Liles Parker PLLC
(202) 298-8750 (800) 475-1906
Washington, DC | Houston, TX
San Antonio, TX | Baton Rouge, LA

We Defend Healthcare Providers Nationwide in Audits & Investigations

CMS Implements RAC Program Improvements

(January 9th, 2015) Health care providers increasingly complain that the Recovery Audit Program creates numerous administrative and financial burdens for those participating in the federal Medicare program. Providers continue to advocate for numerous changes to the program, especially those that will reduce their burden when dealing with Recovery Audit Contractors (RACs). In response to these concerns, the Centers for Medicare and Medicaid Services (CMS) has implemented a number of RAC program improvements that took effect on December 30, 2014.


I. The Recovery Audit Program:

Congress created the RAC as an effort to identify and recover improper Medicare payments paid to health care providers. RACs accomplish this mission by detecting and collecting overpayments made on claims to health care services provided to Medicare beneficiaries, as well as by identifying underpayments to providers. Each RAC is responsible for identifying overpayments and underpayments in a geographically assigned area, which is approximately one quarter of the country. Moreover, RACs are responsible for highlighting common billing errors, trends (recently, for example, improper face-to-face documentation), and other Medicare payment issues to CMS.  After a successful three year demonstration, the program expanded and went national in 2009. RACs have since returned more than $8.9 billion to the Medicare Trust Fund while returning more than $800 million in underpayments to providers.

II. RAC Program Improvements Under the New Recovery Audit Contract:

Health care providers have voiced their concerns over many details of the Recovery Audit Program since its inception. For example, RACs are paid on a “contingency fee” basis. Providers contend that this reimbursement method incentivizes RACs to focus their audits on high-dollar inpatient claims. Furthermore, this payment structure incentivizes the contractors to deny as many claims as possible, with little regard for the accuracy of their denials. The volume of inappropriate denials has subsequently led to widespread delays in the Medicare appeals process. To date, there is at least a two-year delay for appeals to be heard at the Administrative Law Judge (ALJ) level.

While Congressional action may be the most vital tool to improve the Recovery Audit Program, CMS has begun to take measures to listen to provider concerns and feedback. On December 30, 2014, CMS awarded the first national recovery audit contract to Connolly, LLC[1].

The contract pertains to Region 5, which is national in scope and will allow Connolly to audit Medicare claims for Durable Medical Equipment and Home Health and Hospice (DME/HH-H). Since 2006, Connolly has also served as the exclusive RAC for Region C, which covers 17 states and territories in the southern part of the United States.

With this new contract, CMS announced that a number of new changes would take effect in the program.

III. RAC Program Improvements are Intended to Help With Provider Interaction:

CMS believes that the new changes will “result in a more effective and efficient program, by enhanced oversight, reduced provider burden, and more program transparency.”  A significant improvement to the program will limit the look-back period for patient status reviews. Previously, RACs had a three-year look-back period in which to audit claims. Under the changes, CMS will restrict this look-back period to only six months from the date of service for patient status reviews. However, hospitals must submit the claim within three months of the date of service for this to take effect.

Providers also have voiced their concerns regarding the timeframe for RACs to complete a review of a claim. This timeframe forced providers to wait 60 days before being notified of the outcome of their complex reviews. Now, that period has been cut in half – RACs will only have 30 days to complete complex reviews and notify the provider of their findings. This should give providers more immediate feedback on the outcome so that they can assess how to proceed in case of a negative finding.

The changes further the “discussion period” process but with a very significant improvement. RACs had been required to stop the discussion period once they were notified of an appeal by a provider. Under the new changes, RACs must now wait 30 days following their determination, which will allow the provider to request a discussion with the RAC before sending the claim to a Medicare Administrative Contractor for adjustment. This development should allow providers not to be forced to choose between initiating a discussion and an appeal, and they can be assured that modifications to the improper payment determination will be made prior to the claim being sent for adjustment. RACs will also be forced to adhere to a process for confirming receipt of provider correspondence, including discussion requests, within three days of receipt.

CMS has also made adjustments to the RACs’ contingency fee model of payment. Formerly, RACs were paid immediately upon denial and recoupment of the claim. RACs now must wait to be reimbursed their contingency fee until after the second level of appeal has been exhausted. This delay in payment should help assure leery providers that the decision made by the contractor was correct based on Medicare’s statutes, guidelines, coverage determination, regulations, and manuals.

