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We Defend Healthcare Providers Nationwide in Audits & Investigations

Medicaid RACs to Increase Enforcement Efforts

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

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

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

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

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

 

Medicaid RAC Program Up and Running – 26 States Award RAC Contracts

The Medicaid RAC Program is Up and Running!(April 11, 2012): At a conference last week in Baltimore, Angela Brice-Smith, Acting Director of the Centers for Medicare & Medicaid Services (CMS) Medicaid Integrity Group,  stated that 26 states have awarded contracts under the Medicaid RAC program, and a quarter of those states’ Medicaid RACs are now reviewing claims.  Ms. Brice-Smith added that CMS has allowed exceptions for all territories and several states, such as those with low Medicaid payment error rates for a year or two.  Otherwise, all of the remaining states should be in the process of awarding contracts to implement the Medicaid RAC program.

 

I.  Background of the Medicaid RAC Program:

As background, the Affordable Care Act mandated that states contract with Medicaid RACs to review and identify over and under payments under the Medicaid program and to recoup overpayments.  CMS published proposed rules on Medicaid RACs in November 2010 (see HHS Releases Proposed Rules on Medicaid RACs, Nov. 30, 2011), under which states were required to implement their programs by April 2011.  In February 2011, CMS delayed the implementation date.  However, in September 2011, CMS published final rules that became effective January 1, 2012.  While not all states have begun their Medicaid RAC programs as of today, except for the few states that have received waivers of the January 1 deadline, we can anticipate that the remaining states will be working to implement these programs in the near future.

Unlike the Medicare RAC program, the final rules leave substantial flexibility to the individual states on how they implement their Medicaid RAC programs.  They are required to identify over and under payments, and are required to recoup overpayments.  However, it is left to the states whether to refund underpayments that the Medicaid RACs identify, although the regulations require that Medicaid RACs notify providers of these underpayments and the preamble commentary encourages states to refund underpayments consistent with state law.

II.  Issues to Consider With Respect to the Medicaid RAC Program:

In the past, Liles Parker attorneys have assisted providers and a state trade association comprised of providers to obtain modifications to a program that was similar to the current Medicaid RAC program and to appeal attempted recoupments under the state appeals process.  For example, where the Medicaid RAC identified claims that it believed should have been made on an outpatient instead of inpatient basis, the state recovery practice was modified to permit the provider to rebill the state for payment at the outpatient rates even if the time for filing outpatient claims had expired.  We strongly recommend that providers and their state associations engage the state in structuring the program as early as possible. Possible issues that could arise will include:

  • The qualification of reviewers

  • The number of records that can be requested during any particular period

  • The types of claims that can be reviewed

  • Whether there will be advance approval and notice of the issues that will be reviewed – especially with respect to medical necessity reviews

  • The nature and timing of any reconsideration process.

A myriad of other issues may also come up.  In this vein, we found it extremely helpful for providers to quantify the costs of complying with the initial process, which was helpful in convincing the state to make certain modifications in several of these areas.

In these discussions, it is also helpful to understand the degree to which the state currently underfunds Medicaid provider payments.  It may be helpful both for individual providers and their trade associations to remind the agency of the potential need to seek an increase in these provider rates to account for the additional administrative costs generated by unnecessary or unreasonable Medicaid RAC processes – at least as a potential bargaining chip.  While the CMS final rules impose some requirements on this process (e.g. the retention by the Medicaid RAC of 1 FTE physician to serve as medical director), the final rule provides the states substantial discretion in these areas.

III.  Other Considerations for the Medicaid RAC Program:

Additionally, providers should be prepared to respond quickly to identified overpayments and underpayments.  This includes developing a process to ensure that there is one person or group with responsibility to respond to record requests, that there is an internal process to respond for purposes of providing clinical justifications and additional documentation, and that there is a process for analyzing recouped payments to appeal under the state’s appeal process where warranted, including the identification of attorneys to assist where cost-effective and appropriate, and the incorporation of any weaknesses identified into the provider’s internal compliance and quality assurance processes.

The key to minimizing unnecessary adverse results is educating both clinical and administrative  staff and developing key processes to minimize adverse findings and to respond to those findings – both internally and externally.  This includes processes to determine whether and how to appeal recoupments, and where appropriate, engage in a constructive dialogue with the state and Medicaid RAC contractor in the development and modification of the process.

Liles Parker attorneys have extensive experience in working with providers and their associations on matters of this nature, including responding to adverse findings through the appeals process, providing assistance in negotiating with states and commenting on rules implementing the process, and advising clients on revising their compliance programs in response to these audits. For a free consultation, contact Michael Cook at (202) 298-8750. 

