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Prepayment Reviews and Audits of Medicare Claims are Ongoing. Are Your Claims Being Audited?

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Prepayment Review / Prepayment Audit

(January 19, 2021):  As you will recall, on March 30, 2020, the Centers for Medicare and Medicaid Services (CMS) suspended most Medicare audits and reviews due to the COVID-19 national emergency.  In early August, CMS instructed its contractors to resume their prepayment and postpayment audit activities. Over the last six months, we have seen a significant increase in the number of prepayment reviews initiated by Medicare Administrative Contractors (MACs) and other CMS contractors. It is therefore essential that home health agencies, physician practices and other health care providers and suppliers understand the prepayment review process and are prepared to appropriately respond to an document request if a MAC, a RAC or another CMS contractor initiates a prepayment audit of their claims.  This article provides an overview of the process and discusses ways of reducing your level of risk.

I. Legislative Background:

With the passage of the Medicare and Medicaid programs in 1965, the Centers for Medicare and Medicaid Services (CMS)[1] became authorized to perform a myriad of Medicare program functions, either directly or by contract. Moreover, on August 21, 1996, the Congress enacted the Health Insurance Portability and Accountability Act of 1996 (HIPAA).   Section 202 of HIPAA added section 1893 to the Social Security Act, thereby establishing the Medicare Integrity Program (MIP Program).  This legislation also permitted CMS to contract with eligible contractors to perform program integrity activities.

On December 8, 2003, Congress subsequently enacted the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA).  The MMA included a new subsection  regarding both random prepayment audits and non-random prepayment complex medical reviews.  Today, prepayment audits of Medicare claims are now conducted by MACs and other CMS contractors around the country.

II.  Reasons Providers are Targeted for Prepayment Review / Prepayment Audit:

Contrary to popular belief, CMS and its contractors do not conduct random a prepayment audit of health care providers.  As CMS expressly set out in the Federal Register:

“Although section 934 of the MMA sets forth requirements for random prepayment review, our contractors currently do not perform random prepayment review. However, our contractors do perform non-random prepayment complex medical review. We are cognizant of the need for additional rulemaking should we wish our contractors to perform random review.” [2]

As a result, if your practice or home health agency has been subjected to non-random prepayment complex medical review by a MAC, it is because of one or more reasons.  In most instances, prepayment reviews / prepayment audits are the result of data mining efforts used by CMS contractors to identify potentially inappropriately billed claims. The data mining runs may have been initiated by:

  • National or local claims data comparisons.
  • An analysis of utilization practices.
  • Beneficiary complaints.
  • Competitor complaints.
  • Department of Health and Human Services, Office of Inspector General (OIG)
  • Government Accountability Office (GAO) reports.
  • Department of Justice (DOJ) investigations.   

Regardless of the reason for review, once a CMS contractor conducts a data mining run and identifies a likelihood of sustained or high level of payment error, the contractor will typically place a health care provider on prepayment audit and immediately request supporting medical documentation in support of any claims submitted by the provider for payment.

III.  Types of Non-Random Prepayment Review:

There are a number of reasons that a MAC may place your practice or agency on prepayment review.  These reasons are outlined below.  Regardless of the reason for placing a Medicare provider or supplier on prepayment review, from an operational standpoint, the MAC installs an edit in the Fiscal Intermediary Standard System (FISS) which suspends a claim for medical review before the claim is paid by the contractor.  One the edit is put in place, the only way for it to be removed is for the provider or supplier to effectively show (through their submission of a claim’s supporting documentation), that the medical services or DME supplies at issue are medically necessary and qualify for coverage and payment.  An overview of the reasons for being placed on prepayment review / prepayment audit (along with a description of their associated edits) are outlined below:

Automated Edits.  Automated edits have been implemented to address systemic concerns regarding certain billing or claims practices and are not provider specific.  Once an improper practice is identified, MACs will go into their claims processing systems and install automated edits in the FISS so that certain claims are either automatically denied or are flagged for further review. [3]

New Provider/New Benefit Edits.  The billing practices of newly enrolled Medicare providers and suppliers are carefully monitored by MACs to help ensure that the claims being submitted qualify for coverage and payment.  To accomplish this monitoring function, MACs install a “new provider” edit in the FISS system that will then flag claims for prepayment review.  This same approach is used when Medicare is introducing a new benefit and CMS wants to better ensure that providers are meeting medical necessity, documentation, coding and billing requirements. [4].

Provider Specific Probe Edits  These edits select claims from a specific provider who has been identified as having a potential problem identified through their billing patterns, Medicare’s knowledge of service area abuses, and/or complaints received by Medicare. The provider is notified in writing that a probe review (sample of 20-40 claims) is being conducted. When the provider specific probe edits are complete, and it is found that there is a high incidence of inappropriate billing, a provider may be placed on targeted review.  Examples of provider specific billing patterns that may be targeted include:  (1) Through data analysis, a MAC has identified questionable billing practices by a specific provider (such as non-covered, incorrectly coded or incorrectly billed services); (2) A MAC receives alerts from other MACs, Quality Improvement Organizations (QIOs), Comprehensive Error Rate Testing (CERT) auditors, Recovery Audit Contractors (RACs), the OIG, the General Accounting Office (GAO), or other CMS program integrity contractor findings that support the need for further review; (3) A MAC receives complaints about a specific provider’s billing practices; or (4) A MAC validates that a specific provider is billing for services that have been associated with a high risk of payment error. [5].

Provider Specific Targeted Review (TR).  Once a provider is placed on targeted review status, a TR edit is installed in the FISS so that a certain percentage of claims will be pulled for prepayment review.  Once a provider is placed on targeted review, the period of review typically lasts for three months.  At the end of the three month period, if a MAC has determined that the provider’s claims meet medical necessity requirements, are properly documented, have been coded and billed correctly, the MAC may agree to remove the edit.  If a provider’s billing practices remain problematic, the edit will generally remain in place for another three months. It is important to keep in mind that if a provider is unable to to show its MAC that its claims practices are compliant for six months or more, the MAC may make a referral to a Unified Program Integrity Contractor (UPIC) for postpayment audit. [6][7].

Referral Edits. Referral edits are based on a referral from other entities, for example the state surveyor after identifying potential unusual billing patterns or practices. Providers are notified by letter when they have been placed on a referral edit. The source of the referral is not disclosed. 

Widespread Edits.  MACs regularly review claims with the greatest risk of inappropriate program payment, this includes areas that have been identified through data analysis. The following list provides examples of widespread edits but is not all inclusive:  (1) Length of stay or number of visits; (2) Revenue and/or HCPCS; (3) Diagnosis and may include ICD-9/ICD-10 codes in relation to revenue codes.

IV.  Considerations if Your Practice or Home Health Agency is Placed on Non-Random Prepayment Review:

Importantly, once a provider is placed is targeted for prepayment audit, it is highly unlikely that the claims edit will be lifted any time soon without significant work on your part.  Please keep in mind:

  • There is no “silver bullet” approach having a prepayment audit discontinued.
  • There is no administrative appeals process in which to contest the placement of your organization on prepayment audit.
  • Be wary of consultants who claim to “know someone” that can have you removed from prepayment status.

Once you have been placed on prepayment review, your first task is to figure out the reason why your claims were identified for audit.  Were you placed on prepayment review because of your utilization practices, documentation deficiencies or another reason? Ultimately, getting off of prepayment review is just plain hard work.

Over the years, our firm has been contacted by numerous providers whose approach consisted of “holding” their claims in the mistaken belief that the review would eventually be lifted, at which time they would submit their claims for payment.  You need to understand – health care providers are placed on prepayment review because a MAC or another CMS contractor has reason to believe (rightly or wrongly) that their claims are not in full compliance with applicable coverage, documentation, medical necessity, coding or billing rules. The best approach to having a prepayment review lifted is to carefully analyze each aspect of your claims, compare your practices with those set out in the applicable rules and correct any deficiencies.  Sounds simple doesn’t it?  Unfortunately, it can be quite difficult, depending on the types of claims involved.  Our firm has worked with a number of health care providers over the years, assisting them in getting removed from prepayment review and incorporating remedial steps into their Compliance Plan.

Robert Liles represents providers in prepayment review / prepayment audit actions.Robert W. Liles, JD, is Managing Partner at the health law firm, Liles Parker, PLLC.  With offices in Washington, DC, Houston, TX, and Baton Rouge, LA, our attorneys represent home health agencies, physicians and other health care providers around the country in connection with Medicare / Medicaid prepayment reviews, UPIC postpayment audits, Compliance Plan reviews and State licensing board actions.  Should you have any questions, please call us for a free consultation.  Robert can be reached at: 1 (800) 475-1906.   

[1] At the time of passage, the Health Care Financing Administration (HCFA) was responsible for the management of the Medicare and Medicaid programs.  In September 2001, the Secretary, Health and Human Services, Tommie Thompson, changed HCFA’s name to the Centers for Medicare and Medicaid Services
[2] Federal Register /Vol. 73, No. 188 / Friday, September 26, 2008 /Rules and Regulations, 55753.
[3] CMS Pub. 100-08, Ch. 3, §
[4] CMS Pub. 100-08, Ch. 3, §3.1B.
[5] CMS Pub. 100-08, Ch. 3, §3.2.2A.
[6] CMS Pub. 100-08, Ch. 3, §3.2.1.
[7] For an overview of the UPIC program, see our discussion at this link.

Preparing for a UPIC Audit? Examine These Eight Claim Elements

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Preparing for a UPIC Audit(Updated January 9, 2021):  Each year, our attorneys and paralegals review and assess literally thousands of Medicare claims which have been audited (and denied) by Unified Program Integrity Contractors (UPICs) and other contractors working for the Centers for Medicare and Medicaid Services (CMS).  Are you preparing for a UPIC audit?  If your Medicare or Medicaid claims haven’t already been audited by a UPIC, chances are that it will eventually happen. As UPIC audits increase during 2021, it is essential that health care providers and suppliers review their processes to better ensure that services and supplies billed to Medicare and Medicare fully comply with applicable coverage, coding and billing requirements.  While defending physicians and other health care providers in UPIC 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 “Eight 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 the Medicare and Medicaid programs.

I.  Assessing Your Claims — Preparing for a UPIC Audit:

A discussion of the eight elements which must be carefully assessed for each and every claim is provided below.  This is especially when you are preparing for a UPIC audit of the medical services or supplies you have billed to the Medicare and Medicaid programs.

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

Just because a certain treatment regime is medically necessary does not mean that it will be covered by Medicare or Medicaid.  We believe that this element constitutes the most important question to be answered by a provider.  Government payors only cover medically necessary services and supplies.

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 provided in order for those services to be billed and paid.  When you are preparing for a UPIC audit, as part of your internal auditing and monitoring, should you find instances where you cannot show that a medical service or piece of durable medical equipment was provided, you must return any funds that have been received.  Equally important, medical 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?

Remember, a UPIC is specifically instructed to detect and refer instances of fraud, waste and abuse. [1]  When you are preparing for a UPIC audit, your review of claims should not be limited to merely a review of the documentation.  You need to also examine your organization’s business relationship and business practices.  For example, is there any evidence that the service or supplies are 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? In recent years, we have see an increasing number of cases where otherwise payable claims were tainted due to the fact that the referring or servicing provider was excluded from participation in the Medicare or Medicaid programs. [2]  The bottom line is fairly straight-forward: it is insufficient to merely show that a claim appears to meet the government payor’s basic medical necessity, billing and coding rules. You need to also verify that the way the business was generated or referred was proper and not due to a statutory violation.