Notably, several of the changes relate to the volume of reviews. These changes should help providers who have felt over-burdened by inpatient status reviews. First, reviews will be diversified across all claim types (e.g. inpatient, outpatient, etc.) so that providers with multiple claim types are not disproportionately impacted by an audit in one claim type. Second, providers unfamiliar to the RAC program will have review limits applied incrementally to allow them to adjust to reviews. Finally, providers with a low level of denial rates will have a lower level of review while providers with high denial rates will have higher ADR limits. Even more, the rates will be adjusted as a provider’s denial rate declines.

IV. Enhancing CMS’ Oversight and Implementing Performance Standards:

CMS also increased its oversight over the Recovery Audit Program and instituted several performance standards for the RACs. For example, providers have voiced concerns that the contractors were not penalized for high appeal overturn rates. RACs must now maintain an overturn rate of less than 10% at the first level of appeal. If they don’t, they will be placed on a corrective action plan, including decreasing ADR limits or ceasing certain kinds of reviews until the problem is corrected.

In addition, for automated reviews, RACs must maintain a 95% accuracy rate. If they fail to do so, there will be a progressive reduction in their ADR limits. CMS will also continue to use a validation contractor to assess RAC identifications and will improve the new issue review process to help ensure the accuracy of RAC automated reviews.

V. Final Remarks:

It will be interesting to see if any of the proposed changes have a positive effect on the relationship between Medicare providers and the RACs. However, providers should be aware – these updates and improvements will not go in effect for a particular RAC until a new contract has been awarded. Thus, these changes will only affect those DME / HH-H providers under the jurisdiction of Connolly. CMS did announce that the Region 3 contract would be in place at the end of 2014; however, there is no particular contractor in place at this time. Furthermore, CMS’ website reflects that Regions 1, 2, and 4 will not be awarded new contracts until the summer of 2015.

Nevertheless, Medicare providers will continue to face the ongoing administrative and financial burdens created by RACs. You should be prepared to effectively handle an audit of your claims when – not if – the ADR is made. Despite your best efforts to follow the Medicare statutes, guidelines, and regulations, your organization will be subjected to a prepayment review or a full-blown, post-payment audit. Should you receive a request for records from a RAC, advanced preparation can help ensure your organization’s compliance with applicable documentation, coding and billing requirements. Let us help you prepare for this complicated process. If you are currently dealing with a RAC audit, or would like to know how you can best prepare for one, give us a call today.

Saltaformaggio, RobertRobert Saltaformaggio, Esq., serves as an Associate at Liles Parker, Attorneys & Counselors at Law.  Liles Parker attorneys represent health care practices around the country in connection with Medicare, Medicaid and private payor audits.  The firm also represents health care providers in connection with HIPAA Omnibus Rule risk assessments, privacy breach matters, State Licensure Board inquiries and regulatory compliance reviews.  For a free consultation, call Robert at:  1 (800) 475-1906

[1] The contract pertains to Region 5, which is national in scope and will allow Connolly to audit Medicare claims for Durable Medical Equipment and Home Health and Hospice (DME/HH-H). Since 2006, Connolly has also served as the exclusive RAC for Region C, which covers 17 states and territories in the southern part of the United States.

RAC-Initiated Medicare Prepayment Reviews Will Soon Begin.

(February 7, 2012):  In recent years, physicians and other health care providers have faced a wide number of administrative actions and sanctions levied by contractors working for the Centers for Medicare and Medicaid Services (CMS).  Zone Program Integrity Contractors (ZPICs) have subjected physician practices to Medicare prepayment reviews, postpayment audits, suspension and / or revocation actions.  In contrast, Recovery Audit Contractors (RACs) have exclusively initiated postpayment audit actions in their dealings with physicians and other Medicare providers.  As set out below, this will soon change.   Prepayment reviews will now be conducted by both ZPICs and RACs.  Now, more than ever, it is essential that physicians conduct a long, hard look at their documentation and work practices.  As we will discuss, being placed on prepayment audit can result in serious financial harm a practice.  In some cases, it can even lead to bankruptcy.

I.    RAC Conducted Medicare Prepayment Reviews Will Soon Begin:

Late last week, CMS announced that prepayment reviews by RACs would begin (again) on or after June 1, 2012.  As discussed in previous articles, CMS had originally delayed the program amid significant provider concerns about its operation.