Top Ten Health Care Compliance Risks for 2011

Compliance Risk(December 31, 2010):  In case you missed it, Congress, President Obama and the healthcare regulators had a banner year with respect to regulatory activism in 2010.  Over the next several weeks we will be releasing a series of articles on our website addressing the compliance risk areas facing your organise dramatic changes and the compliance risks they present for your practice, clinic or health care business in 2011:

 

Compliance Risk Number 1:  Increased “HEAT” Activity and Enforcement:

Perhaps the greatest risk to consider in 2011 is the increase in targeted health care fraud enforcement efforts by the government’s Health Care Fraud Prevention and Enforcement Action Team (HEAT).  These teams are comprised of top level law enforcement and professional staff from the U.S. Department of Justice (DOJ), the Department of Health and Human Services (HHS), and their various operating divisions.  HEAT team initiatives have been extraordinarily successful in coordinating multi-agency efforts to both prevent health care fraud and enforce current anti-fraud initiatives.

As DOJ noted in September 2010, over the previous Fiscal Year, DOJ (including its 94 U.S. Attorneys’ Offices), HHS’ Office of Inspector General (HHS-OIG), and the Centers for Medicare and Medicaid Services (CMS), jointly accomplished the following:

  • Filed charges against more than 800 defendants.
  • Obtained 583 criminal convictions.
  • Opened 886 new civil health care fraud matters.
  • Obtained 337 civil administrative actions against parties committing health care fraud.
  • Through these efforts, more than $2.5 billion was recovered as a result of the criminal, civil and administrative actions handled by these joint agencies. 

President Obama’s FY 2011 budget request includes an additional $60.2 million in funding for the HEAT program.These funds will be used to establish additional teams and further fund existing investigations. Now, more than ever, it is imperative that you ensure that your Compliance Plan is both up-to-date and fully implemented.  Medicare providers are obligated to adhere to statutory and regulatory requirements and the government’s HEAT teams are aggressively investigating providers who fail to comply with the law.

Compliance Risk Number 2:  Zone Program Integrity Contractor (ZPIC) / Program SafeGuard Contractor (PSC) / Recovery Audit Contractor (RAC) Audits of Medicare Claims:

As you already know, private contractor reviews of Medicare claims are big business – one ZPIC was awarded a five-year contract worth over $100 million.  In 2011, we  should expect to see:

  • The number of ZPIC / PSC / RAC audits of Physician Practices, Home Health Agencies, Hospice Companies, DME Suppliers and Chiropractic Clinics will greatly increase in 2011.

  • The reliance of both contractors and the government on data mining will continue to grow.  Providers targeted will likely be based on utilization rates, prescribing practices and billing / coding profiles.

  • An increase in the number of Administrative Law Judge (ALJ) hearings in where ZPIC representatives choose to attend the hearing as a “participant.”  In these hearings, the ZPIC representative will likely aggressively oppose any arguments in support of payment that you present.

Are you ready for an unannounced / unanticipated site visit or audit?  When is the last time that you have conducted an internal review of your billing / coding practices?  Are you aware of the hidden dangers when conducting these reviews?  In 2011, your Compliance Officer may very well be your most important non-clinical staff member.  Physicians and other providers should work with their Compliance Officer to better prepare for the unexpected audit or investigation.

Compliance Risk Number 3: Electronic Medical Records:

Unfortunately, some early adopters of Electronic Medical Records (EMR) software are now having to respond to “cloning” and / or “carry over” concerns raised by ZPICs and Program SafeGuard Contractors (PSCs).  In a number of cases, these audits appear to be the result (at least in part) of inadequately designed software programs which generate progress notes and other types of medical records that do not adequately require the provider to document individualized observations.  Instead, the information gathered is often sparse and similar for each of the patients treated.  Take care before converting your practice or clinic to an EMR system.  Include your Compliance Officer in the selection and review process.

Compliance Risk Number 4:  Physician Quality Reporting Initiative (PQRI) Issues:

Under the Health Care Reform legislation passed last March. PQRI was changed from a voluntary “bonus” program to one in which penalties will be assessed if a provider does not properly participate.  As of 2015, the penalty will be 1.5% and will increase to 2.0% in 2016 and subsequent years. Additionally, questions about the use of PQRI date in “Program Integrity” targeting remain unanswered.  Once again, it is essential that your Compliance Officer provide guidance to your staff regarding this program and its potential impact.

Compliance Risk Number 5:  Medicaid Integrity Contractors (MICs)  and Medicaid Recovery Audit Contractors (MDRACs):

In recent months, we have seen a marked increase in the number of MIC inquiries and audits initiated in southern States.  Notably, the information and documentation requested has often been substantial.  Medicaid providers must now also contend with MDRACs.  As a result of health care reform, MDRACs are now mandatory in every State and are may initiate reviews and audits as soon as March 2011.   Compliance Officers should review their current risk areas and ensure that Medicaid coding and billing activities are actively monitored to better ensure statutory / regulatory adherance.

