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Prioritize Protecting Patient Records after HIPAA Breaches

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January 19, 2012

What You Need to Know: Inpatient Denials and Part A/Part B Reimbursement

By Andrew B. Wachler, Esq. and Jessica C. Lange, Esq.

In today's audit landscape, hospitals' inpatient short-stay claims are receiving increased attention from the Centers for Medicare & Medicaid Services (CMS). On Nov. 15, 2011, CMS announced the launch of two demonstration programs that directly impact hospitals, specifically as it pertains to these claims. The first such program, called the Part A-to-Part B Rebilling Demonstration Program, is voluntary. The second program, the Recovery Auditor Pre-Payment Review Demonstration Program, however, is mandatory for providers in 11 states.[2] Whether included in either of these programs or not, hospitals must be aware of the most current audit developments affecting them and effective strategies to employ during the audit appeals process.

AB Rebilling Demonstration Program

The Part A-to-Part B Rebilling Demonstration Program reflects CMS's stated goal to reduce improper payments from the Medicare program, and it will involve the participation of up to 380 hospitals.[3] The program's participants, determined through a first-come, first-serve application process, will consist of 80 large hospitals (300 or more beds), 120 moderate-sized hospitals (100-299 beds) and 180 small hospitals (99 or fewer beds).[4] The program will run for three years, from Jan. 1, 2012 to Dec. 31, 2014. Enrollment for the program opened at 2 p.m. EST on Dec. 12, 2011.

The AB Rebilling Demonstration Program only will involve the rebilling of certain claims for Part B reimbursement. Specifically, it will center on short-stay inpatient claims (denied on or after Jan. 1, 2012) that are denied by a Medicare Administrative Contractor, a Zone Program Integrity Contractor, a Recovery Auditor or Comprehensive Error Rate Testing (CERT) when services are determined to have been provided in an incorrect setting. Under the program, these claims can be resubmitted as new claims for outpatient services provided. In addition, short-stay inpatient claims self-identified by a provider as being rendered in the incorrect setting after services were provided and billed may be resubmitted as new claims for outpatient services.[5]

Under the program, once a hospital rebills a claim for Part B reimbursement it will receive 90 percent of the total Part B payment (not including observation services), but still will be required to refund the difference of the beneficiary's co-pay and deductible due under Part A and Part B.[6] CMS expressed its rationale for the 90 percent provision during its Nov. 30, 2011 Special Open Door Forum. The agency noted that it did not want to provide 100 percent of Part B reimbursement because it did not want to incentivize inaccurate billing, fearing that full payment would encourage hospitals to "game" the system.

One of the most concerning aspects of the AB Rebilling Demonstration Program is the requirement that participants waive their right to appeal all inpatient short-stay claims denied for lack of medical necessity when services are determined to have been provided in an inappropriate setting.[7] This highlights the inequity of a system in which a provider must choose between either appealing the denial of an inpatient claim and being unable to rebill the claim for outpatient reimbursement or rebilling the claim for 90 percent reimbursement of the Part B outpatient portion, yet waiving all due process rights.

Recovery Audit Pre-Payment Review Demonstration Program

Again, unlike the AB Rebilling Demonstration Program, the Pre-Payment Review Demonstration Program is mandatory and will have a dramatic effect on providers in the 11 participating states because it allows Recovery Auditors (RACs) to conduct pre-payment reviews on providers' Medicare claims.

In states outside of the demonstration program, RACs only may conduct post-payment reviews of providers' Medicare claims. However, on Dec. 30, 2011 CMS announced that the implementation of the Recovery Audit Pre-Payment Review Demonstration Program was being delayed until further notice. There has been no indication that this delay will be indefinite, therefore it is still important for providers to understand the basics of the program.

The Recovery Audit Pre-Payment Review Demonstration Program will allow RACs to review claims before they are paid to ensure that providers are complying with all Medicare payment rules.[8] The 11 states CMS selected for the demonstration program included Florida, California, Michigan, Texas, New York, Louisiana, Illinois, Pennsylvania, Ohio, North Carolina and Missouri. Under the current plan CMS will roll out the demonstration program with a focus on inpatient short-stay claims, focusing on MS-DRG 312 Syncope & Collapse as the only claim initially subject to review. However as the program progresses, CMS will initiate pre-payment review of seven more DRGs. CMS likely will add even more claims, including physician claims, as the demonstration program proceeds. Furthermore, the program is being introduced in addition to, and not in replacement of, the current RAC Program. The limit on the number of medical records eligible to be reviewed by the contractors is the same as that which exists under the post-payment RAC program; therefore, the limits may be doubled for hospitals in the demonstration states.