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 by Medicare or Medicaid.  It is important to keep in mind that a medical service or supplies 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 or a Medicaid plan participant, must be examined to see if it qualifies for coverage.

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 UPIC clinical reviewers of both Medicare and Medicaid claims are quick to state in hearings before an Administrative Law Judge (ALJ), “If it isn’t documented, it didn’t happen.”   When made during an ALJ hearing by a UPIC, 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.

UPIC 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 Medicare Administrative Contractor (MAC) and your Qualified Independent Contractor (QIC) agree with the UPIC’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.  It is very important that you show your clinicians that UPICs  enforce a strict application of Medicare’s documentation and coverage requirements.

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 Medicare or Medicaid;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.” [3] Conversely, if you don’t owe the money, don’t automatically throw in the towel.  Discuss these claims with our attorneys to determine if there may be other arguments in support of payment that may be asserted.  

II.  Final Considerations — UPIC Audits:

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” [4] 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.

Healthcare LawyerRobert W. Liles represents health care providers in UPIC Medicare and Medicaid audits. 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 Do you need help preparing for a UPIC audit? Call Robert for a free consultation: 1 (800) 475-1906.

[1] A detailed discussion of the UPIC audit process can be found at the following link.

[2]  For an overview of the impact of an “exclusion” action, please see Paul Wiedenfeld’s article titled “A Provider’s Guide to OIG Exclusions.”

[3] A detailed discussion of a provider’s repayment obligations when an overpayment has been identified can be found at this link.

[4]  For a detailed discussion on how to conduct a “GAP Analysis” of your health care claims, please see our page titled: “How to Conduct a GAP Analysis of Your Health Care Practice.”

CBRs for Spinal Orthoses (CBR201803): What Do You Need to Know?

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CBR201803(April 12, 2018): The Centers for Medicare & Medicaid Services (CMS) utilizes a variety of private contractors to process Medicare claims and conduct both administrative and program integrity audits of claims submitted by healthcare providers and suppliers.  At the present time, CMS has contracted with eGlobalTech (eGT) to analyze data and prepare “Comparative Billing Reports (CBRs) of various services and claims billed to the Medicare program. eGT works directly with another CMS contractor, Palmetto GBA (Palmetto), to conduct the statistical work that is necessary to complete the CBR process. The latest report to be issued by eGT is CBR201803.

I.  eGT is Currently Distributing CBRs ” CBR201803 ” to Spinal Orthoses Suppliers:

The most recent CBR review initiated by eGT has been focused on Spinal Orthoses Suppliers. On April 2, 2018, eGlobalTech sent out letters to affected suppliers around the country advising them of the initiation of CBR201803: Spinal Orthoses Suppliers. This CBR is focused on orthotic suppliers that have billed the Medicare Part B program for both off-the-shelf and custom-fitted prefabricated spinal orthoses (commonly referred to as “braces”[1]) in claims with dates of service from October 1, 2016 to September 30, 2017.[2]  CBR201803 focuses on the following Healthcare Common Procedure Coding System (HCPCS) codes:

Prefabricated Custom-Fitted Spinal Orthoses.[3]

L0627: Lumbar orthosis, sagittal control, with rigid anterior and posterior panels
L0631: Lumbar-sacral orthosis, sagittal control, with rigid anterior and posterior panels
L0637: Lumbar-sacral orthosis, sagittal-coronal, with rigid anterior and posterior panels

Prefabricated Off-the-Shelf-Fitted Spinal Orthoses.[4]

L0642: Lumbar orthosis, sagittal control, with rigid anterior and posterior panels
L0648: Lumbar-sacral orthosis, sagittal control, with rigid anterior and posterior panels
L0650: Lumbar-sacral orthosis, sagittal-coronal, with rigid anterior and posterior panels

 II.  The Improper Billing of Medicare Claims for Spinal Orthoses Has Been a Long-Standing Problem for CMS:

The initiation of CBR201803 is merely the government’s most recent attempt to address long-standing problems that have repeatedly been identified in connection with the coverage, coding and billing of spinal orthoses by authorized Medicare suppliers.  As eGT has noted on its website (and in correspondence with affected suppliers), Lumbar-Sacral Orthoses have been on the government’s Durable Medical Equipment, Prosthetics, Orthotics, and Supplies (DMSPOS) list of “Top 20 Service Types with Highest Improper Payments” as far back as 2013. In fact, as set out in the most recent assessment of improper billing data by the Department of Health and Human Services (HHS), entitled “2017 Medicare Fee-for-Service Supplemental Improper Payment Data,” the estimated improper error rate for Lumbar-Sacral Orthoses was 52.5%. The magnitude of this problem is easily seen when compared with the overall improper payment rate for ALL Medicare claims which has been estimated at 9.5%.  Finally, it is worth noting that the HHS Office of Inspector General (OIG) identified concerns with the billing of orthotic braces in both its 2016 and 2017 Work Plans.[5]

III.  How Were Spinal Orthoses Suppliers Categorized this Review?

At last count, more than 6,000 qualified DME suppliers billed Medicare Part B for spinal orthoses under one of the six HCPCS codes outlined above.  In an effort to define peer groups for general comparison purposes, DMEPOS suppliers and physicians / non-physicians were assigned to a specialty peer group, based on their assigned Medicare Specialty Code and whether or not the provider / supplier was likely to have orthotist training The following categories were used by eGT:

 Peer Group#1:  DMEPOS Supplier Not Likely to Have Orthotist Training 
Medicare Specialty CodeMedicare Provider / Supplier Type Description
A6Medical Supply Co. with Respiratory Therapist
B1Oxygen Supplier
54Medical Supply Co. — Other
58Medical Supply Co. with Registered Pharmacist
63Portable X-Ray Supplier
87All Other Suppliers
 Peer Group#2:  DMEPOS Supplier Likely to Have Orthotist Training 
Medicare Specialty CodeMedicare Provider / Supplier Type Description
B3Medical Supply Co. with Pedorthic Personnel
51Medical Supply Co. with Certified[6] Orthotic Personnel
52Medical Supply Co. with Certified Prosthetic Personnel
53Medical Supply Co. with Prosthetic / Orthotic Personnel
 Peer Group#3:  Physician / Non-Physician Not Likely to Have Orthotist Training 
Medicare Specialty CodeMedicare Provider / Supplier Type Description
01General Practice
02General Surgery
08Family Practice
11Internal Medicine
16Obstetrics / Gynecology
19Oral Surgery (Dentists Only) (LLP)
30Diagnostic Radiology Head
40Hand Surgery
41Optometry (LLP)
48Podiatry (LLP)
84Preventative Medicine
93Emergency Medicine
94Interventional Radiology
99Unknown Physician Specialty
 Peer Group#4:  Physician / Non-Physician Likely to Have Orthotist Training 
Medicare Specialty CodeMedicare Provider / Supplier Type Description
B2Pedorthic Personnel
12Osteopathic Manipulative
20Orthopedic Surgery
23Sports Medicine
25Physical Medicine and Rehabilitation
35Chiropractic (LLP)
55Individual Orthotic Personnel
56Individual Prosthetic Personnel
57Individual Prosthetic / Orthotic Personnel
65Physical Therapist in Private Practice
67Occupational Therapist in Private Practice
70Single or Multispecialty Clinic or Group Practice
72Pain Management

CBR contractors (eGT and Palmetto) then calculated statistics for each of the separate peer groups.  As the categories reflect, the CBR contractors separated suppliers from providers and then further stratified the two primary groups by whether or not they were “likely” to have orthotist training.  While the CBR contractors expressly recognized that an individual may be specially trained to custom fit beneficiaries with a medically necessary orthosis, for the purposes of this review, they still ultimately categorized both suppliers and providers by Medicare specialty code based on the contractors’ assessment of whether a specific specialty was likely to have specialized orthotist training.[7] Unfortunately, there are likely a number of instances where eGT’s presumption of whether a supplier has orthotist training may be just plain wrong.

IV.  Why Was My DME Company Included in this Review?

A Comparison of Your Billing Percentages for Each of the Six HCPCS Categories of Spinal Orthoses.  As a first step, the CBR contractors compared each supplier’s billing patterns, by HCPCS code, with those of other suppliers in their peer specialty group.  To the extent that a supplier’s utilization ratios were aberrant when compared to the ratios of their peers, the supplier was more likely to be sent a CBR.

The Percentage of Allowed Services Defined as Custom-Fitted.  Another primary assessment conducted by the CBR contractors is whether the percentage of spinal orthoses submitted for payment by a supplier was billed as a “custom fitted” brace.  The percentage of custom-fitted braces billed by a specific supplier was compared to the percentage billed to their DME MAC contractor by other suppliers in their respective peer specialty group.  Each supplier’s percentage of custom-fitted brace billings were also compared to the national average.  If a specific supplier’s percentage was deemed to be “significantly higher” than one of these peer groups, it was one step closer to being sent a CBR.

The Percentage of Allowed Services Submitted without a Visit to the Referring Provider within 90 Days of the DMEPOS Service Date.  Another factor analyzed by the CBR contractors is whether a significant percentage of beneficiaries fitted (either custom-fitted or off-the-shelf) for a brace by a specific supplier had not been seen by their referring provider within 90 days of the DMEPOS service date (the date that the spinal orthosis order was filled by the DMEPOS supplier).  Simply stated, red flags are going to be raised if you fill a prescription / order for a brace and the patient hasn’t seen his / her referring provider within the previous 90 days.[8]  Once again, the CBR contractor compared each specific supplier’s percentage to the percentage billed to their DME MAC contractor by other suppliers in their respective peer specialty group.  Each supplier’s percentage of custom-fitted brace billings were also compared to the national average.

The Average Allowed Charges per Beneficiary for the One-Year Period.  The CBR contractors also examined the average allowed charges of each supplier billed to Medicare per beneficiary and compared this number to average allowed charges of other suppliers in their peer specialty group.  If a supplier’s average allowed charged were significantly higher than that of their peers, it was more likely to be issued a CBR.

V.  The Results of an Assessment by eGT:

After reviewing the utilization and billing practices of each spinal orthoses supplier, if a specific supplier’s measures were considered to be Significantly Higher than their peers in at least one of the three factors discussed above, the supplier was issued a CBR.

  1. Supplier is significantly higher than at least one of its peer groups on at least one of the measurements studied;
  2. Supplier is near or above the 45th percentile in allowed charges ($5,000); and
  3. Supplier had at least ten beneficiaries.

VI. Responding to a CBR:

If your company received a CBR, you likely noted the fact that eGT may expressly state in its reports that “no reply is necessary.”   While that may technically be the case, after handling CBRs for many years, our experience (and the collective experience of our associates) has been that your organization is much more likely to be audited if you do not respond and address any misconceptions or incorrect positions about your billing pattern stated by the contractor in its report.

To be clear, if you receive a CBR, you need to immediately take steps to validate or invalidate eGT’s findings.  If, in fact, your billing practices have been improper, you have an affirmative obligation to take steps to remedy any deficiencies. Additionally, the risk issues identified by eGT should be incorporated into your existing Compliance Program and should be taken into account when you perform periodic internal claim audits and monitoring functions.

