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Medicare Audits by ZPICs, MACs, RACs and CERTs

Medicare Audits by Various CMS Contractors are Currently Underway.Under the Medicare Prescription Drug, Improvement and Modernization Act of 2003, CMS transferred Program Safety Contractor’s (PSC’s) fraud detection and deterrence functions to Zone Program Integrity Contractors (ZPICs).  In recent years, most of the significant Medicare audits conducted have been handed by ZPICs.




I.  Zone Program Integrity Contractors (ZPICs):

ZPICs detect, deter, and prevent fraud, waste, and abuse in the Medicare program.  ZPICs, unlike RACs, are not paid on a contingency fee basis, instead they compete for one of the few ZPIC contracts that are awarded periodically. They are also eligible to receive performance bonuses. ZPIC auditors are not limited to only auditing claims paid in recent years or on the number of claims that may be audited. There is also no limit on the amount of documents a ZPIC may request.  For a more detailed discussion of the ZPIC audit process, please see: ZPIC Audits.

II.  Recovery Act Contractors (RACs):

Historically, most of the Medicare audits conducted by Recovery Act Contractors (RACs) have been focused on hospitals and large medical centers.  RACs identify and correct improper payments through the detection and collection of overpayments made on health care claims for services provided to Medicare beneficiaries. RACs are paid on a contingency fee based on the amount of Medicare reimbursement recovered from providers’ “improper” payments.

III.  Medicare Administrative Contractors (MACs):

MACs identify potential improper claims submitted to Medicare for payment. MACs, like RACs and ZPICs, are tasked with detecting and deterring fraud. In addition, MACs are responsible for processing and paying Medicare claims and educating providers about appropriate billing methods.

IV.  Comprehensive Error Rate Testing (CERT): 

The Comprehensive Error Rate Testing (CERT) program was implemented as a mechanism for the Centers for Medicare and Medicaid Services (CMS) to assess whether their Medicare Administrative Contractors (MACs) are properly paying claims.  In other words, is a particular MAC failing to identify and deny improper claims?  Alternatively, is the MAC denying claims which do, in fact, qualify for coverage and payment? Essentially, the CERT program serves as an integral management tool for CMS as well as an important feedback mechanism for the MACs. When problem areas are identified, they can be actively addressed by a wide variety of Medicare contractors with audit responsibilities.  Notably, several of the MACs around the country have been aggressively reasserting their roles in the corrective action process

V.  Audits:

ZPICs, RACs, and MACs conduct prepayment reviews. ZPICs, RACs, MACs, and CERTs conduct postpayment audits.

  • Prepayment Reviews.

After conducting a probe audit of a provider’s Medicare claims, a MAC or ZPIC may place a provider on “Prepayment Audit,” also sometimes referred to as “Prepayment Review.”  Prior to beginning provider-specific review, MACs and ZPICs should notify providers through written communication.

RACs conduct prepayment reviews under the “RAC Pre-Payment Review Demonstration” on certain types of claims that historically result in high rates of improper payment.  RAC pre-payment reviews focus on eleven states:

  • FL, CA, MI, TX, NY, LA, IL, which have high amounts of fraud and error-prone providers, and

  • PA, OH, NC, MO, which have high claims volumes of short inpatient hospital stays.

RACs are required post a description of all approved new issues on their website before sending correspondence to the provider about a specific investigation.

MACs, ZPICs, and RACs all may request additional documentation from providers.

There is no administrative appeals process for Pre-Payment review, but there are strategies that may be utilized by a provider to assist in keeping the time period on a pre-payment review at a minimum.

  • Postpayment Audits:

Post-Payment Audits are audits conducted after the Medicare claims have already been paid by the government. Contractors strictly apply coverage requirements and therefore it is not unusual for them to find that a provider failed to comply with each and every requirement. Depending on the nature of the initial sample, a Contractor may extrapolate the damages in a case, which significantly increases the alleged overpayment. Contractors extrapolate the damages to effectively claim that the “sample” of claims audited are representative of the claims at issue in an audit.

  • Appeals:

Medicare providers can contest payment denials (whether pre-payment or post-payment) through a four-level appeals process within HHS. Each level is governed by specific time frames in which a decision must be rendered following receipt of the appeal. At the third level of the appeals process, providers have a right to have their claims reviewed by an Administrative Law Judge (ALJ) within the HHS Office of Medicare Hearings and Appeals (OMHA). ALJs are statutorily required to hold a hearing and render a decision within ninety (90) days from a provider’s filing of its appeal with OMHA.

If you have been audited by one of these contractors, it is imperative that you hire experienced legal counsel to assist you in this complicated and time-consuming process.

Liles Parker has attorneys experienced with Medicare audits and appeals. Call today for a free consultation: 1 (800) 475-1906.