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CERT Postpayment Audits: An Overview of the Audit Process

CERT Postpayment(March 12, 2011):  Health care providers around the country are finding their practices and clinics subjected to Medicare post-payment audits by Zone Program Integrity Contractors (ZPICs), Program Safeguard Contractors (PSCs) and Comprehensive Error Rate Testing (CERT) Contractors.  While all post-payment audits should be taken seriously, there are real differences between both the contractors and the post-payment audits they are conducting.  This is the first of three articles examining these differences.  Starting with the CERT audit program, we will be examining each of the Medicare contractors conducting CERT postpayment audits and review of provider claims for services and devices.

I.  Historical Background of the CERT Postpayment Audit Program:

With the passage of the Health Insurance Portability and Accountability Act (HIPAA) of 1996 (P.L.104 -191), the Department of Health and Human Services, Office of Inspector General (OIG) initiated work in an effort to estimate the improper payment error rate of Medicare Fee-For-Service (FFS) claims.  From 1996 through 2002, OIG continued to manage this program. In 2002, the “Improper Payments Information Act” (IPIA) was enacted. The Centers for Medicare and Medicaid Services (CMS) subsequently began working with the OIG in 2003, and worked to further refine the estimated Medicare FFS error rate so that the program would comply with the requirements of the IPIA.  These efforts became known as the “Comprehensive Error Rate Testing” (CERT) program.[1]  Unlike early efforts, the CERT program does not only estimate a national improper payments error rate for Medicare FFS claims.  As Timothy Hill, OIG’s Chief Financial Officer testified before the Senate, the CERT program examines a number of essential aspects of the overall error rate of Medicare FFS claims:

“Contractor-specific improper payment rates – which measure the accuracy of our claims processors.

Provider-type specific improper payment rates – which measure how well the providers who care for our beneficiaries are preparing and submitting claims to the program; and

Other management related information – which provides insight into payment errors by region and reason.”[2]

Notably, the CERT program was designed to provide a comprehensive assessment of the improper payments being made to specific types of Medicare providers, along with the improper payment decisions being made by various Medicare contractors.  In doing so, the CERT program was set up to serve as an integral management tool to be used by CMS. Once problem areas were identified, CMS was able to monitor specific problem areas (and in some cases, specific Medicare contractors making erroneous payment decisions) so that corrective action could be taken.

II.  Contractors Performing CERT Postpayment Audits:

CMS has selected private contractors to administer various aspects of the CERT audit program.  There are two basic types of CERT contractors, a “CERT Review Contractor” (CRC) and a “CERT Documentation Contractor” (CDC).  As an initial step, the CRC will first select random samples of claims from each Medicare claims processing contractor.  The CDC will then take the list of claims selected by the CRC and request the relevant documentation related to these claims from the health care provider who provided, billed and was paid for the services.  Once received, the CDC then forwards the documentation to the CRC.

A.  Livanta – CDC.

CMS has awarded the CDC contract to a private company named “Livanta, LLC” (Livanta), located in Annapolis Junction, Maryland. Notably, Livanta has also been awarded the “Statistical Contractor” (SC) portion of the Payment Error Rate Measurement (PERM) program.  The PERM program is designed to measure improper payments in both the Medicaid program and the State Children’s Health Insurance Program (SCHIP).

Focusing on Livanta’s duties as CDC, the contractor typically proceeds as follows when completed its duties as a CERT contractor:

  • Once a provider has been identified, the CDC will contact the provider regarding the audit.  In a number of cases, the CDC will first call the provider by telephone and then follow-up with a fax or written request for the documents sought.
  • If a provider has not forwarded the documents requested to the CDC by day 30, both telephone and written follow-ups are made by the CDC to the provider.
  • If the records are not received by day 45, the CDC will again both call and fax or write the provider to ascertain the status of the requested documentation.
  • If the requested documentation still has been received by day 60, a letter is sent to the provider again inquiring on the status of the missing documents.
  • If no documentation is received by day 76, the claims associated with the missing documentation is denied and scored as an “error” based on the missing documentation.

B.  AdvanceMed – CRC.

Once the CDC has requested and received the claims documentation from the provider, it is forwarded to the “CERT Review Contractor” (CRC).  CMS has awarded the contract to serve as CRC to AdvanceMed. As CRC, AdvanceMed must carefully review the documentation received and determine whether the services qualify for coverage and payment.  The CRC then compares its assessment to that of the Medicare contractor who originally reviewed and paid the claims (the contractor is typically a Medicare Administrative Contractor (MAC) who is responsible for review of the Part A or Part B claims).  If the CRC finds that the Medicare contractor incorrectly billed, paid or processed the services at issue, the claim is noted to be an “error”

III.  Sample CERT Postpayment Audit Program Results From the Fourth Quarter of 2010:

Each quarter, Highmark Medicare Services (Highmark) reports on the most recent “errors” identified by the CERT contractor in connection with the CERT program audit.  During the Fourth Quarter of 2010, 508 CERT errors were found in connection with the Part A claims reviewed.   The 508 errors can be broken down as follows:

