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ZPIC Audits / UPIC Audits: The Impact of Transmittal 768 on the Medicare Appeals Process Timeline

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Transmittal 768(April 12, 2018): A big concern with the Medicare appeals process is the ghastly backlog at the Office of Medicare Hearings and Appeals (OMHA) for an Administrative Law Judge (ALJ) hearing coupled with the government’s authority to recoup alleged overpayments after the second level of appeal (reconsideration). There is renewed buzz regarding the backlog and potential recourse given the Fifth Circuit’s decision on March 27, 2018 in Family Rehabilitation, Inc. v. Azar, No. 17-11337, which affirmed the possibility for providers to sue for an injunction to prevent Medicare Administrative Contractors (MACs) from recouping overpayments until administrative appeals are concluded under the collateral-claim exception. But what about the snail-like pace of postpayment reviews at the very beginning of this process?  As discussed below, Medicare’s Transmittal 768 may alleviate this continuing problem to some extent.

I.  Continuing Delays by ZPICs / UPICs in Completing an Initial Review – Overview of the Problem:

Before claims are appealable, they have to be denied on review. A major source of massive extrapolated alleged overpayments are postpayment reviews by Zone Program Integrity Contractors (ZPICs) and their successor Unified Program Integrity Contractors (UPICs). Our experience has been that these reviews usually take many months, even years. This is in spite of the fact that providers are required to turn over the requested records in somewhere between 15 and 30 days, maybe even 45 days if the provider requests an extension. The investigators typically remain tight-lipped throughout the review and investigation process. Inquiries about the status of a review are usually met with no response or cryptic feedback like “The review findings will be provided at the conclusion of the review.” In the meantime, providers are expected to sit on their hands. Then one day, a letter arrives which often reflects an unmanageable alleged overpayment figure for the provider and the provider is left to dispute the alleged overpayment through “Medicare’s Byzantine four-stage administrative appeals process” – in the words of Circuit Judge Jerry E. Smith in Family Rehabilitation, Inc. v. Azar.

II.  New Timelines Under Transmittal 768 for ZPICs / UPICs to Complete a Postpayment Review:

There has been a development that may effectuate speedier postpayment reviews by ZPICs and UPICs. The Centers for Medicare and Medicaid Services (CMS) issued guidance, which imposes a new timeline and requirements on these contractors effective March 1, 2018. Specifically, the transmittal adds the following requirements to Chapter 3 of the Medicare Program Integrity Manual:

the UPICs / ZPICs shall complete postpayment medical review and provide the lead investigator with a final summary of the medical review findings that includes reference to the allegations being substantiated/not substantiated by medical review, reasons for denials, and any observations or trends noted within 60 calendar days” and “[t]he counting for the 60-day time period begins when all of the documentation is received by the UPIC / ZPIC contractor.”

Please note, however, that this is an internal timeline for the contractors (as between the medical reviewer(s) and lead investigator), meaning that providers should not expect to receive the postpayment audit results within 60 days of having submitted the records to the UPIC / ZPIC. However, Transmittal 768 may be useful to put pressure on the contractors when reviews are pending for months or years on end.

For a detailed discussion of the ZPIC program and process, please see: ZPIC Audits.

Healthcare LawyerLorraine A. Rosado, J.D., is a Senior Associate at Liles Parker and has extensive experience representing Medicare providers and suppliers around the country in administrative claims audits, suspension and revocation cases.  She is also performed a number of IRO reviews in connection with annual CIA reviews by HHS-OIG.  Should you have any questions regarding an administrative enforcement action, please feel free to call Lorraine for a free consultation.  She can be reached at: (202) 298-8750.

The Texas Medical Board Remains Busy Due to High Number of Complaints Filed in 2012

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Medical Board(February 7, 2013):  The Texas Medical Board (Medical Board) was quite busy in 2012.  While the number of disciplinary action taken had dropped in some categories, it rose in others.  In fact, the overall number of complaints filed with the Medical Board was the 2nd highest in the last decade. The Medical Board’s workload numbers for 2012 are now in – a total of 7550 complaints were filed by complainants with the Medical Board against physicians last year.  Notably, this was second highest number of complaints filed in the last decade, only surpassed by the number of complaints filed with the Texas Medical Board in 2011.  Notably, a total of 755 “Informal Settlement Conferences” were conducted by panels assigned by the Medical Board, 85 of which were later advanced to the formal stage, with cases being filed with the State Office of Administrative Hearings (SOAH).  What was the result of this heightened adminstrative activity?  An overview of the disciplinary actions taken is set out below.