VII.  Get Ready for Follow-Up Audits by ZPICs / UPICs!

Although your claims haven’t yet been audited, if you received one of these reports an audit of your claims may be right around the corner.  While it has been our experience that responding to a CBR is helpful, (and may reduce your chances of having a prepayment or postpayment Zone Program Integrity Contractor (ZPIC) or Uniform Program Integrity Contractor (UPIC) audit) if eGT has based its assessment on incorrect assumptions, there are no guarantees that a CMS program integrity contractor won’t still choose to initiate an audit of your claims for one or more braces billed to Medicare.

As a CBR recipient, you need to recognize that your organization has been identified as an outlier and there is significant likelihood that your spinal orthoses claims will be audited in the near future by a ZPIC or a UPIC, especially if you have not taken steps to identify and correct any misconceptions about your billing practices that the CBR contractor has made.

Now, more than ever, it is essential that suppliers review their documentation and ensure that they are fulling complying with all applicable requirements to show that each brace was medically necessary, fully documented, properly coded and billed.  For instance, as set forth under the Medicare Program Integrity Manual:

“All DMEPOS items…require detailed written orders prior to billing. Detailed written orders may take the form of a photocopy, facsimile image, electronically maintained, or original ‘pen-and-ink’ document. The written order must be sufficiently detailed, including all options or additional features that will be separately billed or that will require an upgraded code. The description can be either a narrative description (e.g., lightweight wheelchair base), or a brand name/model number. All orders must clearly specify the start date of the order.”

The failure to fully document the delivery of a brace is another significant risk faced by spinal orthoses suppliers.  ZPICs and UPICs routinely refuse payment citing this reason for denial.  As discussed in the Medicare Program Integrity Manual:

“Suppliers are required to maintain proof of delivery documentation in their files. Proof of delivery documentation must be maintained in the supplier’s files for 7 years (starting from the date of service).” 

Pursuant to 42 C.F.R. Sec. 424.57(c)(12), proof of delivery:

Must be responsible for the delivery of Medicare covered items to beneficiaries and maintain proof of delivery. (The supplier must document that it or another qualified party has at an appropriate time, provided beneficiaries with necessary information and instructions on how to use Medicare-covered items safely and effectively).”[9]

VIII.  Potential Liability for Non-Compliance:

After receiving a CBR, you may soon find that your supplier claims will be subject to  prepayment or postpayment audit by a ZPIC or UPIC. Alternatively, you may merely receive an “Additional Document Request” (ADR) from a CMS contractor.  ADRs aren’t uncommon and most suppliers have received multiple such requests since becoming a participating supplier in the Medicare program.  Nevertheless, in recent years, ADRs have taken on a new level of importance. ZPICs and UPICs aren’t hesitating to place a supplier on 100% prepayment review if the documentation submitted in response to an ADR results in the denial of one or more claims.

Similarly, if a supplier is placed on prepayment review and a significant percentage of your claims are denied when the associated supporting documentation is submitted, there is much higher risk that your claims will be subjected to a postpayment audit.  In some cases, a high error rate identified in a prepayment or postpayment audit has led to the suspension of Medicare supplier’s billing privileges. Unfortunately, this “snowball effect” of cumulative adverse administrative actions may not be over. In accordance with 42 C.F.R. Sec. 424.57(e), a CMS contractor may recommend to the agency that your billing privileges are “revoked” if a supplier is found not meet applicable conditions of payment:

“Failure to meet standards. CMS will revoke a supplier’s billing privileges if it is found not to meet the standards in paragraphs (b) and (c) of this section. (The revocation is effective 15 days after the entity is sent notice of the revocation, as specified in §405.874 of this subchapter.)” 

IX. Conclusion:

Despite what you may have been told, CBRs are far from benign.  If a provider or supplier has received a CBR (such as, but not limited to CBR201803), it may be a harbinger of future administrative audits or in more serious cases, a possible civil and / or criminal investigation of your billing practices.  While every case is different, if the CBR contractor’s CBR findings (as outlined in their letter to your organization) are incorrect, it is typically in your best interests to correct the record.  Our attorneys are experienced in assessing these matters and can assist your organization is putting its best foot forward when responding to a CBR, the receipt of an ADR, prepayment review or postpayment audit.  Give us a call for a free consultation.  1 (800) 475-1906.

Robert W. Liles Healthcare AttorneyRobert W. Liles, J.D., M.B.A., M.S., serves as Managing Partner at the law firm of Liles Parker, Attorneys & Clients at Law.  Robert represents providers and suppliers around the country in ZPIC / UPIC audits, Medicare suspension actions and revocation cases.  For a complimentary consultation, please call: 1 (800) 475-1906.

[1] As set out in the Chapter 15, Section 130 of the Medicare Benefit Policy Manual, braces are “rigid and semi-rigid devices which are used for the purpose of supporting a weak or deformed body member or restricting or eliminating motion in a diseased or injured part of the body.”

[2] eGT’s analysis is based on a snapshot of claims in the Integrated Data Repository as of January 24, 2018.

[3] As set out in the Joint DME MAC Publication, a “Custom-Fitted Orthosis,” is defined as:

  • Devices that are prefabricated.
  • They may or may not be supplied as a kit that requires some assembly. Assembly of the item and/or installation of add-on components and/or the use of some basic materials in preparation of the item does not change classification from OTS to custom fitted.
  • Classification as custom fitted requires substantial modificationfor fitting at the time of delivery in order to provide an individualized fit, i.e., the item must be trimmed, bent, molded (with or without heat), or otherwise modified resulting in alterations beyond minimal self-adjustment.
  • This fitting at delivery does require expertise of a certified orthotist or an individual who has equivalent specialized training in the provision of orthosis to fit the item to the individual beneficiary.

[4] Off-the-shelf (OTS) orthotics are defined as:

  • Items that are prefabricated.
  • They may or may not be supplied as a kit that requires some assembly. Assembly of the item and/or installation of add-on components and/or the use of some basic materials in preparation of the item does not change classification from OTS to custom fitted.
  • OTS items require minimal self-adjustmentfor fitting at the time of delivery for appropriate use and do not require expertise in trimming, bending, molding, assembling, or customizing to fit an individual.
  • This fitting does not require expertise of a certified orthotist or an individual who has equivalent specialized training in the provision of orthoses to fit the item to the individual beneficiary.

[5] In both its 2016 and 2017 Work Plans, OIG noted that it would be reviewing the reasonableness of Medicare payments for orthotic braces when compared to the amounts paid by other non-Medicare payers..

[6]A “certified” individual is someone who is certified by either the American Board for Certification in Orthotics and Prosthetics, Inc., or the Board for Orthotist/Prosthetist Certification.

[7] As set out in Appendix C of the Durable Medical Equipment, Prosthetics, Orthotics and Supplies (DMEPOS) Quality Standards, “Individuals supplying the item(s) set out in this appendix must possess specialized education, training, and experience in fitting, and certification and/or licensing.”  While the CBR contractors expressly recognized that an individual specially trained to custom fit beneficiaries that have a medical need for an orthosis.

[8] To determine this, the CBR contractor checks to see if the referring provider billed for a Part B visit within 90 days of the service date of the DMEPOS claim.

[9] https://www.gpo.gov/fdsys/pkg/CFR-2005-title42-vol2/pdf/CFR-2005-title42-vol2-sec424-57.pdf

Medicare Chiropractic Audits are Increasing!

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Medicare Chiropractic Audits(June 5, 2017):   Despite the fact that only three treatment services are covered by Medicare, the number of Medicare chiropractic audits conducted by the Department of Health Human Services (HHS), Office of Inspector General (OIG), has remained high over the last decade and is anticipated to grow throughout 2017 and 2018.  As you are aware, the Department of Health and Human Services (HHS), Office of Inspector General (OIG), concluded that in Fiscal Year 2016 the Improper Payment Rate for chiropractic services was 46.0%.  Even more alarming is the fact that OIG has found that the Improper Payment Rate of chiropractic Part B Medicare claims was the highest of any Part B service type in both FY 2015 and FY 2016.[1]

I.   Medicare Chiropractic Audits are Anticipated to Intensify in FY 2017 and FY 2018:

The already-active Medicare audit landscape facing chiropractors is likely the proverbial “calm before the storm.”  When you think of “Medicare Access and CHIP Reauthorization Act of 2015” (MACRA),[2] it’s likely you first think of the statute’s Quality Payment Program provisions which are intended to tie Medicare’s payments to the quality of the medical being provided.   Unfortunately, the documentation of chiropractic services have the unique distinction of being the only Part B service that are expressly address in MACRA.  A detailed discussion of the documentation requirements for chiropractic services under Medicare Part A will be addressed in a separate article.  The bottom line is simple – chiropractors participating in the Medicare Part B program are strongly encouraged to have a comprehensive assessment of their services conducted as soon as possible.  An overview of the current audit landscape is discussed below.

II.   Almost All Part B Medicare Chiropractic Audits Find Documentation Problems:

As set out in OIG’s Improper Payment Report for FY 2016, when examining the 46% of chiropractic services that were denied, the Centers for Medicare and Medicaid Services (CMS) found that  98.4% of the chiropractic denied claims were denied because of NO DOCUMENTATION or INSUFFICIENT DOCUMENTATION.  We believe that this is due, in large part, to the fact that the clinical reviewers employed by a Zone Program Integrity Contractor (ZPIC) or a Medicare Administrative Contractor (MAC) to audit your chiropractic claims (primarily Registered Nurses), aren’t really qualified to conduct these reviews. Sure, they can read Medicare’s guidelines governing medical necessity, coverage, documentation, coding and billing – but that doesn’t mean that they truly understand what constitutes a “subluxation” or that they can recognize that the patient’s condition warrants manual manipulation. The vast majority of medical reviewers examining your claims have little or no substantive knowledge and training in the field of chiropractic care.  Therefore, why are you surprised that the ZPIC reviewer is now alleging that 80$ – 100% of the claims you have billed to Medicare do not qualify for coverage or payment?

III.   Medicare’s Position with Respect to “Medical Necessity”:

Under Medicare, the definition of “medical necessity” is generally defined under Title XVIII of the Social Security Act, Section 1862(a)(1)(a):  As the statute provides:

“No payment may be made under Part A or Part B for expenses incurred for items or services which are not reasonable and necessary for the diagnosis or treatment of necessary for the diagnosis or treatment of illness or injury or to improve the functioning of a malformed body member.”

Despite the fact that chiropractors are recognized as physicians by Medicare, CMS has steadfastly refused to cover most of the traditional care and treatment services that are offered by licensed chiropractors around the country.  Medicare Part B only covers treatment by means of manual manipulation of the spine that is used to correct a subluxation (i.e. spinal manipulation). Moreover, the coverage policies developed by CMS and its contractors make it clear that the agency has restricted the definition of what is considered to be “medically necessary” chiropractic care to only include spinal manipulation services that are active or corrective in nature.

IV.   Maintenance Therapy is Not Covered by Medicare:

CMS has essentially taken the position that maintenance therapy does not qualify as medically necessary care and therefore does not qualify for coverage and payment.   As set out in the Medicare Benefit Policy Manual, Section 30.5.B:

Under the Medicare program, Chiropractic maintenance therapy is not considered to be medically reasonable or necessary, and is therefore not payable. Maintenance therapy is defined as a treatment plan that seeks to prevent disease, promote health, and prolong and enhance the quality of life; or therapy that is performed to maintain or prevent deterioration of a chronic condition. When further clinical improvement cannot reasonably be expected from continuous ongoing care, and the chiropractic treatment becomes supportive rather than corrective in nature, the treatment is then considered maintenance therapy.  (emphasis added).