Despite CMS's focus on the positives of the Recovery Audit Pre-Payment Review Demonstration Program, there are very serious implications for providers subject to its provisions.

Specifically, the program highlights the difficulty in balancing Medicare program integrity with the detrimental effects a pre-payment review has on Medicare providers. Pre-payment review is an aggressive and effective method for contractors to audit providers and prevent improper payments. This method threatens providers, however, because it significantly impacts cash flow, and there are no substantive criteria or procedures in place to determine placement on (or removal from) pre-payment review lists. For hospitals in the demonstration program, they will have no choice but to experience pre-payment review and the possible devastating impacts it may have on their finances.

The looming implementation of CMS's Recovery Audit Pre-Payment Review Demonstration Program indicates a pronounced shift in contractors' focus on pre-payment reviews. From a Medicare program integrity perspective, a "prevent and detect" approach is an effective way to avoid improper payments, but pre-payment reviews can be unjustly devastating to providers. Specifically with regard to hospitals, pre-payment reviews may involve providers being forced to absorb the costs of expensive procedures and admissions while a contractor reviews (and potentially denies) a claim. In fact, if a hospital appeals a denied claim 30 days after each level of appeal, it could take at least a year before the claim reaches the ALJ level of appeal.[1]

One possible result of the Recovery Audit Pre-Payment Review Demonstration Program will be hospitals choosing to bill services they consider inpatient as outpatient services instead. Although hospitals should determine how to bill services based upon clinical decisions, this review demonstration program places them in a difficult position because of the uncertainty of payment for inpatient short-stay claims.

The Rest of Us

Even providers not participating in the recently announced CMS demonstration programs will be affected by the demonstration programs' implications on obtaining orders for Part B reimbursement for Part A denials for lack of medical necessity.

Specifically, the demonstration programs reinforce the importance that hospitals appeal Part A denials - and in the event that those claims continue to be denied, seek Part B reimbursement. In addition, the Recovery Audit Pre-Payment Review Demonstration Program highlights the importance that providers receive Part B reimbursement early in the process and do not have to wait until they reach the ALJ stage of appeal. At this juncture there is not an effective mechanism for providers not taking part in the Part A-to-Part B Rebilling Demonstration program to achieve Part B reimbursement in this context despite the fact that they are entitled to it by law.

Since the reimbursement mechanism is not in place, it is essential that hospitals continue to appeal Part A claims denied due to medical necessity when services allegedly are provided in the wrong setting - and, in the alternative, to seek Part B reimbursement. A consistent effort by the healthcare industry will help to encourage CMS to implement a mechanism for Part B reimbursement that not only reaches beyond the rebilling demonstration program, but also maintains hospitals' due-process rights to appeal Part A inpatient denials.

The demonstration programs announced late last year reflect the current state of the Medicare program and the federal government's extensive efforts to curb improper payments to providers. However, they also reflect the need for hospitals to individually and collectively seek Part B reimbursement in the context of Part A claims denied for medical necessity.

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jlange@wachler.com.

References:

[1] Interestingly, hospitals subject to the pre-payment review demonstration program that also are enrolled in the Part A-to-Part B Rebilling Demonstration Program will not be able to appeal pre-payment review denials of inpatient short-stay claims, but only will be able to rebill them through the Part A-to-Part B Rebilling Demonstration Program.

[2] The Recovery Audit Pre-Payment Review Demonstration Program's implementation was delayed on Dec.30, 2011.

[3] Part A to Part B Rebilling Demonstration Program, Provider Outreach and Education PowerPoint presentation, Nov. 28, 2011, available at: https://www.cms.gov/CERT/downloads/Rebilling_Demo_Outreach_1129.pdf (Last visited: Dec. 9, 2011).

[4] Id.

[5] Supra, Note 13. During the Special Open Door Forums, CMS clearly stated that conditional Code 44 still applies, wherein a hospital is precluded from changing the service from inpatient to outpatient once the patient has been discharged but when services have not yet been billed. This places hospitals in the demonstration program in a difficult position, because in order to rebill the short-stay inpatient services as outpatient they first must submit a bill for the inpatient services.