II.   Background of the RAC Program:

RACs have long served an important role in detecting and recovering both Part A and Part B overpayments since the program began in 2005. Utilizing both automatic review edits and complex medical reviews to identify a multitude of claims errors, RACs have greatly assisted the government in its efforts to protect the integrity of the Medicare Trust Fund.  As you know, RACs are paid on a contingency basis, based on the amount of improper payments (either overpayments or underpayments) each RAC identifies and actual recovers. Despite harsh criticism from the provider community, RACs have been successful in their audit and recovery tasks, prompting the federal government to expand their authority to conduct prepayment audits, not merely post-payment reviews.

III.   Demonstration Project of Proposed RAC Prepayment Reviews:

Initially announced on November 15, 2011, CMS’ “RAC Prepayment Review Demonstration Project” was slated to start in 11 states on January 1, 2012, including Florida, California, Mississippi, Texas, New York, Louisiana, Illinois, Pennsylvania, Ohio, North Carolina and Missouri. Through the project, CMS was hoping to ensure that Medicare claims reimbursed by the government were medically necessary and met coding and billing criteria before such claims were paid. Due, at least in part, to significant concerns from providers and hospitals about the substantial administrative burden such review would cause, CMS announced last month that it was indefinitely delaying the RAC Prepayment Review Demonstration Project.

As we noted when CMS first announced this delay, while providers may have considered this postponement a victory, CMS still has numerous other contractors actively performing prepayment review audits each day around the country. At the end of the day, the issue really isn’t whether CMS is going to instruct its contractors to conduct prepayment reviews, it really comes down to whether providers are properly meeting applicable medical necessarily, coverage, documentation, coding and billing requirements.

IV.   Impact of Medicare Prepayment Reviews:

As we have previously discussed, there is no prepayment review administrative appeals process. As a result, providers placed on prepayment review have little recourse to reverse the decision, and often remain on review for four to six months (although we have seen reviews lasting up to a year) or until the provider is able to show their Medicare Administrative Contractor (MAC) that the services billed meet medical necessity, coverage and documentation requirements. Importantly, this determination is entirely based on the respective MAC’s subjective view of the propriety of a provider’s claims.

It is important to note that Medicare prepayment reviews can prove disastrous for physicians and other health care providers who mainly treat Medicare beneficiaries. Being placed on prepayment review can effectively delay payments to a physician for several months, even assuming that the MAC finds the provider’s claims are payable. Often times, providers must also take many of these claims through the administrative appeals process, adding another one to two years before payment is made (again assuming that an Administrative Law Judge ultimately finds your claims to qualify for coverage and payment).

V.   Avoiding Prepayment Review:

With RAC prepayment reviews on their way, providers may consider investing in the time and energy now to make sure their claims meet applicable payment requirements. While there is no “silver bullet” to completely eliminate the risk of prepayment audit, a number of preemptive steps exist to reduce the likelihood of such an occurrence.    Physicians and other health care providers should consider conducting a “gap analysis” of their practice.  In doing so, a provider will learn whether their billed services, and associated documentation, meet medical necessity and coverage requirements.  Physicians should also review their utilization rates of certain procedures and compare these rates to those of their local, regional and national peers. All in all,  physicians need to identify the regulatory benchmarks applicable to their practice, identify where they fail to meet these benchmarks, consider the manner and method to rectify these deficiencies, and add proper procedures and additional risk areas to their Compliance Plan. Such efforts now can leave a physician’s practice in an excellent position to respond to any billing questions by RACs or other Medicare contractors.  While RAC prepayment reviews are just another type of audit in a long list of concerns for providers, don’t underestimate the ability of these RACs to identity errors and deny payment.

VI.   Reading the Tea Leaves:

The government’s rekindled RAC Prepayment Review Program is slated to begin again on June 1, 2012.  With the re-implementation of this project, CMS moves yet another step away from its “pay-and-chase” model.  Among its many advantages, the prepayment review approach greatly reduces the likelihood that the claims being paid by the government are improper. We believe that the scope of RAC and ZPIC prepayment reviews will continue to grow in the near future and will represent a key component of the government’s fraud prevention efforts in years to come.  To be clear, we all agree with the government’s goal of identifying and stamping-out Medicare fraud.  Unfortunately, it has been our experience that many physicians and other Medicare providers have little understanding what CMS and its contractors expect to find when auditing medical records.  As a participating provider in the Medicare program, you are required to know and adhere to all of Medicare’s rules and regulations which apply to your practice and the services that you provide.  Changes in documentation requirements, coverage issues and questions of medical necessity are constantly changing.  Keeping up with these changes can be quite a challenge.