The fact that chiropractic care used to “prevent deterioration of a chronic condition” remains non-covered is especially frustrating in light of the 2013 settlement in the case Jimmo v. Sebelius.   Earlier this year, the court approved a Corrective Statement that is to be used by CMS to affirmatively discontinue the use of an “Improvement Standard” for Medicare coverage.  Unfortunately, chiropractors and dentists were specifically carved out of this new rule by CMS.  As CMS noted in its January 14, 2014 guidance intended to clarify the agency’s new position after the settlement in Jimmo v. Sebelius, Pub. 100-02 Medicare Benefit Policy.  Transmittal 179 expressly provides that:

Chiropractors and doctors of dental surgery or dental medicine are not considered physicians for therapy services and may neither refer patients for rehabilitation therapy services nor establish therapy plans of care. (emphasis added).

V.   The Types of Chiropractic Services Covered by Medicare are Extremely Limited.

Under Medicare, the types of chiropractic services that are eligible for coverage and treatment are limited to three chiropractor-administered services.  To ensure that claims are processed in in an orderly and consistent fashion, Medicare employs the Healthcare Common Procedure Coding System (HCPCS) developed by the American Medical Association (AMA).  Level I of this standardized coding system is comprised of Current Procedural Terminology (CPT) codes that the AMA maintains.  The CPT uniform coding system consists of descriptive terms and identifying codes that are used primarily to identify medical services and procedures furnished by physicians and other health care professionals.  The CPT codes of the three chiropractic manipulation services that may qualify for payment by Medicare include the following:

98940: Chiropractic Manipulative Treatment (CMT); spinal, one or two regions;

98941: CMT; spinal, three to four regions; and

98942: CMT; spinal, five regions.[3]

To add insult to injury, even though a number of Medicare procedures may be within a licensed chiropractor’s state-defined scope of practice, with the exception of the three services described above, no other diagnostic or therapeutic service furnished by a licensed chiropractor, or under his / her order, is considered a covered service under Medicare.  We have handled a number of cases in recent years where the medical necessity of these manipulative treatments was never challenged by the auditing ZPIC.  Nevertheless, almost all of the otherwise-covered chiropractic claims were denied because the CMS program integrity contractor concluded that the services were improperly documented.  The primary reasons that these claims have been denied have been documentation-related.

VI.   Medicare’s Position with Respect to the Documentation of Chiropractic Services:

When providing one of these three covered services, it is essential that you carefully review Medicare’s current documentation requirements. The documentation mandates described under MACRA are not the necessarily the litmus test you should be applying.  The statutory requirements mandated under MACRA have been reviewed and interpreted by CMS so that appropriate regulations and policies implanting any applicable statutory provisions have been developed.  Additionally, as described in Section IX below, MACs are given some latitude in further defining what they require in terms of documentation.

VII.   Risks in Using a “Travel Card” if Your Practice is Subjected to a Chiropractic Audit:

Chiropractic services primarily documented with a “travel card” are likely to be denied if you are audited by a CMS program integrity contractor. Although it has been a while since we have defended a case of this type, they still occasionally arise.  For decades, travel cards have been used by chiropractors to document the care and treatment services they have provided.  Travel cards were easy and could provide an excellent picture of whether a patient was progressing.  While additional information (such as x-rays and other diagnostic studies) were also recorded in the patient’s medical record, the travel card was, and still is, utilized in a number of practices as a documentation tool.  Unfortunately, if your Medicare claims are ever audited by a ZPIC or MAC, you are likely to face a multitude of problems if you are relying on a travel card to document your services.  Unfortunately, CMS contractors (such as ZPICs and MACs)) don’t know how to read a travel card.  While there may be isolated exceptions to this statement, in the cases we have handled over the last decade, none of the auditors working for a ZPIC or for the MAC had been trained on how to read and interpret a travel card.  Additionally, most travel cards still in use don’t even come close to documenting all of the various points are set out in a MAC’s LCD.  As a result, when auditing chiropractic claims billed to Medicare, they almost always found a 100% error rate.

VIII.   Are Applicable Documentation Requirements Met if We Utilize Both a Travel Card and SOAP Note to Record the Chiropractic Services Provided?

Efforts to address the travel card problem by also documenting their services in a SOAP note format[4] have often been unsuccessful. Many experienced chiropractors love travel cards.  Their ease of use and ability to provide a quick, accurate picture of the patient’s prior care and progress are invaluable in a busy practice.  Recognizing that both government and private payors now require that a more detailed discussion of the patient’s care be documented, some chiropractors also document the care provided in a SOAP note format.  Unfortunately, in the cases we have seen, this approach typically fails to fully document the points that are now required by governmental and private payors alike.

IX.   Basic Rule for Documentation Under the Social Security Act:

Medicare’s documentation requirements are based on the fundamental obligation set out in Section 1833(e) of the Social Security Act which states that:

“no payment shall be made to any provider of services or other person under this part unless there has been furnished such information as may be necessary in order to determine the amounts due such provider or other person under this part for the period with respect to which the amounts are being paid or for any prior period.”  (emphasis added).

X.   Complying with Medicare’s Documentation Requirements:

If you intend to bill Medicare for one of the three manual manipulation services set out above, it is essential that you regularly check to ensure that your documentation practices fully comply with Medicare’s requirements. When is the last time you reviewed the documentation and coverage requirements issued applicable for your jurisdiction?  MACs have been delegated the responsibility for developing Local Coverage Determination (LCD) guidance by the Secretary for the Department of Health and Human Services (HHS) under section 1395y(a)[5] of the Social Security Act.  This responsibility also includes the promulgation of reasonable and necessary coverage determinations.[6] Therefore, in the absence of applicable National Coverage Determination (NCD) guidance,[7] MACs are responsible issuing LCD guidance.  LCDs must adhere with applicable requirements set out under the Social Security Act, federal regulations, CMS rulings, Medicare Manual Provisions, and other forms of guidance.

An overview of the coverage and documentation requirements that must be met when providing Medicare-covered chiropractic services is set out in the Section 240.1. of the Medicare Benefit Policy Manual.  Additionally, the Medicare Program Integrity Manual (PIM), mandates that any LCD that is promulgated must reflect local medical practice within the contractor’s jurisdiction and must be supported by substantial medical evidence.[8]  A CMS contractor must ensure that LCDs are consistent with applicable Medicare statutory provisions, regulations, NCDs, and other federal guidance.[9]

When developing an LCD, MACs also consider medical literature, the advice of medical societies and consultants, public comments, and comments from the Medicare provider community.[10]  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 Food and Drug Administration (FDA) approval process.[11]  Working within these parameters, it is important to recognize that the specific requirements for documenting your chiropractic claims may vary from one MAC region to another.

For instance, National Government Services (NGS) has issued an LCD titled “Chiropractic Services – L27350.” [12]   For chiropractic services to be medically indicated in the region managed by NGS:

“The patient must have a significant health problem in the form of a neuromusculoskeletal condition necessitating treatment, and the manipulative services rendered must have a direct therapeutic relationship to the patient’s condition and provide reasonable expectation of recovery or improvement of function. The patient must have a subluxation of the spine as demonstrated by x-ray or physical exam. (CMS Publication 100-02, Medicare Benefit Policy Manual, Chapter 15, Section 240.1.3).”

Under its section titled Limitations, NGS essentially set out the coverage requirements that must be met in order for chiropractic services to qualify for coverage and payment.  Moreover, ICD codes that support medical necessity are laid out in the guidance.  Should you code a chiropractic service with a diagnosis code that does not qualify for coverage, edits in the claims processing programs run by the MAC will automatically identify and deny the claims.

The documentation requirements set out in the LCD issued by NGS are typical of what you are likely to find in your particular region.  Nevertheless, you cannot assume that they are the same.  Check the LCD documentation requirements that have been published by your MAC.  The documentation requirements that are applied by NGS and other MACs are quite extensive.  A chiropractic audit of your Medicare claims will heavily rely on the coverage requirements set out in the LCD covering your region.

XI.   Elements to Review When Assessing Your Claims in Advance of a Medicare Chiropractic Audit:

The best time to assess your compliance with applicable Medicare medical necessity, coverage, documentation, coding and billing requirements is NOW, not after an audit has already been initiated by Medicare.  There are seven elements to be considered when assessing whether any chiropractic claims will qualify for coverage and payment.  These elements are:

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

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

Element #3No 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?

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

Element #5Fully Documented Have the services been properly and fully documented?

Element #6: Properly Coded – Were the services correctly coded?

Element #7: Properly Billed – Were the services correctly billed to Medicare?

XII.  Consultants and Device Manufacturer Representatives:

Take care when conducting an internal review of your documentation and billing practices.  Should you decide to bring in an outside consultant to assist you in preparing for a chiropractic audit, you should be prepared to apply the doctrine of “caveat emptor” (let the buyer beware).  The types of problems our clients have faced when engaging consultants generally fall within one of two categories, both of which are discussed below.

  • If it sounds too good to be true – it probably is!

Unfortunately, some consultants and device manufacturer representatives have used the challenging financial environment now facing chiropractic practices to their advantage.[13]  If a chiropractic consultant claims to have “proprietary” or “special” methods that can raise your billing revenues, or makes similar claims, be careful.

We have represented numerous chiropractic and medical practices over the years that have been led astray by coding and / or billing consultants, device manufacturers and others purporting to have identified supposed legal methods of coding and billing non-covered services so that they will, in fact, pass through the MACs edits and be paid. Years later, the chiropractic practice may learn that the practices they taught to employ are improper and do not qualify for payment.

  • Even Well-Meaning Consultants May Adversely Impact Your Practice.

Imagine for a moment that in an effort to improve your level of regulatory compliance, you have decided to engage a well-known coding and billing consultant to review your medical necessity, coverage, documentation, coding and billing practices. Assuming that the consultant is thorough, chances are that he / she will present you with a list of problems at the end of their review, you need to keep in mind that their findings are not privileged.  In other words, any reports that they issue, work papers that they prepare and actions that they take are discoverable by the government.  As a result, a list of problems identified by a coding or billing consultant can essentially be used as a roadmap for the prosecution.

You should therefore consider having a qualified health lawyer engage the consultant and direct his or her work.  Any reports would be issued to the attorney, not to you or your chiropractic practice. As a result, the work product prepared by the consultant would likely qualify and privileged and would not be discoverable by the government.  Does this mean that any errors, improper claims or other problems identified by the consultant could be “swept under the rug”?  No, not at all, but it may give the practice considerably more latitude in how they ultimately take remedial action.  Improper payments must be reported and repaid to Medicare in a timely fashion.. The problem we typically see is that non-attorneys are imprecise in how they describe a problem.  We have seen reports prepared by well-meaning consultants that are full of hyperbole and characterize certain conduct as possible fraud, when in fact, the actions that led to an overpayment were nothing more than a mere accident, error or mistake.

  • Call Liles Parker if Your Chiropractic Practice is Being Audited.

Liles Parker attorneys are not merely dedicated health lawyers.  We require that our associate attorneys study for and pass the certification requirements to be a Certified Medical Reimbursement Specialist.  Additionally, most of our attorneys and paralegals are Certified Medical Compliance Officers. Our staff has extensive experience conducting pre-audit assessments of provider documentation, coding and billing practices.  To the extent that your practice is undergoing a Medicare chiropractic audit by a UPIC, ZPIC or MAC, it isn’t too late to obtain a favorable result. Our health lawyers have extensive knowledge and experience of the Medicare appeals process, up to and including post-ALJ appeals to the Medicare Appeals Counsel and Federal Court.