[6] Supra, Note 9.

[7] Supra, Note 13.

[8] Centers for Medicare & Medicaid Services, Fact Sheet for the Recovery Audit Pre-Payment Review Demonstration Program, Nov. 15, 2011, available at: https://www.cms.gov/apps/media/press/factsheet.asp?Counter=4170 (Last visited: Dec. 11, 2011).

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October 5, 2010

Complex Medical Necessity Reviews Underway: What Does the Past Tell Us

By Amy K. Fehn, Esq. and Jennifer Colagiovanni, Esq.

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While recently approved medical necessity reviews in all four RAC regions suggest that increased audit activity is imminent, providers should continue to address identified vulnerabilities in an effort to prevent additional RAC scrutiny.

One place providers can look to distill key areas of vulnerability is the RAC Demonstration program, which began in 2005. CMS initially implemented the demonstration program in three states and later expanded it to include a total of six states in an effort to determine whether recovery auditing could be an effective tool for Medicare. As part of its RAC assessment, CMS collected improper payment information from the Demonstration RACs, including high-risk medical necessity and coding vulnerabilities. CMS recently released three MLN Matters articles addressing several high-risk vulnerabilities identified during the RAC Demonstration, which may prove helpful to providers as they prepare for increased audit activity under the permanent program.

High Risk Vulnerabilities

CMS released the first of three articles addressing high-risk vulnerabilities in July 2010 (SE1024), focusing on documentation risk areas like the deadline requirements for submission of medical record requests and insufficient documentation that fails to support that services billed were covered, medically necessary and/or appropriately coded. For complex reviews such as DRGs and medical necessity, it is crucial that medical records requested be submitted for review in a timely manner. Failure to submit supporting medical documentation surely will result in claim denials.

Moreover, the documentation must be complete and legible. The medical records need to document the eligibility of the patient receiving treatment, that the Medicare criteria for coverage and billing requirements were met, and that the service was medically necessary and correctly coded. If the documentation fails to demonstrate the need for the service or that the appropriate level of care was provided, the claim likely will be denied on review.

Building on the insufficient documentation considerations set forth in the first MLN Matters article, CMS on Sept. 23 released the second (SE1027) and third (SE1028) articles in the series. These articles focused on specific high-risk vulnerabilities related to medical necessity reviews and DRG coding for inpatient hospital stays.

With respect to medical necessity reviews, CMS listed 17 high-risk vulnerabilities recognized in the RAC Demonstration Program, including Cardiac Defibrillator Implant (DRG 514/515), Heart Failure and Shock (DRG 127), Other Cardiac Pacemaker Implantation (DRG 116) and Chest Pain (DRG 143). CMS noted that while many of these services and procedures were deemed to be medically necessary, it was determined that they could have been performed in a less intensive setting. More specifically, in order to avoid denials for inpatient admissions, the medical record must contain "sufficient documentation to demonstrate that the beneficiary's signs and/or symptoms were severe enough to warrant the need for inpatient medical care."

Coding Vulnerabilities

The Demonstration RACs also identified hospital coding vulnerabilities tied to scenarios in which the medical records submitted failed to support the codes billed. The high-risk DRGs identified included Respiratory System Diagnosis with Vent Support (CMS DRG 475), Closed Biopsy of Lung (CMS DRG 076, 077, 120), OR Procedure for Infections, Parasitic Diseases (CMS DRG 415) and Coagulopathy (CMS DRG 397/143). For inpatient admissions, the patient's principal diagnosis must be identified by the attending physician, and CMS recommends documenting the principal diagnosis in both the medical record and the discharge summary. "Other" or "secondary" diagnoses also must be provided by the attending physician for an inpatient admission.

Improper Payments

The improper payment amounts associated with the high-risk claim types listed in the articles suggest that these claim types also will be the focus of the permanent RACs in the future. As such, it is extremely important for providers to improve their medical records so as to provide reviewers with a complete picture of the patient's medical condition to support the appropriateness of the code billed, and to eliminate claim denials for insufficient documentation. Hospitals and health systems need to stress to providers the impact of these "big-ticket" denials and focus in on specific areas in the documentation of these services where additional information is needed.