Healthcare lawyerRobert W. Liles is Managing Partner at the health law firm of Liles Parker PLLC.  With offices in Washington, DC, Houston, Texas, San Antonio, Texas and Baton Rouge, Louisiana, Liles Parker attorneys are available to help physicians around the country with Medicare audits which may arise.  Our attorneys have extensive experience conducting “GAP Analyses” and compliance reviews for health care providers of all types. In addition, our attorneys are skilled in assisting providers who have been placed on prepayment review or subjected to postpayment audit. For more information, please call Robert today for a complimentary consultation.  Robert and our other attorneys can be reached at: 1 (800) 475-1906.

Lose Your Appeal at Reconsideration? Consider an ALJ Hearing

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

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

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

I.  The Third Level of Appeal: ALJ Hearing:

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

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

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

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

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

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

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

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

III.  Consequences of Not Filing for ALJ Hearing:

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

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

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

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

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

  • How much of your law practice involves health law issues?
  • Please describe the extent of your experience handling large, complex administrative appeals of denied Medicare claims.
  • Please describe your experience in challenging statistical extrapolations applied to an alleged overpayment in a case.
  • How often have you responded to AdQIC appeals of favorable ALJ decisions?
  • How often have you handled MAC appeals?
  • Can you provide provider references?

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

V.  Conclusion:

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

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

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

ZPIC Participation in ALJ Hearings is Increasing

ZPIC Participation(February 12, 2011):  Over the last year, we have noted an important trend when representing Medicare providers in post-payment overpayment cases at the Administrative Law Judge (ALJ) level of appeal.   Medicare contractors are actively attending and participating in many ALJ hearings.  In fact, it is now common for a Zone Program Integrity Contractor (ZPIC) to participate in these proceedings. The virtual “Courtroom” where ALJ hearings are typically held (most ALJ hearings are now held by teleconference or video-teleconference — few are conducted in person) are no longer attended by only a provider, its attorney and the Judge.   Instead, it is now relatively crowded, requiring the scheduling of experts and the testimony of various clinical specialists — representing not only the provider, but also one or more government Medicare contractors.  Although mostly limited to “big-box” cases where the amount at issue ranges from $100,000 to several million dollars, we have even had ZPIC participation in ALJ hearings involving alleged overpayments of only a few thousand dollars.

This “sea change” in how the government and its contractors view their role in working to help ensure that alleged overpayments stay in place demands that providers reconsider their decision to represent themselves in ALJ appeals hearings.  While many health care providers feel comfortable handling an ALJ hearing on their own when the only parties on the teleconference or on the video-teleconference are the Judge and the Medicare providers themselves, it is a completely different situation when one or more contractors elects to participate in the hearing and present their denial reasons to the ALJ.  The purpose of this article to examine this trend and discuss a number of considerations that Medicare providers should be taking into account when deciding whether or not to represent themselves at ALJ hearing, without an attorney.

I.  Rights / Limitations of a ZPIC or Other Contractor When Acting as a “Participant” in an ALJ Hearing:

Pursuant to 42 C.F.R. § 405.1010, both representatives from the Centers for Medicare and Medicaid Services (CMS) and its contractors may participate in an ALJ hearing.  Moreover, an ALJ may request that CMS or its contractors participate in a hearing.  As the regulatory provisions provide:

“(a) An ALJ may request, but may not require, CMS and/or one or more of its contractors to participate in any proceedings before the ALJ, including the oral hearing, if any. CMS and/or one or more of its contractors may also elect to participate in the hearing process.

(b) If CMS or one or more of its contractors elects to participate, it advises the ALJ, the appellant, and all other parties identified in the notice of hearing of its intent to participate no later than 10 calendar days after receiving the notice of hearing.

(c) Participation may include filing position papers or providing testimony to clarify factual or policy issues in a case, but it does not include calling witnesses or cross-examining the witnesses of a party to the hearing. (emphasis added).

(d) When CMS or its contractor participates in an ALJ hearing, the agency or its contractor may not be called as a witness during the hearing.

(e) CMS or its contractor must submit any position papers within the time frame designated by the ALJ.

(f) The ALJ cannot draw any adverse inferences if CMS or a contractor decides not to participate in any proceedings before an ALJ, including the hearing.”

