits of their Medicare billings.

In the case of post-payment reviews, the vast majority of Medicare audits we have worked on have included the statistical extrapolation of damages by ZPICs and PSCs.  We expect RACs to follw suit as the number of their audits increase.  In defending a post-payment audit, it is essential that you examine the statistical methodology utilized and identify any flaws in the contractor’s approach.  We have successfully convinced both Qualified Independent Contractors (QICs) and ALJs to invalidate statistical extrapolations based on mistakes in the process committed by the ZPIC or PSC.  Arguments can be legal and / or methodology-based.  In many cases, it is necessary to engage the assistance of a qualified statistical expert.  Should you succeed – be ready to defend this decision before the Medicare Appeals Counsel (MAC).  Over the past year, practically every invalidation of the statistical extrapolation of damages was appealed to the MAC by the Administrative QIC (AdQIC).

V.  Summary:

Health care providers must be proactive in their efforts to better comply with applicable Medicare coding and billing practices.  Should your practice be placed on pre-payment audit or have its post-payment Medicare claims reviewed, we recommend that you immediately contact your health care attorney for assistance.

Should you have questions regarding RAC, ZPIC or PSC audit processes, you may contact us for a complimentary consultation.  We can be reached at 1 (800) 475-1906.

Region B RAC CGI Announces that it will Begin Review of Eighteen Projects that Involve Medical Necessity

CGI Has Been Awarded a RAC Contract(August 25, 2010): CGI Technologies and Solutions, Inc., (CGI), has announced it will immediately begin reviews on 18 newly approved projects that involve the medical necessity of selected inpatient DRG payments.  A complete list of the “issues” currently being examined by CGI can be found on its website. Recovery Audit Contractors (RACs), such as CGI, contract with the Centers for Medicare & Medicaid Services (CMS) to perform post-payment reviews of Medicare claims to find overpayments and underpayments in return for a percentage (from 9 percent to 12.5 percent) of the amounts recovered. Put simply, they eat only what they kill.  CGI was awarded responsibility for handling Region B audits.  CGI’s contingency fee contract award dollar amount is 12.50% according to CMS.  Issues where CGI will be examining “medical necessity” requirements, include certain procedures related to:

  • Chest Pain

  • Other Circulatory System Diagnoses

  • Other Vascular Procedures

  • Syncope & Collapse

  • Red Blood Cell Disorders

  • Atherosclerosis

  • Heart Failure & Shock

  • Esophagitis, Gastroenteritis & Misc Digestive Disorders

  • Musculoskeletal Disorders

  • Chronic Obstructive Pulmonary Disease

  • Respiratory

  • Nutritional and Metabolic Disorders

  • Kidney & Urinary Tract Infections

  • GI Disorders

  • Percutaneous Cardiovascular Procedures

  • Renal Failure

  • Nervous System Disorders and

  • Cardiac Arrhythmia & Conduction Disorders.

 As CGI’s website discusses, when asked What utilization criteria will CGI be using to review for medical necessity?” in its FAQ section, CGI states, CGI will utilize the rules for National Coverage Determinations (NCD), Local Coverage Determinations (LCD), HCPCS, ICD-9 (ICD-10 when implemented and appropriate) and CCI that were in effect on the date of service. 

 A continuing concern of providers is that the RAC determinations of medical necessity will be  performed by personnel with little, if any, specific knowledge of the specific claims at issue.  Given the RAC business model, providers remain worried that audits will not reflect a fair and reasonable application of applicable coverage requirements. This is especially worrisome in light of the fact that approximately 41 percent of overpayments in the demonstration project were due to medical necessity determinations.

 Should you have questions regarding the RAC process, you may contact us for a complimentary consultation.  We can be reached at 1 (800) 475-1906.

Questions to Ask Your Lawyer When Defending an Overpayment Case Where Extrapolation has Occurred.

July 20, 2010 by  
Filed under Home Health & Hospice

What Questions Should You Ask Your Attorneys in an Extrapolation Case?(July 20, 2010): In recent years, we have seen agents for the Centers for Medicare & Medicaid Services (CMS) increasingly rely on statistical extrapolation estimates when assessing claims overpayments. In early cases, attorneys successfully invalidated countless extrapolations by identifying relatively basic reasons for why the calculations were inconsistent with accepted statistical principles and practices.  Now, however, providers should expect for ZPICs and PSCs (and soon, RACs) to send a team of statisticians and attorneys to vigorously oppose most (if not all) hearings challenging the validity of the extrapolation calculation.

Regardless of whether you are providing Partial Hospitalization, Evaluation and Management (E/M), Home Health, Physical Therapy, Surgical, or other services, should your practice or clinic find that it is facing an extrapolated Medicare audit, it is strongly recommended that you engage qualified, experienced counsel to represent you as early in the process as possible.  Your legal counsel can then engage an expert statistician to assess the contractor’s actions and assist with the attorney’s efforts to have the extrapolation thrown out by either the Qualified Independent Contractor (QIC) or the Administrative Law Judge hearing your case.