Knowing what additional information the reviewers are looking for is half the battle. The MLN Matters articles touch on key documentation components providers can and should integrate. For example, providers should document pre-existing medical problems or other considerations that lead the provider to determine that inpatient admission is medically necessary. Developing documentation that indicates why a beneficiary's health would be threatened if care was provided in a less intensive setting is integral in supporting an inpatient level of care.

Progress Notes

Likewise, when completing form-based progress notes, providers should ensure that all fields are completed, including fields that are not applicable to the specific patient, to demonstrate that the criteria were considered in the evaluation. For example, a provider should enter "N/A" rather than leaving a field blank to indicate that each matter was considered during the patient's assessment. Consistency among various portions of the medical record is also imperative. If contradictory information is noted, CMS recommends including documentation from the provider that explains the existence of the contradiction, if available.

Proactive compliance focused on improving documentation efforts in these key areas of high-risk vulnerabilities can help providers avoid RAC claim denials on "big-ticket" services and procedures in the future.

About the Authors

Amy K. Fehnis a partner at Wachler & Associates, P.C. Ms. Fehn is a former registered nurse who has been counseling healthcare providers for the past eleven years on regulatory and compliance matters and frequently defends providers in RAC and other Medicare audits.

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Links:

SE1024: https://www.cms.gov/MLNMattersArticles/downloads/SE1024.pdf

SE1027: http://www.cms.gov/MLNMattersArticles/downloads/SE1027.pdf

SE1028: http://www.cms.gov/MLNMattersArticles/downloads/SE1028.pdf

To read article, "$19.2 Million in Denied Claims Since Q1 2010," please click here

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September 8, 2010

Federal Regulations Provide Minimum Time Requirements for Medical Record Retention

By Amy K. Fehn, Esq. and Jennifer Colagiovanni, Esq.

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The Centers for Medicare and Medicaid Services (CMS) on Aug. 10 issued an informational MLN Matters article on addressing medical record retention considerations.

While the article did not change or revise current record retention policies, it did highlight key requirements of which all providers should be aware. The Health Insurance Portability and Accountability Act (HIPAA) requires a covered entity, such as a provider billing Medicare, to maintain medical records for at least six (6) years from the date of their creation or when they last were in effect. The HIPAA retention requirement preempts state laws that require shorter lengths of time. But providers also should keep in mind that some states may require the records to be held for longer than the HIPAA-mandated six years. If this is the case, the provider should abide by the state requirements so as to be in compliance with both federal and state regulations.

Beware of State Requirements

It is important for providers to determine their particular states' requirements so as to ensure compliance with all applicable record retention regulations, and to consider additional concerns such as the ability to defend potential medical malpractice actions.

The MLN Matters article also reminds providers that patient medical records must be accurately written, promptly completed, accessible, and properly filed and retained in accordance with the HIPAA Privacy Rule requirements.

Retaining Documentation

In the context of Medicare audits, documentation retention is crucial to a provider's ability to challenge claim denials successfully. Identifying lack of documentation for services provided is an easy method for auditors to deny otherwise covered claims. Providers are required to provide all necessary documentation to substantiate the medical necessity of items and services. Failing to maintain appropriate documentation almost certainly will result in claim denials due to lack of documentation.

A very difficult issue arises when another entity, such as a hospital or skilled nursing facility (SNF), is the custodian of medical records supporting physician services - especially when the hospital or SNF does not produce the records when they are requested by the Medicare carrier. For example, a physician may see hospitalized or institutionalized patients and document the visit in the institution's progress notes.

When auditing the physician's visits, a contractor may request the medical records from both the physician and the hospital. However, the Program Integrity Manual states that it is the physician's ultimate responsibility to obtain signed copies of such medical records. Thus, physicians proactively should consider obtaining contractual assurances from hospitals or other institutions that supporting medical records will be maintained sufficiently and produced within a certain timeframe when requested for audit purposes.

Custodial Responsibility

The recently passed "healthcare reform" legislation addressed the issue of custodial responsibility for certain programs susceptible to high rates of waste and abuse, such as durable medical equipment prosthetics, orthotics and supplies (DMEPOS) and home health services. These new regulations, which went into effect July 5, require among other things that both the provider or supplier who furnishes the ordered services as well as the physician who ordered or referred the items or services to maintain documentation for seven (7) years from the date of service and provide access to the documentation at the request of CMS or its Medicare contractors.