While ZPICs and other contractors may not “cross-examine” a Medicare provider or its witnesses during an ALJ hearing, contractors have easily worked around this regulatory obstacle.  Rather than confront a provider directly, a contractor will merely point out their concerns or make a specific point to the Judge.  The presiding ALJ will often then merely ask the provider the same questions first raised by the ZPIC.  As a result, a Medicare contractor never has to cross-examine the provider but his points and questions are still ultimately answered.  For instance, the following very simple exchange might occur during an ALJ hearing:

“ALJ:  I would like to hear the Medicare contractor’s views regarding the medical necessity of this E/M claim.

ZPIC:  Your honor, the 1997 E/M Guidelines clearly reflect the types of situations which would qualify as “High Complexity.”  We don’t believe that the facts here represented that level of complexity.  Additionally, the physician is now alleging that the patient suffered from multiple serious co-morbities which complicated the medical decision-making required.  Where is there proof that the patient had these conditions?

ALJ:  Dr. Smith, can you point out where these medical conditions are documented in the medical records submitted?”

In most instances, a provider should expect ZPIC participation in their ALJ hearing.  Moreover, a provider should expect for the ZPIC to point out weaknesses in the provider’s case.  ALJ’s are seeking to determine the facts and decide whether the claims at issue qualify for coverage and payment.  When a ZPIC raises a concern, most ALJ’s will want to follow-up with the provider in order to obtain an answer regarding the points raised.

Over the last year, we have also seen a marked  increase in the number of ZPIC participation cases, either at the hearing stage or where the ZPIC seeks permission to file a post-hearing brief with the Court.  This can be especially problematic for providers who choose to represent themselves at hearing because the ZPICs have used this as an opportunity to present new evidence and/or new arguments that were never introduced at lower levels of the case or at ALJ hearing.  As a result, the provider is often placed in the position of trying to respond to new arguments, never before presented by the ZPIC or other contractors, at the last minute in the ALJ hearing process.

II.  The Nature of ZPIC Participation:

Medicare providers should keep in mind that both ZPICs and Program Safeguard Contractors (PSCs) are quite sophisticated and are becoming more and more active in the ALJ hearing process, often replying to arguments presented to the Judge by a Medicare provider.  Moreover, it is not uncommon for a ZPIC to send as many as three professionals to participate in an ALJ hearing — all of whom may ultimately defend the ZPIC’s initial denial of the provider’s Medicare claims.  One of the ZPIC representatives very well may be an attorney.  A ZPIC contractor against whom we regularly litigate often sends a licensed attorney to respond to pro-provider arguments that the claims qualify for payment because they were not reopened in a timely fashion or that even if the claims do not meet all of the applicable coverage requirements, any overpayment would still qualify for “waiver.”  The ZPIC’s attorney may also respond to a number of limited arguments presented by a provider when trying to get a statistical extrapolation declared invalid by an ALJ.   It has been our experience that the ZPIC’s attorney is typically polished, smart and prepared.  When facing an unrepresented physician, the ZPIC’s lawyer would likely easily address any non-medical arguments presented by a Medicare provider.  A second ZPIC or PSC representative likely to participate in an ALJ hearing is the contractor’s statistician.  He is responsible for defending the legitimacy of the statistical sampling and extrapololation methodology employed by the ZPIC or PSC when extrapolating the damages in a case.  While a significant number of physicians and other health care providers are knowledgeable in statistics and mathematics, few know or understand the regulatory requirements which must be met before a contractor may engage in statistical sampling and seek to extrapolate damages.  As a result, few unrepresented providers have been able to convince an ALJ that an extrapolation is invalid.  While the additional cost of engaging a statistical expert to review a ZPICs extrapolation actions can be costly, it is likely required if a provider hopes to have a reasonable chance of challenging an extrapolation.   Finally, it is quite common for a ZPIC to send a third representative (typically a Registered Nurse) to provide clinical testimony in support of the ZPIC’s decision not to cover and pay certain claims, often citing the ZPIC’s own unique interpretation of LCD and LMRP requirements (an interpretation with which we often disagree).  Overall, an unrepresented provider is often unprepared to address and respond to the many legal, statistical and clinical arguments presented by the various ZPIC participants in an ALJ hearing.

While ZPIC and PSC representatives are now regularly participating in ALJ hearings, they are not the only contractors who are prepared to rise to the challenge.   Representatives of the Qualified Independent Contractor (QIC) have also been participating in some ALJ hearings.   In cases we are aware of, the QIC representative has been an attorney working for the contractor.  Nevertheless, there is nothing to prevent a clinician working for the QIC from attending the ALJ hearing and presenting the QIC’s arguments why certain claims did not qualify for coverage and payment.  Additionally, in at least one fairly recent case we handled on behalf of a provider, a Medicare Administrative Contractor (MAC) clinical reviewer chose to participate in the ALJ hearing.