Robert W. LilesRobert W. Liles Healthcare Attorney, M.S., M.B.A., J.D., has worked on the provider side in health care management, served as a federal prosecutor and now represents chiropractors and other health care providers around the country in connection with Medicare and private payor audits and investigations.  For a complementary consultation, please call us at: 1 (800) 475-1906.



[1] Chiropractic services were not separately broken out in OIG’s Medicare Fee-For-Service 2014 Improper Payment Report. https://www.cms.gov/Research-Statistics-Data-and-Systems/Monitoring-Programs/Medicare-FFS-Compliance-Programs/CERT/Downloads/MedicareFeeforService2014ImproperPaymentsReport.pdf

[2] Effective January 1, 2017.

[3] These three claims are expressly covered in Local Coverage Determination (LCD) guidance issued by National Government Services (NGS) and other Medicare Administrative Contractors (MACs).  For additional information please see:  https://apps.ngsmedicare.com/lcd/LCD_L27350.htm

[4] The acronym “SOAP” is a long-standing approach utilized by a variety of medical disciplines when documenting their evaluation of a patient and the plan of care to be followed.  SOAP stands for Subjective, Objective, Assessment, and Plan.

[5] See 42 U.S.C. § 1395h.

[6] See 42 U.S.C. § 1395ff(f)(2)(B).

[7] 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).”[7]

[8] See 64 Fed. Reg. 22,619, 22,621 (Apr. 27, 1999) (stating that the purpose of local medical review policies is to explain to the public and the medical community “when an item or service will be considered ‘reasonable and necessary’ and thus eligible for coverage under the Medicare statute”); PIM Ch.1, §§ 2.1.B,, 2.3.2.

[9] PIM, supra note 17, at § 2.1.B.

[10] PIM, supra note 17, at §1.2.

[11] See Abbott Laboratories, at 29.

[12] https://apps.ngsmedicare.com/lcd/LCD_L27350.htm

[13] Unscrupulous business consultants are nothing new. Almost 20 years ago, HHS, Office of Inspector General (OIG) recognized this problem and issued guidance to providers outlining its concerns. In June 2001, OIG issued a “Special Advisory” titled “Practices of Business Consultants” which detailed the agency’s concerns in this regard.  As OIG noted, health care providers and suppliers need to be wary of potential:

  • Illegal or Misleading Representations.
  • Promises and Guarantees.
  • Encouraging Abusive Practices.
  • Discouraging Compliance Efforts.

Responding to a EHR Meaningful Use Audit

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EHR Meaningful Use Audits are Ongoing. Call Liles Parker for Assistance in Responding.(April 3, 2015): Starting this year, eligible providers who have not attested to meaningful use of the Medicare and Medicaid Electronic Health Record (EHR) Incentive Programs for 2014 will face a 1% penalty on Medicare reimbursement. The penalties will increase to 2% in 2016 and 3% in 2017. Depending on the total number of Medicare eligible professionals who are meaningful users under the EHR Incentive Programs after 2018, the maximum payment adjustment can reach as high as 5%. Eligible providers and hospitals should make sure they have sufficient documentation so that they are prepared to respond to a possible EHR meaningful use audit. Key focus areas of an EHR meaningful use audit will likely include eligibility and meaningful use criteria, Health Insurance Portability and Accountability Act (HIPAA) security risk analysis and mitigation documentation, and documentation of the program.

I.  Overview of the EHR Meaningful Use Audit Process:

The meaningful use audit process typically begins with your receipt of an initial request letter seeking information and documentation regarding your efforts to comply with applicable meaningful use requirements. This letter will likely either come directly from CMS or the audit firm CMS has engaged has engaged to conduct meaningful use audits. An eligible provider will have two weeks to respond to the letter and provide the documentation that has been requested. Following submission, the initial review process will commence, where CMS and/or its audit vendor will examine the documentation. Depending on CMS’s findings and concerns, an onsite review may be needed. Finally, the eligible provider will receive an audit determination letter. The letter will inform the provider whether they were successful in meeting meaningful use of electronic health records. If a provider is found not to be eligible for an EHR incentive payment, the payment will be recouped.

II.  Preparing for an EHR Meaningful Use Audit:

To avoid penalties for 2016, eligible health care providers and hospitals should start gathering meaningful use supporting documentation now, not after an audit has been initiated. Specifically, they should retain all relevant supporting documentation used to complete the Attestation Module responses. Providers should keep summary data from the certified EHR system, but because some certified EHR systems are unable to generate reports that limit the calculation of measures to a prior time period, providers should also download and/or print a copy of the report used at the time of attestation for their records. They should also download and/or print primary evidence of eligibility. Primary evidence documents will be needed for more detailed reviews, and should include, at minimum, the numerators and denominators for the measures, the time period the report covers, and evidence to support that the documentation was generated for that eligible provider or hospital.

In addition, not all certified EHR systems currently track compliance for non-percentage-based meaningful use objectives. These objectives typically require a “Yes” attestation in order for a provider to be successful in meeting meaningful use. To validate provider attestation for these objectives, CMS and its contractor may request additional supporting documentation. Any non-EHR based reports should demonstrate the time period of the reports, proof that the report was not changed or updated, and that it is specific to the practice. Screenshots and timestamps can be used to help evidence these facts.

III.  Final Remarks:

Providers should save all electronic or paper documentation that supports attestation in order to ensure preparation for a potential audit. They should also save any documentation that supports the values entered in the attestation module for clinical quality measures. Hospitals should also maintain documentation that supports their payment calculations. If an audit happens, all of this documentation will be used to validate that the provider accurately attested and submitted clinical quality measures, as well as to verify that the incentive payment was accurate. Should you need assistance with a meaningful use

Robert W. Liles is a health care attorney experienced in handling prepayment reviews and audits.Liles Parker attorneys represent health care suppliers and providers around the country in connection with regulatory compliance reviews, Medicare ZPIC and RAC audits, HIPAA Omnibus Rule risk assessments, privacy breach matters, and State Medical Board inquiries. Robert W. Liles, Esq., is a Managing Partner at Liles Parker, Attorneys & Counselors at Law.  Call Robert for a free consultation at 1 (800) 475-1906.

Wake Up Sleep Labs! OIG is Concered About Questionable Billing Practices

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Is your sleep lab clinic being audited? Call the health lawyers at Liles Parker for help.(October 24, 2013):  Over the next year, sleep lab / sleep medicine practices and clinics should expect to receive increased scrutiny from both the Department of Health and Human Services, Office of Inspector General (OIG) and from program integrity contractors working for the Centers for Medicare and Medicaid Services (CMS).  These contractors may include Zone Program Integrity Contractors (ZPICs), Recovery Audit Contractors (RACs) and other “specialty” contractors hired by the agency to audit these types of claims.

Are your sleep study tests being handled properly?  Do your medical necessity, documentation, coding and billing practices fully compliant with Medicare’s requirements?  Even if you believe that your sleep study practices are fully meeting all applicable statutory and regulatory mandates, we strongly recommend that you conduct an internal review to verify your adherence to the rules.

I.  Introduction to the Sleep Lab Billing Issue:

In recent years, OIG has noted a significant rise in Medicare’s spending on sleep study testing services by physician practices, clinics and hospitals. This unexpected rise, coupled with the agency’s mounting concerns about fraud and abuse, prompted OIG to conduct an in-depth review of sleep study services and reimbursement issues.  As OIG’s October 2013 report reflects, the agency analyzed  Medicare claims from hospital outpatient departments and non-hospital providers, including independent diagnostic testing facilities and physician-owned sleep laboratories.

According to the report, almost $17 million in Medicare claims for polysomnography services did not meet one or more of the three requirements for Medicare reimbursement.  Many of these incorrect claims:

  • Used inappropriate diagnostic codes;
  • Were billed under same-day duplicate claims; or
  • Were submitted for payment using an invalid national provider identifier (NPI). 

Overall, the report also reflected that many providers exhibited patterns of “questionable billing.”

Based on these findings, OIG made four recommendations to CMS.  Since CMS concurred with these recommendations, providers that administer sleep study services should expect increased CMS audit actions in the near future.

II.  What is Polysomnography?

Polysomnography is a type of sleep lab study that is used to diagnose medical conditions that affect an individual’s sleep, such as “sleep apnea,” and is typically used and to evaluate the effectiveness of continuous positive airway pressure (CPAP) devices.[1] During a polysomnography, a patient sleeps while connected to sensors that measure and record biophysical changes that occur during sleep, such as brain wave activity, eye movement, and airflow.[2]  If the polysomnography demonstrates that an individual has sleep apnea, a provider may prescribe a CPAP device for treatment.  Polysomnography services may be performed in hospital outpatient departments or nonhospital locations, such as independent diagnostic testing facilities and provider-owned sleep laboratories.

Providers may conduct a diagnostic service and fit / titrate the CPAP device (if necessary) in two separate visits.  Alternatively, providers may perform both of these services during a single visit.  This is known as a “split-night service.”  Split-night services are generally conducted when a diagnosis of sleep apnea can be made within the first few hours of the polysomnography service and the provider still has time to fit and titrate the CPAP device that same night.  However, if the provider is unable to make the diagnosis early in the polysomnography service, the patient may need to return at a later date for an additional polysomnography service to fit the CPAP device.

III.  Qualification and Reimbursement Requirements for Polysomnography under Medicare:

From the outset, how providers are reimbursed under Medicare for polysomnography services depends on where the service is performed.   Generally, if it is performed in a hospital outpatient department, Medicare pays under the Outpatient Prospective Payment System.[3]  On the other hand, if polysomnography services are performed by a non-hospital provider, Medicare will reimburse the provider under the Physician Fee Schedule.[4]

More importantly, Medicare will only cover polysomnography services that are deemed “reasonable and necessary.”[5]  Medicare also will not reimburse a provider for duplicate claims, (i.e., multiple claims submitted for a single service performed).[6]  Furthermore, for polysomnography tests, CMS requires a valid order from the provider who evaluates or treats the beneficiary.[7][8]

Once a beneficiary has qualified for this type of service and it has been provider, the health care provider must submit the claim to Medicare for reimbursement. Polysomnography service claims are processed by one of the fifteen different Medicare Administrative Contractors (MACs).  In addition to guidelines and regulations promulgated by Medicare, MACs may specify additional coverage requirements through local coverage decisions (LCDs).[9]   LCDs include details such as utilization guidelines, permissible CPT codes, and diagnosis codes that support medical necessity.[10]  In fact, all LCDs for polysomnography services list sleep apnea diagnosis codes which support the medical necessity of diagnostic polysomnography.  More importantly, all of these LCDs specify that routinely performing repeat services is not medically necessary, and that providers must have documentation that justifies the necessity of repeat tests.  However, out of the fifteen MACs who process polysomnography claims, only nine had LCDs that apply to some or all of the polysomnography claims processed in 2011.