I.  Temporary Suspension Actions Were Way Down From 2011:

While the number of disciplinary actions taken against physicians was relatively stable (327) when compared to previous years, the number of “Temporary Suspensions” assessed by the Medical Board was only about a third of the suspension actions taken in 2011 (11 in 2012 versus 32 in 2011).

II.  Probation Placement Actions Were the Highest Number in the Last Decade:  

Notably, 917 physicians were placed on “Probation” by the Medical Board in 2012.  This was the highest number of probation actions taken in the last decade.

III.  Why Are the Number of Complaints Filed with the Medical Board Continuing to Rise?             

At the outset, it is important to keep in mind that Medical Board complaints can be generated in a number of ways. In recent years, the number of complaints filed by disgruntled or unhappy patients has continued to rise. Two of the primary reasons for this increase include:

  • Physicians are treating an educated, consumer driven public.  Now, perhaps more than ever before, patients know their “rights” and will not hesitate to complain if they believe that their concerns have been ignored, their care has been substandard, or that they have been treated unprofessionally by a physician or other licensed clinician.
  • Filing a complaint is as easy as filling out a form.  Moreover, it can literally done online, with relatively little effort on the part of the complainant.  With the advent of the internet, it is easier than ever for a patient (or a member of their family) to file a complaint with Medical Board.  Complaints may now be filed online.

The three primary reasons cited in a complaint against a physician include:

“1. Practice of Medicine Inconsistent with public health and welfare; unprofessional conduct which may endanger the public;

2. Non-therapeutic prescribing/administering of a drug or treatment; and

3. Inability to practice medicine by reason of mental or physical impairment (alcohol or chemical abuse, mental or physical condition).”

Importantly, patients and their families are not the only parties to file complaints with Medical Board against their physician. We have represented a number of physicians in cases brought by another licensee, where it is alleged that a physician has engaged in unprofessional conduct which allegedly triggers the complainant’s statutory obligation to file a complaint against their fellow clinician. While a number of these cases are undoubtedly filed in good faith, we have seen the complaint system “used like a club” by one physician against another because of a personal grudge, a business dispute or even a failed romance.

Finally, physicians need to keep in mind that both Medicare contractors (such as Zone Program Integrity Contractors (ZPICs) and private insurance payor Special Investigative Units (SIUs) are now actively filing complaints with Medical Boards around the country due to payor billing concerns (such as alleged upcoding, double-billing, billing for services not rendered and billing for medically unnecessary services).  In some states, the reverse has occurred.  When a Medical Board has found that a physician has failed to provide adequate supervision or may have engaged in improperly billing, referrals have been made from the Medical Board to the ZPIC in their state.  This often results in a new round of billing reviews and audits by ZPICs (and later SIUs) of the physician’s billing practices.

IV. What Can You Do to Reduce the Likelihood of a Medical Board Complaint?

To the reduce the likelihood of a Medical Board complaint, a physician needs to ensure that he/she is readily accessible to patients and their families.  Moreover, let your patients know that you are interested in hearing their views regarding the quality of care provided, the administrative efficiency of your staff, and any concerns which might arise in connection with the cost of care.  Steps to take would include, but are not limited to:

Listen to your patients.  Many complaints filed with the Medical Board are the result of bad communication practices between a physician and his / her patient.   A patient with a complaint wants an opportunity to share his/her concerns with you.  Listen to your unhappy patients.  Are their grievances legitimate?  You will undoubtedly find that some of their issues are, in fact, valid.  Use this opportunity to improve your organization.  Moreover, by showing your interest in the patient’s complaints, you will serve as a role model for your staff.

Follow-up with your patients. Return their calls if an issue has not been resolved.  Be responsive.  The business of medicine is getting more and more competitive each year.  By resolving a patient’s concerns, you will likely keep the patient as a client and may avoid alienating the patient and giving the patient a reason to still recommend you to their peers.