Before you engage counsel, you should consider asking the following questions:

  • Has the attorney ever handled large, complex contractor audits before? Some firms will happily take your case, despite the fact that they have little or no experience in this area of health law. Don’t pay for your attorneys to learn how to handle a case. While every case is different, an experienced firm will have developed a number of arguments and defenses that may be readily used in your case without having to conduct costly, extensive legal research.
  • Can the firm provide client references who are willing to speak with you about the quality of work performed on their Medicare statistical extrapolation case?
  • Who will be working on your case? Will it be an inexperienced Associate attorney or one of the partners who has actually fought and won a multitude of Medicare overpayment claims and cases where the damages have been extrapolated by the contractors?
  • What are the credentials of the attorneys and paralegals who will be working on your case? Have they ever worked on the side of the government? One of our attorneys served as an Assistant U.S. Attorney for many years, ultimately being selected to serve as the First National Health Care Fraud Coordinator for the Department of Justice, Executive Office for U. S. Attorneys. In addition to a law degree, he also holds a Master’s in Health Care Administration. To fully appreciate the challenges faced by health care providers, you need an attorney who understands both the legal constraints and the practical business risks faced by health care providers.

In several of the cases we have handled, the alleged error rate has exceeded 90%.  With the resulting alleged damages often in the millions of dollars, few providers are in a position to merely pay such an overpayment.  Instead, they need experienced counsel to aggressively fight to have this overpayment overturned.  When defending these cases, it is essential that you challenge both the denial of claims and the extrapolation itself.

Should you have any questions regarding these issues, don’t hesitate to contact us.  For a complementary consultation, you may call Robert W. Liles or one of our other attorneys at 1 (800) 475-1906.


Providers Should Exercise Caution When Handling Overpayments — More Than Likely, You Can’t Keep It, Even if the Payor Doesn’t Want it Back!

July 15, 2010 by  
Filed under Home Health & Hospice

Providers Must Exercise Caution When Handling Medicare overpayments(July 15, 2010): When handling Medicare overpayments, providers must exercise caution.  Since the May 2009 passage of the Fraud Enforcement and Recovery Act (FERA) and subsequent enactment of the Affordable Care Act (ACA), we’ve heard a lot about how the government looks at Medicare overpayments and how providers should handle them.  Prior to the clarification and statutory reinforcement of the “overpayment” issue provided under the ACA, a number of providers have mistakenly believed that in the absence of a direct demand for repayment, an identified overpayment would belong to the provider.  Notably, this issue is not new.  In fact, the recent enacted provisions have merely reinforced the government’s long-standing position that a provider has a responsibility to voluntarily refund Medicare overpayments without an overpayment determination being made by the government.

I. The Rules on Handling Medicare Overpayments Have Been in Place a Long Time:

As you will recall, the agreement to return any overpayments is fundamental to a provider’s eligibility to participate in the Medicare program.  Section 1866(a)(1)(C) of the Social Security Act (42 U.S.C. § 1395cc) requires participating providers to furnish information about payments made to them and to refund any monies incorrectly paid.  Implemented in 2006, the Medicare Credit Balance Report (CMS-838) is designed to ensure timely compliance with this obligation.

Secondly, ACA Section 6402 echoes the requirements of CMS’ 2002 proposed rule that providers “must, within 60 days of identifying or learning of the excess payment, return the overpayment to the appropriate intermediary and carrier, at the correct address, and notify the intermediary and carrier, in writing, of the reason for the overpayment.”  (67 Fed. Reg. 3662 (January 25, 2002)).  A conservative reading of that proposed rule arguably suggested that HHS-OIG’s voluntary disclosure protocol may not be “voluntary” after all but a mandatory repayment may be required.  Thus, the government has long sought to clarify when, not if, overpayment refunds would be required.

Despite the publicity resulting from PPACA and its FCA implications, it is important to remember that this issue was addressed over a decade ago.  As set out in the 1998 holding in United States v. Yale University School of Medicine, Civil Action No. 3:97CV02023 (D.Conn.), the government intervened in a qui tam and obtained $1.2 million settlement based on alleged FCA violations for failing to return credit balances.  In summary, providers who fail to promptly (within 60 days of identification) return an overpayment to the government do so at their own peril.

II.  Handling Non-Federal Overpayments:

As an aside, even if the overpayment at issue is not owed to a Federal payor (such as Medicare or Medicaid), it is imperative to remember that virtually no overpayments belong to a provider.  In the case of non-Federal payors (such as a private insurance company), we are aware of numerous instances where the non-Federal payor has notified the provider that due to the administrative burden of applying an overpayment to a beneficiary’s account (typically due to the complexity of the payment history), the non-Federal payor has chosen to either “waive” collection of an overpayment or not to cash a check sent by the provider.  This also regularly occurs when the identified overpayment is under a certain amount (such as $25.00).  When faced with such a situation, a provider must review applicable State law to ascertain how an overpayment must be handled.  For instance, in Texas, Title 6 of the Property Code requires businesses and other entities holding unclaimed property to turn the property over to the Texas Comptroller’s Office after the appropriate abandonment period has expired.  As in most States, violation of these escheat laws can subject a provider to various penalties.

III. Conclusion:

The lesson to be learned here is quite clear – regardless of who the payor is, an overpayment can rarely, if ever, properly be retained by a provider, regardless of the amount in controversy.  A provider must carefully examine both Federal and State statutes when faced with this issue.  The best practice is to return an overpayment to the payor (Federal, State, or private patient), regardless of the amount, upon identification.  Should a provider be unable to identify who is owed an overpayment or cannot locate a valid address to return the overpayment (due to a variety of factors), your State’s escheat law must be considered.

This can be a complicated issue, especially when a large overpayment has been identified and it is owed to a Federal payor.  While time is of the essence, it is strongly recommended that you contact your legal counsel as soon as it appears that a potential large or complicated Federal overpayment has been found.  Your attorney can help guide you through this complex process.

Should you have any questions regarding these issues, don’t hesitate to contact us.  For a complementary consultation, you may call Robert W. Liles or one our other attorneys at 1 (800) 475-1906.

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