Health care providers typically bill Medicare for polysomnography services using three CPT codes.[11]  Additionally, polysomnography services consist of two components: the administration of the test (i.e., the technical component) and the provider’s interpretation of the test (i.e., the professional component).  Generally, providers bill the technical and professional components separately if each component is performed by a different provider.   However, if a provider bills for the two components together, it is known as a “global service.” Finally, CMS requires an appropriate diagnosis code for payment for polysomnography services.[12]   Providers must list the condition that justifies the service as the primary diagnosis code.[13][14]

IV.   Why OIG Conducted a Review of Sleep Lab Billing Practices:

Notably, OIG based its decision to perform an analysis of polysomnography services on two factors.  First, the agency had seen a noticeable increase in Medicare spending on sleep lab services.  From 2005 to 2011, Medicare spending for polysomnography services rose from $407 million to $565 million, a 39% increase.  In 2011 alone, Medicare paid over one million claims for these sleep lab services.[15]

Second, OIG has also become more concerned with fraud and abuse for healthcare-related claims.  As to polysomnography services, fraud investigators and sleep medicine professionals have identified specific vulnerabilities regarding these sleep lab services and the government is now targeting these  problem areas.  For example, in January 2013, one health care provider agreed to pay more than $15 million to settle allegations of false polysomnography claims billed to Medicare and other governmental payers.

V.  How OIG Conducted its Review of Sleep Lab Claims:

In order to conduct its analysis, OIG reviewed all Medicare payments for polysomnography claims submitted for payment in 2011.  This included all paid claims for the technical component of polysomnography and global polysomnography services.[16]  These claims came from hospital outpatient departments and non-hospital providers, which include physician-owned sleep laboratories and independent diagnostic testing facilities.

To further narrow its data set, the agency identified polysomnography claims that did not meet one or more of three Medicare requirements.  These sleep lab claims were: (1) submitted with inappropriate diagnosis codes, (2) for the same service date as other polysomnography claims for the same beneficiary, or (3) submitted with invalid national provider identifiers (NPIs).

OIG then identified providers who exhibited patterns of “questionable billing.” In particular, it identified those providers that had unusually high percentages of questionable billing relative to other providers.  To do so, OIG used eleven measures of questionable billing, which included the three Medicare requirements above and eight additional measures.  All of these measures can represent services that were not medically necessary, not rendered, or otherwise inappropriate.

The additional eight measures were developed in consultation with fraud investigators and sleep medicine professionals within and outside of OIG.  The agency based these measures on Medicare coverage and billing requirements for polysomnography services, measures used in OIG questionable-billing studies for other Medicare services, and consultations with fraud investigators and sleep medicine professionals within and outside of the agency.  The eight additional measures of questionable billing include:

  1. Shared beneficiaries;
  2. Unbundling a split-night service;
  3. Double-billing for the professional component;
  4. Repeated titrations;
  5. Missing professional component;
  6. Titration with no corresponding treatment device;
  7. Missing visit with ordering provider; and
  8. Repeated polysomnography services.

Notably, OIG emphasized that the eleven measures of questionable billing it used does not provide conclusive evidence of fraudulent.  Instead, the measures were intended to simply identify questionable billing scenarios of the basis of the data set.  The agency recognized that additional investigation would be needed to determine whether a provider had, in fact, knowingly submitted incorrect or fraudulent Medicare claims for these services.

VI.  OIG’s Findings Regarding Sleep Lab Billing Practices:

The OIG’s report reportedly found that inappropriate payments for polysomnography services were more widespread than initially assumed. Health care providers who perform sleep studies should recognize the specifics that OIG identified and tailor their compliance programs accordingly.

From the outset, OIG found that Medicare inappropriately paid $16.8 million for polysomnography services that did not meet one or more of three Medicare requirements.  The majority of these improper claims came from payments for services with inappropriate diagnosis codes.  Notably, the agency did recognize the possibility that Medicare may have paid claims with inappropriate diagnosis codes because claims processing edits to prevent inappropriate payments – which are used by the MACs to process claims – did not exist or were ineffective.  The report indicated that past reviews conducted by the government work had found that MACs do not always use edits to enforce LCD requirements, including those related to diagnosis codes.[17]

In addition, 85% of claims with inappropriate diagnosis codes – or roughly $14 million of the $16 million paid for these claims – came from hospital outpatient departments.  The results were surprising because only 53% of all polysomnography claims in 2011 came from hospital outpatient departments.  From the report, it appears that HHS-OIG placed much of the blame for this problem on the MACs.  The agency noted that inappropriate payments might have been averted if the MACs had effective electronic edits that automatically denied claims or suspended them for manual review.

Furthermore, the report reflects that 180 providers exhibited patterns of questionable billing for polysomnography services in 2011.  While this represented only 3.7% of the overall population of the providers analyzed, current polysomnography should take notice of what OIG was looking at in the data.

Most of the 180 providers who exhibited the questionable sleep lab billing patterns submitted an unusually high percentage of claims for beneficiaries with another polysomnography claim on the same day. This is a questionable practice because beneficiaries can undergo only one polysomnography service in a day, as the process requires an overnight stay.  Thus, current providers should recognize that frequent billing of same-day duplicate claims raises questions about the legitimacy of a provider’s services in the eyes of OIG.

The OIG also determined that nearly half of the 180 providers had an unusually high percentage of beneficiaries who had polysomnography claims from one or more providers.  The agency noted that this may be due to providers using the same compromised beneficiary numbers as other providers to fraudulently bill for services not rendered.  Providers must therefore be on the lookout for stolen beneficiary numbers and ensure that their internal compliance measures are not allowing these numbers to be used in fraudulent billing schemes.

The report further noted that the many providers with questionable billing patterns had an unusually high percentage of diagnostic polysomnography claims with a titration claim for the same beneficiary on the following day.  The OIG believes that these providers may be performing split-night services but are submitting separate claims for diagnostic and titration services (i.e., unbundling the split-night service).  This is problematic because unbundling inappropriately increases a provider’s reimbursement – it generates payment for two separate services instead of a single service.  While there are situations in which a provider may have to perform a separate diagnostic and titration service on consecutive nights, it is generally an unusual circumstance.

Finally, the report highlighted that some questionable billing providers had an unusually high percentage of claims for beneficiaries with no evidence of a visit with the ordering provider in the preceding year.  Under Medicare guidance, an in-person evaluation is required to determine whether polysomnography services are warranted.[18]  The report noted that sleep medicine professionals contend that polysomnography should be performed within a year after the in-person evaluation; as a result, the 180 providers scrutinized may be performing these services without a valid order.  This would make their services not medically necessary.

VII.  Recommendations Made by the OIG:

As OIG noted in its report, nearly all of the nearly $17 million in inappropriate payments made by Medicare could have been prevented.  In fact, more effective claims processing edits, particularly prepayment edits to deny claims with inappropriate diagnosis codes, was its primary prevention course of action.  The OIG made four recommendations to CMS to prevent and /or reduce future inappropriate payments for polysomnography services.

  1. Implement claims processing edits or improve existing edits to prevent inappropriate payments;
  2. Recover payments for claims that did not meet Medicare requirements;
  3. Consider using measures of questionable billing from this study to identify providers for further investigations; and
  4. Take appropriate action regarding providers that exhibit patterns of questionable billing.

Upon its review of HHS-OIG’s concerns, CMS concurred with each of the agency’s  recommendations. CMS plans to re-review its systems and investigate their accuracy and effectiveness.  It has also planned to investigate, and recover if necessary, payments that did not meet Medicare’s requirements.

VIII.  Final Remarks:

So what does this report mean for providers who perform sleep study services?  Well, based on CMS’ concurrence with OIG’s recommendations, including its plans to actively respond to the report’s results, these providers should expect greater scrutiny of their polysomnography services.  This is likely to come in the form of increased and focused audits performed by CMS contractors.  While CMS did not address when review and recoupment efforts would begin, we would expect that affected sleep medicine physicians and clinics should begin to receive audit letters from CMS contractors shortly.

As a result, polysomnography providers must take a proactive approach now to review their current billing practices and strengthen their compliance policies and procedures.  Providers will then be ready if – and when – they become subject to an audit and will be able to effectively resolve any issues before they lead to legal problems and / or potentially large monetary penalties.  As a final point, should you find that your sleep study claims are problematic, don’t neglect to report and return any monies that may be owed to Medicare within 60 days.  Otherwise, your failure to do so could take what would otherwise be a mere overpayment and transform it into a violation of the False Claims Act.

Healthcare LawyerRobert W. Liles, JD, MBA, MS, serves as Managing Partner at Liles Parker, Attorneys, a health care boutique  law firm with offices in Washington, DC, Houston, TX, San Antonio, TX and Baton Rouge, LA.  Should you have any questions regarding an audit of sleep lab claims conducted at your clinic, please give us a call.  For a complimentary initial discussion regarding these issues, please call us at:  1 (800) 475-1906


[1] CPAP devices are the most common treatment devices used to help individuals who have obstructive sleep apnea breathe more easily during sleep.  A CPAP machine increases the air pressure in a patient’s throat so that the airway does not collapse when the individual breathes in.

[2] The Centers of Medicare & Medicaid Services (CMS) considers the overnight stay to be an integral part of a covered diagnostic test. CMS, Medicare Benefit Policy Manual, Pub. No. 100-02, ch. 15, § 70(B).

[3] 42 C.F.R. § 419.21.

[4] § 419.22.

[5] 42 U.S.C. § 1395y(a)(1)(A).

[6] CMS, Reminder to Stop Duplicate Billings, Medicare Learning Network Matters  No. SE0415. Available at http://www.cms.gov/Outreach-and-Education/Medicare-Learning-Network-MLN/MLNMattersArticles/downloads/SE0415.pdf.

[7] 42 CFR § 410.32(a).

[8] CMS, Medicare Benefit Policy Manual, Pub. No. 100-02, ch. 15, § 70(A).

[9] CMS, Medicare Program Integrity Manual, Pub. No. 100-08, ch. 13, § 13.1.3.

[10] 42 CFR § 400.202.

[11] Diagnostic services are billed under CPT code 9508 or 9510; Titration/fitting services are billed under 95811; and Split-night services are billed under 95811.

[12] CMS, Medicare Program Integrity Manual, Pub. No. 100-08, ch. 3, §

[13] CMS, Medicare Claims Processing Manual, Pub. No. 100-04, ch. 25, § 75.5

[14] Id., ch. 26, § 10.4.

[15] Office of Inspector General (OIG) analysis of polysomnography claims from National

Claims History data.

[16] CPT codes 95808, 95810, 95811.

[17] See, e.g., OIG, Inappropriate Medicare Payments for Transforaminal Epidural Injection Services, OEI-05-09-00030, April 2010; OIG, Medicare Payments for Facet Joint Injection Services, OEI-05-07-00200, September 2008.

[18] CMS, Medicare Benefit Manual, Pub. No. 100-02, ch. 15, § 70.

The Medicare Audit Improvement Act Appears Promising at First Glance. Is it Really the Answer?

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Is the Medicare Audit Improvement Act Really Going Help Health Care Providers?(November 12, 2012): The AHA Supports the Medicare Audit Improvement Act of 2012.  Is this Legislation Going to Help Physicians or Not?  On October 16, 2012, a new bill was introduced by Representative Sam Graves (R-MO) entitled the “Medicare Audit Improvement Act of 2012.” This legislation was immediately supported by the American Hospital Association (AHA), which called the act “much-needed guidance for medical necessity audits, keeping auditors out of making medical decisions that should be between patients and their physicians.”