Don’t be afraid to set up a Complaint Hotline or E-mail Address for patients to lodge any concerns that they might have. Let patients advise you of their concerns rather than feel that they have no choice but to go straight to the Medical Board with their concerns.

Patients often don’t know how to read an “Explanation of Benefits” (EOB) form sent to them by Medicare or their private insurance company. This confusion may lead a patient to believe that your charges are incorrect or that certain billed services were not rendered. Take the time to have someone on your administrative staff explain to patients how charges are likely to show up on their EOB.

Importantly, a number of complaints filed against a physician are the result of statements, improper actions or the failure to take an action by someone on your staff. In many cases, the complaint is caused by your lowest-paid, least trained staff member – your receptionist.  We have worked on cases where the staff member failed to mail out a patient’s lab results in a timely fashion, ultimately resulting in a Medical Board complaint.  Our attorneys have seen cases where an administrative staff member accidentally switched two sets of medical records, resulting in breaches of Personal Health Information (PHI).  The bottom line is this regard is relatively simple – train each and every member of your staff and ensure that they know their obligations and the adhere to practice policies and regulatory requirements.

Finally, develop and implement an effective Compliance Plan. Identify potential weaknesses in your organization and take remedial steps to fix them.

Healthcare LawyerRobert W. Liles, JD, serves as Managing Partner at Liles Parker.  Robert and a number of other firm attorneys have represented physicians in a number of State Medical Board disciplinary investigations and actions around the country.  Already represented? We are more than happy to work with your local counsel and assist him / her in responding to any inquiry or investigation initiated against you by your State Medical Board.  Questions?  Please feel free to call Robert for a free consultation.  He can be reached at: 1 (800) 475-1906.

Health Integrity Audits of Texas and Oklahoma Home Health Agencies are on the Rise.

August 15, 2011 by  
Filed under Home Health & Hospice

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Health Integrity Audits of Texas Home Health Agencies are Expanding(August 14, 2011):   Home health agencies in Texas and Oklahoma remain under considerable scrutiny by Medicare contractors tasked with identifying fraud and abuse perpetrated against the Medicare Trust Fund.  As discussed below, these Medicare contractors have a number of tools at their disposal, many of which can effectively place a home health agency in financial peril in very little time whatsoever.  As our friend D.K. Everitt is fond of saying, “Compliance is not an Option.”  Now, more than ever, it is essential that you review both your past and current documentation, coding, billing and medical necessity practices to better ensure that your current practices fully comply with applicable statutory and regulatory requirements.

I.  Overview of the ZPIC Audit Program for Zone 4: 

Over last few years, the government’s reliance on private contractors to both identify overpayments and potential instances of fraud has greatly increased.  Health Integrity is the Zone Program Integrity Contractor (ZPIC) awarded the contract for Zone 4 (Texas, Oklahoma, Colorado and New Mexico) by the  Centers for Medicare and Medicaid Services (CMS).

II. Health Integrity Audits of Home Health Claims Are Accelerating: 

As home health agencies in Texas and Oklahoma can readily attest, Health Integrity audits of claims billed to Medicare have increased over the past year.  The Health Integrity audits may involve one or more of the following:

Unannounced site visits leading to probe samples, statistically relevant samples and other actions. Failure to cooperate can lead to revocation from the Medicare program.  Notably, there are no statutory restrictions preventing contractors from showing up unannounced and requesting to see documentation related to Medicare claims.  Should Health Integrity show up at your home health agency, you will likely find that Health Integrity’s auditors are both to-the-point and professional in their dealings you and your staff.  Our clients have generally found that Health Integrity’s reviewers have researched an agency’s billing practices before they arrive.  When they show up, they will already have a listing of the claims-related records to be pulled.   ZPICs have been known to show up with their own scanner or copier.  This has led to problems for providers later on because they failed to receive a copy from the contractor before they left.  Should a ZPIC ask you to make copies, the contractor will often identify a handful to take with them and ask that you forward the other within a set period.

Unannounced interview of home health patients and their families Health Integrity is actively conducting interviews of home health patients and their families in an effort to determine whether a patient was truly “homebound” during the claim period(s) at issue.