III.  What are the Differences Between a “Party” to a Hearing and a “Participant” in a Hearing?

As 42 C.F.R. § 405.1010(c) reflects, there are significant differences between a party to an ALJ hearing and a participant in an ALJ hearing.   As we previously discussed, a “participant”  does not have the right to call witnesses or cross-examine parties or their witnesses.  Additionlly, participants do not have the right to object to the issues described in the ALJ’s “Notice of Hearing.”  As CMS has argued, these elements are “cornerstones” of the adversarial process.  In the absence of these cornerstones, a proceeding is not considered to be adversarial, even though multiple Medicare contractor representatives may participate in an ALJ hearing.  As a result, since the proceeding was not adversarial in nature, a provider will be precluded from seeking to have its attorney’s fees paid under the “Equal Access to Justice Act,” even though it ultimately prevailed at hearing.   While perhaps technically correct, the idea that ALJ hearings are truly “non-adversarial” when Medicare contractors choose to join as a “participant” is flatly untrue.   ZPIC lawyers, clinical reviewers and expert statisticians have proven themselves to be highly capable and effective when arguing their positions, despite the fact that their role in the hearing was considered to be “non-adversarial” in nature.  To their credit, even though both sides may be passionate about their position on the issues, all of the ALJs we have practiced before have kept a strict rein on the proceedings.

IV.  Providers Should Consider Engaging Experienced Legal Counsel to Represent them in an ALJ Appeal:

When faced with an administrative overpayment case that is highly complex, involves a significant alleged overpayment or is based on a statistical extrapolation of damages, we recommend that a Medicare provider retain experienced legal counsel to represent the provider’s interests.  While it is possible for an experienced attorney to step in and handle a case at a later level of administrative appeal (such as the QIC and ALJ levels), it becomes more and more difficult to do so in an effective fashion as the case progresses.  We have seen a number of cases where a provider has failed to properly establish the record in a case and important supportive documentation stood the chance of not being admitted in the record because the provider failed to introduce it at lower levels of appeal.  An experienced attorney can help ensure that the record is properly constructed and no important legal defenses or payment arguments have been left out of the case.  Additionally, legal counsel will be able to assess the coverage requirements, identify possible holes in the provider’s case and work with the provider to identify witnesses and obtain supportive evidence to hopefully fill any gaps in the provider’s case.

V.          Conclusion:

As a final point, it essential to remember that the trier of fact, the ALJ responsible for presiding over the provider’s case, is a lawyer, not a clinician.  Arguably, an experienced health law attorney– rather than a clinician — is uniquely trained to analyze the legal issues presented, organize the provider’s facts and present the relevant evidence to the ALJ (another attorney).  Having said that, an experienced attorney is no substitute for a qualified clinician who can directly address the clinical profiles of the beneficiaries and the medical necessity issues presented. Together, a supporting clinician and a skilled attorney can be a formidable team when arguing a Medicare provider’s case.  Moreover, this team is best equipped to respond to any arguments raised by participating ZPIC representatives during the overpayment hearing.

Robert Liles Healthcare LawyerRobert W. Liles serves as Managing Partner at Liles Parker, Attorneys & Counselors at Law. Attorneys in the Firm’s Health Law Practice have extensive experience representing health care providers around the country in ZPIC, PSC and RAC overpayment appeals cases .  Should you have any questions about your case or the overpayment appeals process, please feel free to call us for a complimentary consultation.   We can be reached at 1 (800) 475-1906.

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

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

  • Chest Pain
  • Other Circulatory System Diagnoses
  • Other Vascular Procedures
  • Syncope & Collapse
  • Red Blood Cell Disorders
  • Atherosclerosis
  • Heart Failure & Shock
  • Esophagitis, Gastroenteritis & Misc Digestive Disorders
  • Musculoskeletal Disorders
  • Chronic Obstructive Pulmonary Disease
  • Respiratory
  • Nutritional and Metabolic Disorders
  • Kidney & Urinary Tract Infections
  • GI Disorders
  • Percutaneous Cardiovascular Procedures
  • Renal Failure
  • Nervous System Disorders and
  • Cardiac Arrhythmia & Conduction Disorders.

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

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

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