I.  What Will the Medicare Audit Improvement Act Require?

If passed, the law would require that the Secretary for the Department of Health and Human Services (HHS) implement certain regulations with respect to HHS’s national audit programs (such as those conducted by Recovery Audit Contractors (RACs) and Zone Program Integrity Contractors (ZPICs)).  Notably, these regulations would specifically require that CMS (and through the agency, its various Medicare contractors) take number of steps designed to better address a number of long-standing concerns expressed by physicians, hospitals and other health care providers participating in the Medicare Program.  Unfortunately, as discussed below, these proposed changes would primarily apply to Part A services — not the Part B services administered and billed by most non-hospital Medicare participating providers.  Proposed changes include:

  • Establishing a consolidated limit for all medical record requests;
  • Implementing financial penalties against audit contractors for poor performance;
  • Improving transparency of Medicare contractors like RACs and ZPICs;
  • Modifying the recent Part A to Part B Rebilling Demonstration Project;
  • Allowing, as appropriate, rebilling of denied inpatient claims as outpatient claims; and
  • Requiring physician review of Medicare denials.

This law is primarily in response to the recent outcry by hospitals and health systems regarding the practices of RACs when evaluating short-stay inpatient admissions. In these situations, RACs have been alleged to have denied inpatient claim outright, without giving credit for services provided on the outpatient side that would otherwise be covered and eligible for some payment. While the Part A to Part B Rebilling Demonstration Project has attempted to remedy this, it is slow-moving and only open to a limited number of providers who are willing to give up their appeal and other rights. As such, the Medicare Audit Improvement Act would give additional relief to hospitals burdened by these audits.

II.     The Medicare Audit Improvement Act and Part B Payments:

If enacted, this legislation will have a significant impact on hospital audits conducted by Medicare contractors.  Importantly, the definition of “Medicare contractor” under the proposed Act is quite broad and includes Medicare Administrative Contractors (MACs), RACs, and ZPICs.  However, the Medicare Audit Improvement Act is intended to only apply to Part A services.  Since most non-hospital health care providers participating in the Medicare program (including, but not limited to: physicians, clinicians, therapists, DME suppliers, and other health care professionals) provide Part B services, this legislation is not expected to provide any relief.

III.  The Medicare Audit Improvement Act Seeks to Penalize Contractors Who Fail to Conduct Their Duties Appropriately.  Is This Fair?

As a review of the bill will show, sections of the legislation, including those related to contractor transparency, financial penalties, and limiting records requests, apply specifically to RACs and do not apply to other “Medicare contractors” as defined under the statute.  Moreover, even if passed, this legislation will have little, if any, impact on Medicare Part B providers.  Is it fair to only penalize RACs for “poor performance”?  Should ZPICs be penalized if claims they deny are ultimately found to be payable?  Don’t answer just yet. . . .

Over the years, we have handled numerous cases where a Medicare contractor denied a claim on the basis of “lack of documentation” or on another basis that is clearly contradicted by a review of the documentation sent to the contractor for assessment.  We share our clients’ concerns — these cases often reflect a fundamental error on the part of the contractor.  Nevertheless, once a claim is denied by a ZPIC or RAC, a provider virtually no ability to have an audit terminated.  Instead, a provider’s only option is to press their concerns and lay out their arguments in support of payment through the administrative appeals process.

IV.  While ZPICs and RACs Occasionally Miss Evidence Clearly in a File, Providers Need to Keep The Contractor’s Actions in Perspective:

Stepping back for a moment and considering contractor audits as an impartial observer rather than as an advocate for our clients can be quite helpful in understanding the frustration sometimes exhibited (albeit in a professional fashion) by ZPIC representatives during hearings before an Administrative Law Judge (ALJ).  As ZPIC reviewers have pointed out in prior hearings, when assessing whether a claim should be paid, they are obligated to apply the applicable medical necessity, coverage, documentation, coding and billing guidelines published by the Centers for Medicare and Medicaid Services (CMS) and its MACs.  This guidance is often in the form of Local Medical Review Policies (LMRPs), Local Coverage Determination (LCD) issuances, and a variety of other publications issued by the government and its agents.  While not discussed, it has become abundantly clear that ZPICs are not intended to exercise their personal judgment when assessing a providers claims.  Rather, their mandate is to apply the above-discussed guidelines.  In contrast, ALJ’s enjoy a significantly broader degree of discretion.  Although they will undoubtedly consider these same guidelines, based on other reasons, an ALJ may ultimately hold that a claim should be paid.   Additionally, in some instances, by the time a claim is heard by an ALJ, records cited by a ZPIC as “missing” have later been found and supplemented into the record by a provider.  With this new information, an ALJ may decide to overturn a prior denial.  Furthermore, it is not at all uncommon for a ZPIC to deny a claim because the physician’s handwriting (and Progress Note) could not be read.  In several cases, we have been able to remedy this deficiency by having the notes as issue “transcribed” and typed out so that a reviewer can easily read the entries.  Once transcribed, an ALJ may have additional information upon which to consider whether a claim should be paid.  Finally, it is essential to keep in mind that the ALJ level is the first time that a provider will have an opportunity to tell its side of the story, thereby addressing and refuting a ZPIC’s concerns.

V.  What Should You Do to Prepare for a Prepayment Review or Postpayment Audit by a Medicare or Medicaid Contractor?

In light of the above, we believe that this issue is much more complicated than it may initially seem.  ZPICs and RACs are far from perfect.  They miss documents and evidence when conducting their reviews and their failure to fully review a record can lead to the improper denial of a claim.  Nevertheless, many times ZPICs and RACs do, in fact, have a basis for initially denying a claim  — you and I may not agree with their assessment, but in most instances they are likely to have at least a colorable argument in support of their denial decision.  The mere fact that an ALJ later overturns a denial does not necessarily mean that the ZPIC has acted improperly.  As described above, the record and arguments reviewed by an ALJ can greatly vary from the information first sent to, and considered by, the ZPIC.

As we have previously discussed, physicians and their staff members need to go back to the basics.  Examine your Local Coverage Determination (LCD) provisions which cover everything from “medical necessity” to documentation requirements for certain services. Read the 1995 and 1997 E/M Guidelines Dust of your copy of the Medicare Benefit Policy Manual.  Unfortunately, physicians are going to continue to experience problems in this regard until they read, understand and apply the same guidelines as those utilized by the RACs and ZPICs.  Internal Audits, ongoing education and training are the key to reducing your error rate and improving your compliance with applicable rules and regulations.  Don’t wait until you are facing an audit — examine your documentation practices NOW  and take remedial action to repay any overpayment which may be owed and educate your staff so that any identified deficiencies do not reoccur.

Healthcare Lawyer

Robert W. Liles is the Managing Partner at the health law firm, Liles Parker PLLC.  Our attorneys represent a wide variety of health care providers around the country.  Robert handles health care compliance reviews, internal audits, Medicare and Medicaid post-payment overpayment appeals, fraud and abuse investigations, and a number of other health care matters. He also assists providers in responding to prepayment audits conducted by ZPICs (and now RACs).  Should you have any questions, please feel free to call Robert today for a complimentary consultation.  Robert and our other attorneys can be reached at: 1 (800) 475-1906.


A CMS ZPIC Contract is Quite Lucrative

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CMS ZPIC Contract(September 26, 2012):  From the start, Zone Program Integrity Contractors (ZPICs) have worked to separate themselves from their proverbial “bounty hunter” peers – Recovery Audit Contractors (RACs). As you may know, ZPICs are paid on a contractual basis by the Centers for Medicare & Medicaid Services (CMS), instead of by how much money they return in overpayments, as the RACs are. But as we’ve explained, the incentives are still there – if the ZPIC doesn’t produce positive results, it may lose its lucrative CMS ZPIC contract altogether. So, even though they are not traditional “bounty hunters,” ZPICs are still driven by those same financial interests. And many would argue that shows up in how they approach Medicare claims reviews.

The largest ZPIC, holding two CMS ZPIC contracts and covering nearly half the country, is AdvanceMed Corporation, an NCI company. A closer look at the contractor’s payments reveals some pretty interesting information, none more interesting than the fact that AdvanceMed has been paid nearly half a billion dollars by the Federal government to perform healthcare audit services (specifically $467,087,923). The majority of this money has been awarded in just the past few years, from 2009 to the present.

While we’ve previously mentioned that AdvanceMed appears to have received over one hundred million dollars for one contract (and a similar amount for their second primary contract), it also looks like AdvanceMed receives “option” bonuses, which make up a large percentage of the rest of AdvanceMed’s receipts. In all likelihood, AdvanceMed’s contract with CMS (and other ZPIC contracts with CMS) outline certain opportunities for CMS to further compensate AdvanceMed for exceptional work. This would be called an “option” and when CMS pays AdvanceMed (often around $5 – $15 million), it is referred to as “exercis[ing] an option” by the Federal government. AdvanceMed has received a half-dozen “option” bonuses during 2012 alone, worth approximately $33 million, and many more in year prior.

So it is not entirely accurate to say that ZPICs are not “bounty hunters” unlike RACs. While they do have a primary contract that guarantees payment over a certain period, they do have to renew that contract periodically with CMS (requiring that they continue to meet certain overpayment recovery standards) and they also have the potential for earning extra bonuses. Providers should consider this fact carefully when communicating with AdvanceMed or other ZPICs during a Medicare audit.

Healthcare LawyerRobert 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.

Medicare Administrative Appeals Process – An Overview for New Providers

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(August 15, 2012):  Is this your first time being audited by a Medicare Administrative Contractor (MAC) or a Zone Program Integrity Contractor (ZPIC)?  If so, the brief outline below can provide a handy summary of the Medicare appeals process.

I.  Step 1 – Request for Information:

Medicare Administrative Appeals ProcessIn most instances, a health care provider will receive notice of a Medicare post-payment audit by mail, either from the provider’s MAC or the ZPIC responsible for handling that region. This initial correspondence is significant. From this letter, a provider can usually surmise whether the initial review is merely a probe audit or an allegedly statistically relevant review.  Perhaps most importantly, a provider can typically learn the scope of the contractor’s review.  While many requests for documentation are limited to medical records and claims-related documentation, we are now seeing an increase in the number of audits where the ZPIC or MAC has also requested copies of “business” records, such as a listing of current and past employees, copies of contracts, and other materials which can assist the government in determining whether a provider is currently (or has) engaged in conduct which might violate the federal Anti-Kickback Statute or the Stark law.

While many providers feel comfortable responding to a MAC or ZPIC’s request for information, they do not always realize that pre-emptive steps can be taken at this point to help them present their documentation in its best light.  Equally important, a provider may not fully appreciate the importance of maintaining an accurate record for the Medicare appeals process.  Efforts to improperly supplement or correct an incomplete medical record can expose a provider to criminal liability. Providers must understand the rules. Don’t inadvertently turn a mere overpayment matter into a criminal case.

II.  1st Level of Appeal – Re-determination:

After assessing the documentation submitted, a MAC or ZPIC will then notify a provider in writing of their results.  Please note, if the initial Medicare audit was conducted by a ZPIC, you will first receive the ZPIC’s results – a demand letter from your MAC will likely arrive within a few days.  The Medicare audit decision letter and its attachments will identify any claims found to qualify for coverage and payment and should discuss why any denied claims did not Medicare’s payment requirements.

The MAC’s demand letter serves as a “revised initial determination.”  Unfortunately, a large part of the Medicare post-payment audits conducted by ZPICs find that the majority of claims should not have been paid.  Upon receipt of the MAC’s demand letter, you have 120 days to file an appeal with your MAC for re-determination. However, to avoid recoupment, you should file this appeal within 30 days of the date written on the MAC’s letter.  Rather than risk having monies recouped, the best practice is just to ensure that your appeal is received within 30 days of the date of the demand letter.  The first level of the Medicare administrative appeals process involves a contractor from the Centers for Medicare & Medicaid Services (CMS), highlighted on the HHS organizational chart in yellow.