Pre-payment audit the number of home health agencies and other providers placed on pre-payment  review appears to have significantly increased over the last six months

Post-payment audit Health Integrity is actively conducting post-payment audits of Texas and Oklahoma home health agencies and are extrapolating alleged damages identified in these post-payment audits.

Suspension exercise caution when using Electronic Medical Records EMR) software – some software programs are better than others.  Avoid any program which minimizes the need for individualization and the documentation of patient-specific observations.  As always, it is important that home health agencies properly document the medical necessity of skilled care.  In some instances, ZPICs have expressed concern that the patient records generated appeared to be “cloned.”

Medicare number revocation take care if your home health agency is subjected to a site visit.  As a participating provider, you have an obligation to cooperate with the ZPIC’s review. Should you fail to cooperate, a ZPIC can recommend to CMS that your Medicare number be revoked. This is a very real threat and should not be discounted.  This becomes even more complicated if the ZPIC’s representatives go beyond mere claims-related questions and appear to be seeking information which could subject you (in your individual capacity), to possible civil and / or criminal liability.   Remember your obligations as a participating provider but call your attorney.  

Referral for criminal investigation and prosecution  — ZPICs are actively referring cases to HHS-OIG and DOJ for formal civil and criminal review.

III. Primary Reasons of Health Integrity Audits: 

We currently represent a number of home health agencies around the country in connection with post-payment audits and the appeal of overpayment assessments levied by Health Integrity and other ZPICs.  Our clients often ask why their home health agency was targeted by the ZPIC for audit.  After handling many of these cases, the following reasons for targeting have been cited by the ZPIC or ultimately learned when handling the case:

Predictive Modeling / Data Mining —  As Chapter 2, Sec. 2.3 of the MPIM details: “Claims date is the primary source of information to target abuse activities.”  Data mining may have been used to examine a home health agency’s “error rate.”  This would provide the provider’s history of repeated overpayments   or improperly filed claims.

Complaints  These can include “complaints” filed by beneficiaries, physicians, other providers (such as competitors), disgruntled current and former employees.

Referrals  ZPIC audits may be generated based on referrals from other CMS contractors (other ZPICs, PSCs, RACs, MACs, QA Staff), State MFCUs, Offices of the U.S. Attorney, or other Federal agencies.  Notably, it appears that private payors are now also referring cases to the government.

Reports —  HHS-OIG and GAO regularly issue reports addressing areas of concern.

State Licensing Boards State Medical Boards, Nursing Boards, Pharmacy Boards and other regulatory entities responsible for handling State licensing responsibilities regularly hear or learn of improper actions by providers.  This information may be shared with one or more Federal agencies and ultimately be referred to the ZPIC handling a certain zone.

IV.  Preparing for Health Integrity Audits: 

While many home health agencies believe that their Compliance Plan is satisfactory, it has been our observation that many of the plans currently in place are little more than copies taken from a sample off of the internet.  Unfortunately, many providers view Compliance Plans as mere paperwork, rather than as a useful “audit tool” to be used by the organization on an ongoing basis. When properly constructed, an effective Compliance Plan can both improve the quality of patient care rendered and assist a provider in its efforts to fully comply with applicable statutory and regulatory requirements.  Therefore, it is imperative that you take steps to ensure that your Compliance Plan takes into account each of the unique risks faced by your home health agency.

To be clear, although there are a number of steps you can take to reduce the likelihood of a ZPIC audit, there is no way to entirely eliminate the risk.  Nevertheless, the development, implementation and consistent application of an effective Compliance Plan can greatly reduce an organization’s potential liability.  In many respects, an effective Compliance Plan is similar to a flu shot.  Although a flu shot cannot prevent you from getting sick, it will hopefully reduce the severity of your illness should you catch the flu.  Similarly, if you have implemented and diligently adhered to an effective Compliance Plan, you could still be audited by a ZPIC, a Recovery Audit Contractor (RAC) or by a law enforcement agency, such as the Department of Health and Human Services, Office of Inspector General (HHS-OIG).  However, as a compliant home health agency, an auditor is much more likely to find that your billing practices comply with applicable coverage requirements.