For example, physicians referring patients to home health agencies will be required to provide those agencies with access to the patients' medical records in order to defend an audit, and the agencies in turn will be required to obtain such medical records upon request of a CMS contractor.

For those healthcare providers servicing Medicare beneficiaries, increased audit activity is a reality. Failure to maintain or have access to the required documentation can result in audit denials and overpayment demands for services that otherwise are medically necessary, having met the criteria for coverage.

Providers should implement data storage and management systems that allow for the safe and secure storage of patient medical records, but also allow for quick access in the event of a medical records request by a reviewing contractor. Electronic health records may provide solutions to storage and access concerns in addition to qualifying providers for CMS incentives to the extent they can demonstrate the meaningful use of such systems.

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March 23, 2011

The Use of Payment Suspensions in the Audit Landscape

By Amy K. Fehn, Esq. and Jennifer Colagiovanni, Esq.

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The suspension of Medicare payments in conjunction with a CMS contractor audit creates a one-two punch that can easily result in a provider being forced out of business before having the opportunity to defend against a contractor's allegations.

CMS may suspend payments to Medicare providers and suppliers in situations involving suspected fraud or where an overpayment exists but additional information is required to make a determination. In accordance with the Affordable Care Act, CMS recently issued proposed regulations on September 23, 2010, providing that in cases of suspected fraud, Medicare payments may be suspended pending an investigation if "a credible allegation of fraud exists against a provider or supplier, unless there is good cause not to suspend payments." The proposed regulations define a "credible allegation of fraud" as an allegation from any source, including but not limited to fraud hotline complaints, claims data mining and patterns identified through provider audits, civil false claims cases, and law enforcement investigations. Allegations are considered "credible" when they have "indicia of reliability."

The Office of Inspector General ("OIG") for the Department of Health and Human Services recently released a Memorandum Report addressing the use of payment suspensions to prevent inappropriate Medicare payments. This memorandum provides some insight on the frequency with which suspensions are imposed, the likelihood of successfully rebutting a suspension, and the rate at which overpayments of suspended providers are ultimately reversed.

The OIG memorandum notes that payment suspensions are typically requested from Program Safeguard Contractors (PSCs) and Zone Program Integrity Contractors (ZPICs), both of which conduct benefit integrity activities to identify potential Medicare fraud. Law enforcement entities also request payment suspensions from CMS through PSCs and ZPICs. A Medicare contractor may initiate a request for payment suspension based on its own analysis, CMS's request or at the request of a law enforcement entity such as the OIG or Department of Justice (DOJ).

Because the extent and amount of an overpayment need not be determined prior to imposing a suspension, a suspension may occur prior to the initiation of a formal audit of the provider's services. To initiate a payment suspension, the contractor provides CMS with a draft notification letter and a summary of the reliable information the suspension is based upon. CMS then determines if suspension should be implemented and whether the provider should receive notice of the suspension before or after it is initiated. Generally if the provider's payments are suspended due to suspected fraud or willful misrepresentation, the provider is notified after the suspension is implemented.

Providers are not permitted to appeal a payment suspension. The only recourse offered is the opportunity to file a rebuttal statement to explain why CMS should remove the suspension. A provider experiencing a payment suspension must file its rebuttal statement within 15 days of the date of the suspension notification letter. CMS contractors are instructed to respond to the provider's rebuttal within 15 days of receipt. According to the OIG's memorandum, only 16 percent of providers submitted rebuttals to CMS and, of those 16, only 3 rebuttals resulted in CMS lifting the suspension.

Payments are typically suspended for a period of 180 days, though CMS may extend the suspension if warranted under the circumstances. During the course of payment suspension, providers may continue to submit claims to their Medicare contractor, but payment amounts from valid claims will be held in suspense, thus eliminating cash flow to the provider's business.

Once the payment suspension is implemented, the contractor procures any additional information needed to calculate the overpayment. This calculation can involve the use of a statistically valid random sample and the request and review of medical records from the provider. Once the overpayment amount is calculated, a demand letter is issued by the provider's Medicare claims processing contractor. Payments that have been held in suspense over the course of the suspension are applied to the overpayment and the suspension is then removed. Once the suspended payments have been applied to the overpayment amount, any remaining monies are returned to the provider.