Compliance Risk Number 6:  HIPAA / HITECH Privacy Violations:

Failure to comply with HIPAA can result in civil and / or criminal penalties. (42 USC § 1320d-5).

  • Civil Penalties – A large retail drug store company was recently fined $2.25 million for failure to properly dispose of protected information.

  • Criminal Penalties – Earlier this year, a physician in Los Angeles, CA, was sentenced to four months in prison after admitting he improperly accessed individual health information.

As of mid-2010, there had been 93 breaches affecting 500 or more individuals.  The total number of individuals whose information was disclosed as a result of these breaches was estimated at over 2.5 million.  Out of the 93 breaches, 87 involved breach of hard copy or electronic protected health information (about 1/4 involved paper records and 3/4 involved electronic records. The vast majority of the 93 breaches involved theft or loss of the records.  Many of these thefts could have been avoided with appropriate security.  The government is serious about privacy and your practice, and in 2011 you will likely see increased HIPAA / HITECH enforcement.  Your clinic or health care business must take appropriate steps to prevent improper disclosures of health information.

Compliance Risk Number 7:  Increased Number of Qui Tams Based on Overpayments:

Section 6402 of the recent Health Care Reform legislation requires that all Medicare providers, (a) return and report any Medicare overpayment, and (b) explain, in writing, the reason for the overpayment.

This law creates a minefield for physicians and other Medicare providers.  First, providers have only 60 days to comply with the reporting and refund requirement from the date on which the overpayment was identified or, if applicable, the date any corresponding cost report is due, whichever is later.  Of course, the legislation does not actually explain what it means to “identify” an overpayment.

From a “risk” standpoint, this change is enormous.  Disgruntled employees try to file a Qui Tam  (“whistleblower”) lawsuit based on a provider’s failure to return one or more Medicare overpayments to the program in a timely fashion.  While the government may ultimately choose not to intervene in a False Claims Act case based on such allegations, a provider could spend a significant amount defending the case.  Providers should ensure that billing personnel understand the importance of returning any overpayments identified as quickly as possible.

Compliance Risk Number 8:  Third-Party Payor Actions:

Third-party (non-Federal)  payors are participating in Health Care Fraud Working Group meetings with DOJ and other Federal agents.  Over the last year, we have seen an increase in the number of “copycat” audits initiated by third-party payor “Special Investigative Units” (SIUs).  Once the government has announced the results of a significant audit, the third-party payor considers the services at issue and reviews whether it may have also been wrongly billed for such services.  If so, their SIU opens a new investigation against the provider.

Compliance Risk Number 9:  Employee Screening:

With the expansion of the permissive exclusion authorities, more and more individuals will ultimately be excluded from Medicare.  As we have seen, HHS-OIG is actively reviewing whether Medicare providers have employed individuals who have been excluded.  In one recent case, HHS-OIG announced that it had assessed significant civil monetary penalties against a health care provider that employed seven individuals who the provider “knew or should have known” had been excluded from participation in Federal health care programs. These individuals were alleged to have furnished items and services for which the provider was paid by Federal health care programs.  All providers should periodically screen their staff against the HHS-OIG and GSA databases to ensure that their employees have not been excluded from participation in Federal Health Benefits Programs.

Compliance Risk Number 10:  Payment Suspension Actions:

Last, but not least, we expect the number of payment suspension actions to increase in 2011.  In late 2010, Medicare contractors recommended to CMS that this extraordinary step be taken against providers in connection with a wide variety of alleged infractions.  Reasons given for suspending a provider’s Medicare number included, but were not limited to: (1) the provider failed to properly notify Medicare of a change in location, (2) the provider allegedly engaged in improper billing practices, and (3) the provider failed to fully cooperate during a site visit.

As each of these compliance risks reflect, health care providers are expected to fully comply with a wide myriad of Medicare and Medicaid statutory and regulatory requirements.  Moreover, the failure to meet these obligations can subject a provider to penalties ranging from suspension from the program to criminal prosecution.  Providers must take compliance seriously if they hope to thrive in 2011.

Robert W. Liles Healthcare AttorneyRobert W. Liles, J.D., represents healthcare providers and suppliers around the country in connection with Medicare and Private payor audits.  Liles Parker attorneys have extensive experience working on compliance related matters and defending providers in connection with allegations of one or more alleged violations of regulatory requirements. Should you have questions regarding these and other issues, give us a call for a free consultation.  We can be reached at 1 (800) 475-1906.

HHS Publishes Proposed Rules on Medicaid RACs

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

I. Overview of the Medicare RAC Program:

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

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

II.  Medicaid RAC Programs are Now Required by Law:

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

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

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

III.  Medicaid RAC Appeals:

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

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

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

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

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

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


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