Healthcare AttorneyRobert W. Liles serves as Managing Partner at Liles Parker, Attorneys & Counselors at Law.  Mr. Liles has extensive experience representing home health agencies and other providers in connection with the appeal of post-payment audits conducted by ZPICs and RACs.  Mr. Liles has conducted “gap analyses” of many provider organizations and has worked with these providers to implement effective Compliance Plans.  Should you find that your organization is being audited, feel free to call give him a call for a complimentary consultation.  He can be reached at: 1 (800) 475-1906.  

Lose Your Appeal at Reconsideration? Consider an ALJ Hearing

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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.

Is a ZPIC Tougher than a RAC or PSC When Conducting Medicare Audits?

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(March 25, 2010): The Recovery Audit Contractor (RAC) program is an integral part of the Centers for Medicare & Medicaid Services’ (CMS’) “benefit integrity” efforts which seek to identify and recoup alleged overpayments paid to Medicare providers. Similarly, Program SafeGuard Contractors (PSCs) have been actively auditing Medicare providers and suppliers around the country. While the RAC program is still being expanded in many parts of the country (to cover not only hospitals but also other providers and types of Medicare claims), the PSC program is in the process of being replaced by Zone Program Integrity Contractors (ZPICs)   ZPICs are already active in many areas and are actively conducting Medicare audits of physicians, home health agencies, hospices, DME companies, therapy clinics, chiropractors and other small to mid-sized health care providers.  Despite the “hype” surrounding RACs, at this time, ZPICs represent a significantly greater risk to non-hospital providers than do RACs or PSCs.  The purpose of this article to examine a number of the differences between these various Medicare audit contractor programs.

I.  What Are The Chances of Your Practice Being Reported by a ZPIC or RAC to DOJ for Possible Fraud?

While both Medicare audit contractor programs are designed to “find and prevent waste, fraud and abuse in Medicare,” the fact is that to date, ZPICs have been much more likely than RACs to report possible incidents of “fraud” that are identified while conducting Medicare audits.  Frankly, it makes sense.  RACs make money by identifying alleged overpayments – not by making a fraud referral to law enforcement.  Notably, as a result of recent criticism by HHS-OIG, CMS will be requiring RACs to be much more diligent in the future about making referrals to law enforcement when it appears that a health care provider’s conduct represents fraud rather than a mere overpayment.  CMS has provided training to RACs on how to identify fraud in the near future.  Importantly, a RAC denial of claims which results in a provider repayment will not necessarily prevent HHS-OIG from investigating and making a referral to DOJ for possible prosecution, as appropriate, if there are allegations of fraud or abuse arising out of the alleged overpayment.

Notably, recent letters by ZPICs conducting Medicare audits in South Texas and in other parts of the country have been seeking copies of business related records (copies of contracts, agreements with Medical Directors, lease agreements and more), along with its request for claims-related medical documentation.  Importantly, the contractor is assessing the provider’s business relationships to help verify that referral and other business relationships do not violate the Federal Anti-Kickback Statute or Stark Law.  To reduce the possibility of civil or criminal liability, it is essential that Medicare providers take affirmative steps to better ensure that their practices are compliant with applicable statutory and regulatory requirements.  2011 will be the “Year of Compliance.”  All providers, regardless of size, should take steps to implement an effective Compliance Program.  Should you not have a compliance program in place, give us a call — we can help.

II.  What is the Difference Between  a ZPIC and a PSC?

Representatives of both a ZPIC and Program Safeguard Contractor (PSC) will argue that they are not “bounty hunters” in the Medicare audit process.   A ZPIC is are not paid contingency fees like RACs and are paid directly by CMS on a contractual basis.  Nevertheless, common sense tells us that if ZPICs aren’t successful at identifying alleged overpayments through Medicare audits, the chances of a particular contractor getting their contract with CMS renewed are pretty slim.  Experience has shown that both a ZPIC and a PSC don’t always appear to strictly adhere to medical review standards established by Medicare Administrative Contractors (MACs) and approved by CMS.  In our opinion, there appear to have been cases where these contractors applied their own unwritten standards, often denying claims based on conjecture and speculation rather than a strict application of the applicable LCD or LMRP.