  • 311 errors were due to “insufficient documentation.”  Notably,   a majority of the errors in this category were because the medical record “did not contain a valid physician’s signature” or because a diagnostic test performed “did not contain a valid physician’s order” or an identification of the provider who rendered the service.
  • 132 errors were due to “lack of medical necessity” based on the medical documentation submitted.
  • 37 errors were due to “incorrect coding” (primarily related to laboratory testing).
  • 10 errors were due to “invasive procedures that were assessed  to be without medically necessity.”
  • 9 errors were due to an “incorrect procedure code” used when billing the service.
  • 6 errors were the result of “billing for services that were not rendered.”
  • 2 errors were due to “other errors.”
  • 1 error was due to an “incorrect discharge code being used.” 

In addition to the Part A errors identified, a separate error report covering Part B claims is also detailed on Highmark’s website. [3] 

IV.  Responding to a CERT Postpayment Audit Request for Documents:

Should you receive a CERT postpayment audit request for documents from a CDC, it is important to keep in mind that your practice or clinic is not being accused of fraud or wrongdoing.  Fundamentally, a CERT postpayment audit is primarily designed to identify deficiencies and mistakes made by Medicare contractors.  As Compliance Officer, upon receipt of a CERT postpayment audit request, you should carefully review the request and take steps to assemble a complete set of documentation covering the specific claims at issue.  As Highmark also notes, when dealing with notes that are difficult to decipher, it is recommended that a transcription of the notes be made and submitted with the documentation.

V.  Appealing CERT Denials:

The results of a CERT postpayment audit are likely to be set out in Medicare’s electronic Fiscal Intermediary Standard System (FISS) computer system.  It is imperative that you monitor the status of the claims selected for CERT review.  If the CRC finds that one of more of your paid claims did not qualify for coverage and payment you will have to decide whether or not you agree with the denial decision that has been issued.  Should you dispute the denial, you will need to file for administrative appeal within the standard, established timeframes.   CERT denials are appealed in the same manner as any other claims denial would be appealed.

VI.  Comparison of CERT Postpayment Audits and ZPIC Postpayment Audits:

As reflected above, CERT postpayment audits are fundamentally different from ZPIC audits, both in terms of fundamental purpose and in terms of likely financial liability.  At its core, a CERT postpayment audit is really an attempt by CMS to learn whether or not its contractors (typically MACs) are properly assessing and processing claims submitted by Medicare providers for review and payment.  If a CERT contractor finds that a provider’s claims should not have been paid, it primarily reflects on the MAC, not necessarily the provider.  Having said that, claims denied by a CERT contractor should still be appealed if the provider believes that the claims do, in fact, qualify for coverage and payment.  While denied claims will still contribute to a provider’s overall error rate (possibly increasing the likelihood that a provider could be subjected to later audits), damages associated with CERT postpayment audits are not typically extrapolated.  As a result, the overall damages associated with CERT postpayment audits are relatively modest, especially when compared to the potential damages alleged in ZPIC and PSC “big-box” cases.  Additionally, unlike ZPIC and PSC audits, most CERT postpayment audits are solely concerned with the coverage and payment of the particular claims under review.  In contrast, ZPIC postpayment audits can lead to suspension, revocation or even referral to OIG or DOJ in cases where fraud may be evident.

Despite the limited scope of liability inherent in CERT postpayment audits, it is imperative that Medicare providers diligently work to respond to requests for documentation in a timely fashion.  Notably, other contractors (including ZPIC, PSC and RAC auditors) may review CERT postpayment audit findings for targeting purposes.  The bottom line is fairly simple — if you owe money to the Medicare program, pay it back.  If not, you should challenge unwarranted denials of claims by CERT auditors. 

Robert Liles Healthcare LayerRobert W. Liles, J.D. serves as Managing Partner at Liles Parker, Attorneys & Counselors at Law.  Liles Parker attorneys represent health care providers around the country in connection with postpayment CERT audits and program integrity reviews by ZPICs and other Medicare contractors.  Should your practice, clinic or company be subjected to a post-payment audit, give us a call for a complimentary consultation.  We can be reached at: 1 (800) 475-1906.    

[1] Guidance regarding the CERT program can be found in the “Medicare Program Integrity Manual, Chapter 12 – The Comprehensive Error Rate Testing Program.”

[2] This information was discussed by Timothy Hill, OIG’s Chief Financial Officer, as part of his sworn testimony regarding “Medicare and Medicaid Improper Payments” in front of the Senate Committee on Homeland Security and Governmental Affairs, Subcommittee on Federal Financial Management, Government Information and International Security, on Thursday, March 29, 2007.  A transcript of Mr. Hill’s testimony may be found at:

[3] Highmark Medicare Services’ CERT audit report covering Part A and Part B errors identified during the Fourth Quarter of 2010 can be found at:

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.