Auditors Are Ramping Up Operations

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Original story posted on: October 21, 2020

A culture of compliance is the key to success.

There are no indications that audits of healthcare entities by government payers are slowing down – if anything, the ramping up of audit operations that was hinted at a short while ago has indeed materialized. Commercial payers are moving just as aggressively, based on the cases on which I’m engaged. Since my last Monday Monitors article, the following are new cases:

  • During the week of Oct. 7, a Florida client received 14 targeted probe-and-educate (TPE) letters for their providers;
  • Fidelis New York received a demand for $868,000;
  • Blue Cross Georgia received a demand for $365,000;
  • Blue Cross Texas received a demand for $143,000;
  • A two-count grand jury indictment for healthcare fraud scheme or artifice in Miami was handed down, resulting in an asset seizure of $864,000;
  • A Centers for Medicare & Medicaid Services (CMS) referral to the U.S. Department of Treasury was made for three outstanding audit demands from FCSO, amounting to $64,000;
  • A six-count grand jury indictment for healthcare fraud scheme or artifice in Michigan was handed down, with a demand of $2 million; and
  • Three separate laboratories in Georgia, Tennessee, and Indiana were hit for UTD panels, resulting in demands ranging from $72,000 to over $1 million.

My specific focus is on strategic audit defense, which means my role centers on audit results and the language used by payers and government investigative agencies. The key to audit survival and/or mitigation of damages lies in your ability to remain vigilant regarding compliance with coding and documentation requirements, and ensuring your providers can defend their clinical judgement and the medical necessity of the services they render and/or order!

I have an orthopedic client that has been engaging in lots “peer reviews” from commercial payers wanting to determine the reasonableness and appropriateness of his services. This provider began requiring insurance company medical directors, prior to the call or during the call, to give their full legal name, city and state they practice in, medical license number, and the specialty in which they’re credentialed. When they want to know why, he tells them he’s adding them to the patient’s medical record, so that if the patient is harmed by a decision they make, their name is in the medical record as the dissenting caregiver in the patient’s care – and they can potentially be held liable. The result has been medical directors not showing up for calls, and some of those who do disconnect immediately once his request is made. This is such a brilliant strategy, because if the medical director fails to engage, the billed services stand, because they are no longer being clinically challenged!

Unified Program Integrity Contractor (UPIC), Recovery Audit Contractor (RAC), Comprehensive Error Rate Testing (CERT), and commercial payer audits, including additional documentation requests (ADRs) for pre-payment reviews, must be addressed immediately to ensure adequate time for reviewing provider documentation, as well as to prepare for whatever steps may be needed, based on audit findings. One of the biggest trends seen over the past month is the increase in comparative billing reports (CBRs), and the fact that payers are pushing providers to take a closer look at their billing patterns, per-relative value unit (RVU) charges, and where they rank, regionally and nationally. Receipt of a CBR does not mean you should change your billing patterns; it simply means you should run your own utilizations reports per provider within your group, and identify any aberrant billing patterns or potential outliers by conducting your own internal audit (or have an independent third-party/objective organization conduct an audit under attorney/client privilege).

Several of the demand-for-refund letters I’ve received speak to adverse audit findings and claim that a “statistically valid sample” was used, including extrapolation based on the sample. Sampling is one of the most critical parts of audit results, yet it is the area most likely to have significant flaws – so much so that CMS had to revise Chapter 8 of its Program Integrity Manual (PIM) several years ago. Section 8.4.2 of the PIM states the following:

“If a particular probability sample design is properly executed, i.e., defining the universe, the frame, the sampling units, using proper randomization, accurately measuring the variables of interest, and using the correct formulas for estimation, then assertions that the sample and its resulting estimates are ‘not statistically valid’ cannot legitimately be made.”

While the above statement is specific to CMS and other government audits (TRICARE Operations Manual 6010.59-M April 1, 2015 Chapter 13, Addendum A; 13.A-5 Statistical Sampling for Overpayment Determinations and Identification of Probable False Claims), it is also generally accepted in the statistical community. Accordingly, these criteria must be met for an extrapolation to take place.

Because the accuracy and applicability of an extrapolation is so heavily dependent upon the statistical validity of the sample, the first and perhaps most important question to be answered is precisely this – whether the sample is in fact statistically valid. In many cases, a sample is assumed valid if there is a belief that the sample units were drawn randomly from the sampling frame or universe. The term “random” is most often defined here as meaning that each audit unit of interest (beneficiary, claim, claim line, etc.) has an equal and non-zero chance of being selected. There is, however, an important difference between a sample being random and a sample being representative of the sampling frame from which it was drawn.

According to 8.4.1.3 of the PIM, “The major steps in conducting statistical sampling are:

  • Selecting the provider or supplier;
  • Selecting the period to be reviewed;
  • Defining the universe, the sampling unit, and the sampling frame;
  • Designing the sampling plan and selecting the sample;
  • Reviewing each of the sampling units and determining if there was an overpayment or an underpayment; and, as applicable,
  • Estimating the overpayment. Where an overpayment has been determined to exist, follow applicable instructions for notification and collection of the overpayment.”

In simple terms, we want the sample to be representative of the universe – or, more colloquially, for it to “look like” the universe, with regard to its characteristics. These characteristics might include what was paid for the procedure, as well as coding characteristics, such as the differences between the vast array of procedure and service codes included in the HCPCS II coding universe. It may also have to do with specific characteristics found among the beneficiaries, which often more accurately define the types of diagnoses and treatments represented within the medical records.

Some characteristics, such as charges or paid amounts, can be visualized by graphing data using histograms, for example. Non-valued characteristics, such as those subject to rules, regulations, or guidelines, are more difficult to visualize in this way. For value-based characteristics, distribution and variance are two effective ways to look at representativeness of a sample to a universe (or sampling frame).

The above seems simple enough, no? However, it is among the biggest areas of error when it comes to payers and their contractors conducting audits. So the next time you get a letter stating that you have been audited and they used as “statistically valid” audit sample, you may want to check it, because odds are there will be a flaw. Once the sample is fatally flawed, then the extrapolation is fatally flawed – and then, as they say, game over!

Practices must remain vigilant if they’re going to be prepared for what comes with an audit request, post-payment demand for refund, pre-payment review, or peer review request! The point here is simple: you should not allow yourself to become the prey! When a denial of service is received, validate the denial and appeal if you’re in the right! When demands for a refund are issued, appeal, because the more the payers and their contractors know you are willing to push back (especially if you prevail on appeal), the less time and effort they will expend on targeting you in the future.

At the end of the day, healthcare is a business!

Sean M. Weiss, CEMA, CMCO, CPMA, CPC-P, CMPE, CMPM, CPC-P

Sean Weiss is a partner and vice president of compliance with DoctorsManagement, LLC. Sean has dedicated his career to helping healthcare facilities reduce the risk of noncompliance and achieve measurable financial results. He has protected thousands of physicians, medical practice groups, and hospitals from undue compliance penalties.

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