In any event, over the last year, we have seen ZPIC and PSC auditors readily place health care providers on pre-payment review, conduct post-payment Medicare audits, and  recommend suspensions of payment.  Additionally, in many cases they have been extrapolating the alleged damages based on a sample of claims reviewed. Finally, as discussed above, identified instances of potential fraud are being referred by a ZPIC or a PSC to HHS-OIG for possible investigation, referral for prosecution and / or administrative sanction.

III. What Sources of Coding / Billing Data are Used by ZPICs During Medicare Audits?

ZPICs are required to use a variety of techniques, both proactive and reactive, to address any potentially fraudulent practices.  Proactive techniques will include the ZPIC IT Systems that will combine claims data (fiscal intermediary, regional home health intermediary, carrier, and durable medical equipment regional carrier data) and other source of information to create a platform for conducting complex data analyses. By combining data from various sources, ZPICs have been able to assemble a fairly comprehensive picture of a beneficiary’s claim history regardless of where the claim was processed. The primary source of this data is reportedly CMS’ National Claims History (NCH) database.

IV.  How do ZPICs Conduct Medical Reviews?

During their Medicare audits, ZPICs conduct medical reviews of charts to determine, among other things, whether the service submitted was actually provided, and whether the service was medically reasonably and necessary.  Based upon their findings, ZPICs may approve, downcode or deny a claim.  To date, we have never seen a ZPIC conclude that a claim should have been coded at a higher level, only a lower level.  Regrettably, ZPICs are not required to have a physician review a claim in order to deny coverage.  In most of the cases on which we have worked, the contractor’s medical reviewer has been a Registered Nurse.   While some Federal courts have found that a treating physician’s opinion should be given paramount weight, others have ruled that the opinion of a treating physician should not be given any special consideration.  Generally, ZPICs have completely disregarded the “Treating Physician Rule,” despite the fact that a patient’s treating physician was the only provider to have actually seen and assessed the patient at issue.

V.  How Should You Respond to a ZPIC Medicare Audit?

In responding to a ZPIC audit, it is important to remember that although they may not technically be “bounty hunters,” in our opinion, they are in the business of finding fault.   Moreover, they are quite adept at identifying “technical” errors, many of which they will readily cite when denying your Medicare claims.  Unfortunately, it is not at all uncommon for a ZPIC to find that 75% — 100 % of the sample of claims reviewed did not qualify for coverage and payment by Medicare.  After extrapolating the damages to the universe of claims at issue, health care providers often find that they are facing alleged overpayments of between $150,000 and several million dollars.  In many cases, the assessment is far in excess of the provider’s ability to pay.  As such, the administrative appeal becomes a “bet the farm” matter for the health care provider.  If the assessment remains, the provider will have no choice but to declare bankruptcy.

It is also important to remember that ZPIC enforcement actions are not limited to merely overpayment assessments.  In recent months, ZPICs have been increasingly conducting unexpected site visits of health care provider’s offices and facilities, often requesting immediate access to a limited number of claims and the medical records supporting the services billed to Medicare.  Typically, they then require that a provider send supporting documentation covering a wider list of claims within 30 days of their visit.  In other cases, should a ZPIC identify serious problems when reviewing the medical records requested, they may recommend to CMS that the provider’s Medicare billing privileges be suspended.  From a practical standpoint, few providers are diversified (in terms of payor mix) to the point that they can easily do without Medicare reimbursement.  The practical effect of a Medicare suspension is therefore that the provider cannot continue in business throughout the 180-day initial period of suspension typically imposed by CMS.  Finally, in a limited number of cases, after a ZPIC or PSC has visited an office, the provider will subsequently learn that the contractor has recommended that the provider’s Medicare number be revoked.  In a fairly recent case we are aware of (not involving a client of the Firm), the contractor claimed that the provider failed to cooperate, a clear violation of the provider’s “Conditions of Participation” with Medicare.  As a result, the contractor recommended (and CMS approved) the revocation of the provider’s Medicare number.  Short of exclusion from participation in the Medicare program, this is arguably the most serious and far-reaching administrative action that can be taken against a Medicare provider.