III.  2nd Level of Appeal – Reconsideration:

After receiving a re-determination decision from the MAC (which, like the ZPIC’s finding, is usually unfavorable), you have 180 days to file a request for reconsideration with the Qualified Independent Contractor (QIC) assigned to your area. During this process, the QIC will review the documents you’ve submitted and make an independent determination about the propriety of coverage and payment for the claims at issue. To avoid recoupment at this level, you need to file an appeal within 60 days of the date of the re-determination decision.  Once again, the best practice is to base your filing deadline on the date of the QIC’s decision letter. This level of the Medical administrative appeals process  also involves a CMS contractor, again highlighted on the HHS org chart.

IV. 3rd Level of Appeal – Administrative Law Judge Hearing:

While the QIC sometimes issues favorable decisions, it often agrees with the contractors below and upholds the denial of your Medicare claims. At this point, you should file an appeal with an Administrative Law Judge (ALJ). This must be done within 60 days from the date of receipt of the QIC’s reconsideration decision letter. Keep in mind, in order to qualify to file the ALJ appeal, you must meet all other statutory requirements (such as an amount in controversy over $130). Notably, it has been our experience that the ALJ level of the Medicare appeals process has been the most reasonable and provider-friendly, although each ALJ is different. This level of appeal goes through the Office of Medicare Hearings and Appeals (OMHA), which is highlighted on HHS’ org chart.

V.   4th Level of Appeal – Medicare Appeals Council

If the ALJ decision is unfavorable and you choose to appeal (or in some cases, the decision is provider-favorable and the Administrative QIC (the AdQIC) asks for a review), the next level of the Medicare appeals process is the Medicare Appeals Council (the Council). The Council is made up of senior ALJs with significant skill and experience in Medicare administrative matters. The Council generally looks at errors of law and abuses of discretion, similar to an appellate court. There are also a number of statutory bars that an appellant must overcome to have the Council review its case. The Council is part of the Departmental Appeals Board (DAB), which is highlighted on the HHS chart here.

VI. 5th Level of Appeal – Federal District Court

If a provider has not yet obtained the relief they seek at the lower levels of appeal, they may appeal the unfavorable Medicare claims decision to a Federal District Court (usually the district the provider’s office is in, although it is possible that a provider may also appeal to the Federal District Court for the District of Columbia, since the Secretary of HHS is located here). Importantly, the District Court looks at Medicare appeals cases with a high degree of deference to the Agency’s determination. That is, the District Court Judge will often side with CMS and HHS unless the lower ALJ’s decision was “arbitrary and capricious” or “against the substantial weight of the evidence.” In the legal world, these are incredibly difficult standards to overcome, and providers generally do not have a great deal of success in court, especially considering the costs of the litigation. Nevertheless, it is an option that exists for dissatisfied providers. Since the District Court is not a part of HHS, it is not included in HHS’ organizational chart.

VII.  Final Remarks:

As you can imagine, the Medicare appeals process is ultimately much more complicated than this brief outline may suggest.  Representatives of the auditing ZPIC, the MAC and / or the QIC may choose to participate in the ALJ hearing in order to present their arguments in support of denial. Although these proceedings are technically non-adversarial,” these hearings can be both stressful and complicated, especially when both sides support their arguments with statistical and clinical experts. In any event, ALJs are experts at cutting through the smoke and determining whether claims do, in fact, qualify for coverage and payment.

While we recommend that providers avail themselves of the Medicare post-payment appeals process, it is essential that prior to filing an appeal, providers critically examine their claims and associated documentation.  Like it or not, sometimes the Medicare contractors are right – some claims shouldn’t be paid.   At the end of the day, providers need to conduct an honest assessment.  Does a particular claim truly qualify for coverage and payment?  If not, its post-payment denial should not be appealed.  As we always say, “if it’s not yours, give it back.” That is, if you can’t make a good faith argument about why certain claims are payable, they probably aren’t. Similarly, unrelated to the appeals process, have you identified claims that were erroneously paid?  It is often a good idea to consult with qualified health law counsel before reporting and returning an overpayment or going through the Medicare appeals process.

Robert LilesHealthcare Lawyer represents 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 and internal reviews, and trains healthcare professionals on various legal issues. For a free consultation, call Robert today at 1 (800) 475-1906.

Healthcare Data Mining Audits: Impact on Medicare Providers and Suppliers

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(June 27, 2012):  Healthcare data mining has become quite routine.  For instance, in a recent case involving a Missouri psychologist, the provider was indicted and arrested on two counts of healthcare fraud and forgery. At the heart of this case was the fact that the psychologist allegedly submitted claims to Medicare and Medicaid that were virtually impossible for a single individual to perform. In fact, the indictment stated that the physician worked every day except for Christmas from mid-2008 to early 2012, when he was arrested. In other words, he worked three and a half years straight, seven days a week, with only four Christmases away from the practice. Obviously, this data raised a few red flags for Medicare fraud fighters. As both interest and concern in the provision of national health care has risen, the current administration has aggressively pursued fraudsters who have improperly billed Medicare, Medicaid and private health plan payors. Not surprisingly, additional funding has accompanied these increased investigative and prosecutorial efforts.

As the government has increased its pressure on fraudulent providers, both law enforcement organizations such as the Department of Health and Human Services, Office of Inspector General (HHS-OIG) and contractors of the Centers for Medicare & Medicaid Services (CMS) have become increasingly adept at identifying and pursuing fraudulent and / or potentially fraudulent billing activities by abusive health care providers.

I.     How is the Government Using Healthcare Data Mining Audits?

Generally, the two primary targeting tools used by CMS contractors and law enforcement to identify wrongdoing are:  (1) Data Mining, and (2) Complaints.  This article focuses on the first targeting tool, the use of healthcare data mining. We will address “complaints” in detail in a later article.

At the outset, it is important to keep in mind that the government has been accumulating utilization, coding and billing data since the passage of the Medicare and Medicaid programs in 1965 as part of Title XVIII of the Social Security Act. Over the past 40 years, the government has carefully studied this data, identifying trends and noting irregularities. Both HHS-OIG and CMS contractors (including, but not limited to Zone Program Integrity Contractors (ZPICs), Recovery Audit Contractors (RACs), and Medicaid Integrity Contractors (MICs)) are able to effectively use data mining to analyze various aspects of the coding and billing data submitted by billing health care providers. These entities employ experts in database management and use  sophisticated techniques to “slice and dice” the Medicare and Medicaid billing and coding data.  In doing so, they are able to compare providers by practice area, geography, time, and a practically endless number of other factors. They can then effectively identify any “outliers” which may be present when their billing patterns are compared to those of their peers.

For instance, in the case described above, healthcare data mining has become quite common.  It was clearly used to review the psychologist’s claims history and determine that what he was billing was likely both impossible and fraudulent.  Nevertheless, it is important to always keep in mind that although data mining may strongly suggest that a provider is engaging in improper conduct, at the end of the day, an outlier is merely a provider whose billing patterns differ from those of his / her peers.  A review of the documentation must still be conducted to ascertain whether, in fact, fraudulent conduct has occurred.  While ZPICs and MICs handle the majority of the data mining work being conducted, when the data appears to suggest that fraudulent conduct is taking place, providers should expect HHS-OIG and possibly the Department of Justice or the Federal Bureau of Investigations to step into investigation.  Unfortunately, while data mining can detect aberrant patterns in billing data, it can’t explain them, and often times, this leaves well-intentioned providers facing scrutiny if their billing history appears aberrant for an otherwise innocent reason.  For instance, a specialist who is renowned in his area of practice may be referred serious, highly complex patients by his peers. This could result in his billing patterns appearing to be different from those of similarly-situated physicians.  Despite the fact that there is an innocent explanation for the specialist’s billing patterns, the data alone may appear to suggest that fraud is taking place.  Health care providers should take affirmative steps to determine whether their coding and billing patterns are “normal” or whether their practices are irregular when compared to other providers.

To be clear, just because your coding and billing practices differ from those of your peers does not necessarily mean that you are engaging in improper conduct.  Nevertheless, if you are an outlier, we strongly recommend that you carefully analyze your internal practices in an effort to identify why your utilization history differs from those of your peers.  Perhaps you are, in fact, improperly coding or billing for services rendered.  If so, you will need to determine the scope of any overpayment and work with your legal counsel to promptly reimburse the government.  As we have repeatedly advised our clients, “If it isn’t yours, give it back.” Upon review, if your coding and billing practices appear skewed, you need to be ready to explain why your utilization rate is different if audited by a CMS contractor or investigated by law enforcement.

II.    Helpful Tools When Conducted an Internal Assessment:

If you are a Compliance Officer, part of your responsibilities includes the identification and repayment of any improper billings. While you can’t completely eliminate the risk of an audit, there are several tools that can help your organization determine how your utilization rates compare to those of your peers.  Among these tools is one of our personal favorites – DecisionHealth’s “E/M Bell Curve Data Book,” which gives a visual overview of the Center for Medicare and Medicaid Services’ (CMS’) Evaluation and Management (E/M) data rates for 59 different specialties. For instance, a general practitioner can look at his established patient office visits (CPT© codes 99211 – 99215) and compare his utilization rates to the national average for the same CPT© codes. This data can be extremely useful in assessing an office’s billing practices and patterns and give confidence to a provider whose rates are similar to the national average.

Another effective tool, especially for non-E/M practices, such as home health agencies and hospices, is the “The Dartmouth Atlas of Health Care,” which provides a variety of data tools to evaluate Medicare spending by county. Not only does this interactive website have average-spending-per-Medicare-beneficiary maps, it also has a tool which allows providers to examine national and state benchmarks for a variety of statistics. These include Medicare reimbursements, hospice, skilled nursing facility, and home health agency utilization rates, surgical procedures and more. Applied correctly, this data can be instrumental in a practice’s self-evaluation and gives providers significant insight into their own billing patterns.

III.     How Should You Respond to Healthcare Data Mining Audits?

Staying fully compliant with all of Medicare’s and / or Medicaid’s rules and regulations can be a quite a challenge.  Nevertheless, as a participating provider, you have affirmatively agreed to meet that obligation.  As providers are constantly reminded, serving as a participating provider is a privilege, not a right.  Unfortunately, even with the best tools, physicians, group practices, clinics, home health agencies and other providers may still find themselves subject to Medicare post-payment and / or prepayment audits by a ZPIC (and now by a RAC). Reviewers and auditors employed by Medicare contractors are highly experienced, knowledgeable and skilled in assessing the propriety of a claim.  They have years of experience handling audits and are quite good at identifying deficiencies in your documentation, regardless of how minor you may believe those  deficiencies might be.  While it is essential to understand your obligations as a Medicare participant, it is equally important to understand how and why practices get audited.  As discussed in earlier articles, while you may not be able to avoid an audit, you can do your very best to help ensure that upon review, a CMS contractor will find that your practices fully meet Medicare rules and regulations.  The development, implementation and adherence to an effective Compliance Plan is the single best step you can take to avoid regulatory problems.

Healthcare LawyerRobert Liles is the managing member of Liles Parker PLLC. Robert represents providers in Medicare providers around the country in postpayment audits and appeals, and similar appeals under Medicaid. In addition, Robert counsels clients on regulatory compliance issues, performs gap analyses and internal reviews, and trains healthcare professionals on various legal issues. For a free consultation, call Robert today at: 1 (800) 475-1906.

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