The OIG's memorandum involved the analysis of 253 payment suspensions implemented by CMS over 2007 and 2008. The vast majority of suspensions involved Part B providers and were concentrated in four states/territories: Florida, Puerto Rico, California and Michigan. More than half of the payment suspensions were in areas with Medicare Fraud Strike Force operations. As of August 2009, CMS had removed suspensions in 182 cases it approved over the course of 2007 and 2008.

In reviewing these 182 suspensions, the majority of the providers demonstrated questionable billing patterns and many of the suspensions were supported with information from beneficiaries or other providers that raise question about their practices. When the contractors requested medical records in order to make overpayment determinations, 55 percent of providers failed to provide records for review.

While the OIG memorandum states that the great majority of suspended providers exhibited characteristics that suggested fraud, it is also important to note that, in 23 cases the CMS contractors ultimately found no overpayment. In 16 cases, the CMS contractor did not provide the OIG with information regarding the size of the overpayment and in 71 cases the final overpayment amount had not been determined. These statistics highlight the very real and harsh possibility that in some situations suspensions have been imposed against providers whose billings were ultimately approved or possibly had only minor overpayments. Further, it is likely that many suspended providers did not have the necessary resources to defend the overpayment allegations because of cash flow issues created by the suspension.

Although the OIG's memorandum highlights the low success rate of the rebuttal process, providers should consider making arguments based upon any circumstances that are unique to their billing practices. Providers should also vigorously appeal any overpayment findings, or denials based upon audit findings, including additional development requests, arising in connection with a payment suspension. Although the appeals process can be difficult in light of cash flow issues and the time allocated to each stage of the appeals process, it remains the best hope for fighting a payment suspension.

About the Authors

Amy K. Fehnis a partner at Wachler & Associates, P.C.Ms. Fehn is a former registered nurse who has been counseling healthcare providers for the past eleven years on regulatory and compliance matters and frequently defends providers in RAC and other Medicare audits.

Jennifer Colagiovanni is an attorney at Wachler & Associates, P.C.Ms. Colagiovanni graduated withDistinction from the University of Michigan and Cum Laude from Wayne State University Law School.Upon graduation, Ms. Colagiovanni was nominated to the Order of the Coif. Ms. Colagiovanni devotes a substantial portion of her practice to defending Medicare and other third party payer audits on behalf of providers and suppliers.She is a member of the State Bar of Michigan Health Care Law Section.

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To comment on this article please go to editor@racmonitor.com

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March 22, 2011

New Audit Risk: Home Health Face-to-Face Certification Requirements

By Amy K. Fehn, Esq. and Jennifer Colagiovanni

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Noncompliance with the recently enacted face-to-face certification requirements is one of the newest compliance risk areas that could lead to denials in future audits for home health agencies. The face-to-face requirements are part of the Patient Protection and Affordable Care Act of 2010 (PPACA), and they require physicians to perform face-to-face encounters on home health patients as part of home health certification. While the PPACA originally required compliance with this mandate by Jan. 1, 2011, CMS recently announced that it will delay enforcement until April 1, 2011.

In order to satisfy the face-to-face requirements, certain criteria must be met. First, encounters must take place no more than 90 days prior to or within 30 days after the start of home health care services. Encounters may occur up to 90 days prior to this point if a previous face-to-face encounter was related to the reason the patient requires home health services. Also, this encounter must be performed by a physician or a permissible non-physician practitioner (NPP), i.e., an advanced practice nurse or physician assistant. If an NPP performs the face-to-face encounter, the practitioner must document the clinical findings and communicate those findings to the certifying physician. The documentation of the face-to-face encounter must be a separate and distinct section or addendum to the certification, and must be signed and dated by the certifying physician.

Both physicians and NPPs who have a financial relationship with a home health agency are prohibited from conducting the face-to-face encounters unless the relationship falls within a Stark or anti-kickback exception. This regulatory requirement prevents home health agencies from hiring physicians or NPPs to perform face-to-face encounters, representing an important consideration for a home health agency setting up a program for compliance with the new requirements.

Documentation of the face-to-face encounter must include a statement demonstrating that the encounter was performed for the same condition or conditions that represent the primary reason for home care services. In addition, the documentation must include an explanation of the reasons for the patient's homebound status and the medical necessity of either intermittent skilled therapy and/or skilled nursing services. Also, it is important to note that for patients referred directly from a hospital, a hospitalist could conduct the face-to-face encounter. To qualify, the hospitalist would need to document the encounter, perform the certification and review of the initial plan of care, and then clearly communicate the name of the physician in the community (i.e., the patient's primary care physician) who will continue to follow up with the patient going forward. In rural areas, the face-to-face encounter also may be conducted via telehealth services as long as other program requirements are met for telehealth.