In light of the seriousness of the situation, regardless of whether you are contacted by a RAC, a ZPIC or a PSC, you must take great care when responding to Medicare audits.  Administrative enforcement actions can be extraordinarily serious.  Therefore, is essential that you engage an experienced attorney and law firm to represent your interest.

Read more about ZPIC Medicare audits.

Robert Liles represents physicians in connection with ZPIC audits.Robert W. Liles, J.D., M.S., M.B.A., is a health lawyer with Liles Parker PLLC.  Liles Parker has offices in Washington, DC, Houston, TX and San Antonio, TX.  Prior to entering private practice, Mr. Liles served as an Assistant U.S. Attorney.  He now represents health care providers around the country in connection with administrative, civil and criminal health law issues.  He has extensive experience defending providers in audits by a ZPIC, PSC or another Medicare / Medicaid contractors.   For a complimentary consultation, please call:  1 (800) 475-1906.

What is a ZPIC?

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What is a ZPIC ?(March 19, 2010):  Unfortunately, you received a letter in the mail advising you that a set of your Medicare claims are going to be audited by a Zone Program Integrity Contractor (ZPIC) working for the Centers for Medicare and Medicaid Services (CMS).  Your initial reaction is like to be “What is a ZPIC?”  Good question.

I. What is a ZPIC?

Pursuant to the Medicare Prescription Drug, Improvement and Modernization Act of 2003 (MMA), CMS was required to use competitive measures to replace the current Medicare Fiscal Intermediaries (Part A) and Carriers (Part B) contractors with Medicare Administrative Contractors (MACs). After setting up the new MAC regions, CMS created new entities, called Zone Program Integrity Contractors (ZPICs). Intended to consolidate existing program integrity efforts, over the last year ZPICs have been taking over PSC audit and enforcement activities around the country.  Statements of Work in ZPIC contracts are similar to those covering PSCs.  In fact, Chapter 4 of CMS’s “Medicare Program Integrity Manual” reflects that the processes and procedures used by ZPICs when handling program integrity functions are essentially the same as those used by PSCs around the country.  Seven ZPIC zones have been identified.  The zones include the following states and / or territories:

  • ZPIC Zone 1 – CA, NV, American Samoa, Guam, HI and the Mariana Islands.
  • ZPIC Zone 2 – AK, WA, OR, MT, ID, WY, UT, AZ, ND, SD, NE, KS, IA, MO.
  • ZPIC Zone 3 – MN, WI, IL, IN, MI, OH and KY.
  • ZPIC Zone 4 – CO, NM, OK, TX.
  • ZPIC Zone 5 – AL, AR, GA, LA, MS, NC, SC, TN, VA and WV.
  • ZPIC Zone 6 – PA, NY, MD, DC, DE and ME, MA, NJ, CT, RI, NH and VT.
  • ZPIC Zone 7 – FL, PR and VI.

II. What Should Our Practice do After Receiving a ZPIC Request for Records?

Upon receiving a request for records by a ZPIC, there are a number of steps which must be taken.  These steps include, but are not limited to:

  • Take care before conducting an internal review of the claims requested.  While an internal analysis can be invaluable, you want to avoid creating a non-privileged paper trail of identified problems.  Remember, both ZPICs and RACs may make a referral to law enforcement if their assessment indicates that problems may be more than a mere overpayment.
  • Review past claims audits and evaluations to determine whether these claims have been previously evaluated.  If you owe money, pay it back.
  • Note the claims denied and calculate when appeals must be filed.  Review the reasons given for each denial.
  • Has the contractor correctly cited Medicare policy?  Do not automatically assume the contractor’s arguments are meritorious.
  • Appeals must be filed in a timely fashion.  Moreover, all supporting documentation and arguments must be submitted to the QIC.

Read more about Zone Program Integrity Contractors

Robert W. Liles serves as Managing Partner at Liles Parker, Attorneys & Counselors at Law.  Liles Parker attorneys represent health care providers and suppliers around the country in connection with audits and investigations of Medicare, Medicaid and private payor claims.  Our attorneys also represent licensed health care professionals in State Licensure Board complaints and administrative disciplinary proceedings.  Should you have any questions regarding these issues, don’t hesitate to contact us.  For a complimentary consultation, you may call Robert or one of our other attorneys at: 1 (800) 475-1906.