CMS has indicated that it will issue instructions to its contractors with regard to medical reviews and program integrity activities. These contractors will be tasked with making sure that providers are complying with the required time frames set forth for the face-to-face encounters. CMS also has indicated that partial payments will not be made if the face-to-face encounters are performed outside the required time frames.

Physicians and home health agencies should note that the face-to-face encounter only is required for the initial certification and not for any subsequent recertification.

In developing compliance policies, home health agencies should review all guidance from CMS and contractors on this issue to ensure that documentation is adequate. Home health agencies also should collaborate proactively with referring physicians and educate them to ensure that they also understand the requirements prior to the April 1, 2011 effective date.

About the Authors

Jennifer Colagiovanni is an attorney at Wachler & Associates, P.C. Ms. Colagiovanni graduated with Distinction from the University of Michigan and Cum Laude from Wayne State University Law School. Upongraduation, Ms. Colagiovanni was nominated to the Order of the Coif. Ms. Colagiovanni devotes a substantial portion of her practice to defending Medicare and other third party payer audits on behalf of providers and suppliers. She is a member of the State Bar of Michigan Health Care Law Section.

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"Digital Cowboys: Do RAC Auditors Need Auditors"

ED. NOTE: Healthcare attorney Andrew Wachler, founder of Wachler & Associates, discusses RACs and Home Health on Monitor Monday, March 14, 2011. Register to listen at www.monitormondays.com.

To comment on the article please go to editor@racmonitor.com

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November 16, 2010

RACs, SNFs, Audits and Vulnerabilities

By Amy K. Fehn, Esq., Jennifer Colagiovanni, Esq. and Christopher J. Laney, Esq.

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While the Recovery Audit Contractors (RACs) currently only are authorized to investigate a limited number of issues with regard to skilled nursing facilities (SNFs), recent audits by other Medicare contractors tasked with identifying overpayments may shed light on some potential future issues for RACs.

At the time of this writing, the only RAC-approved issues for SNF claims include consolidated billing in Region D, clinical social worker (CSW) services in Region A and ambulance service from one SNF to another in Regions C and D. The consolidated billing issue in Region D requires that the majority of SNF services provided to a beneficiary under a covered Part A SNF stay are included in a bundled prospective payment and are not billed separately.

In Region A, the RACs are reviewing SNF claims to ensure that CSW providers rendering care during a SNF stay are paid under arrangement with the facility and not billed separately under Medicare Part B. RACs for Regions B, C and D have approved a similar issue related to CSW services, but so far the issue description refers only to services rendered in inpatient hospital stays. Claims for SNF-to-SNF ambulance transfers, which are under review in RAC Regions C and D, are not payable separately under Medicare Part B. Rather, the SNF discharging the beneficiary is responsible for the cost of the transfer.

While the above issues are the only SNF issues the RACs presently can review, other Medicare contractors continue to audit SNFs on a variety of other matters. Ongoing audit activities by Medicare Administrative Contractors (MACs) and Program Safeguard Contractors/Zone Program Integrity Contractors (PSCs/ZPICs) highlight several areas that likely will receive increased scrutiny in the future: level-of-care issues, documentation and the three-day qualifying hospital stay requirement.

Need to Document Skilled Services

Recent audits of this nature have focused on the issue of whether SNFs are billing Medicare for the appropriate level of care based on the beneficiary's medical condition and services to be rendered. Providers must be sure that they are documenting the beneficiary's need for skilled services appropriately - whether it be skilled nursing, physical therapy, occupational therapy or speech/language therapy - and billing for the various disciplines only when the beneficiary's condition warrants such services.

SNFs also should focus on keeping accurate and complete records in order to justify the resource utilization group (RUG) score billed. Medicare contractors are probing SNF minimum data set (MDS) documentation, as well as the corresponding medical records for the applicable lookback periods, to determine if the provider billed the correct RUG score. It likely is only a matter of time before RACs also mark this as an area of interest.

Three-Day Qualifying Stay

Contractors also are devoting significant time and resources to reviewing whether a beneficiary has met the mandatory three-day qualifying stay at a hospital, and whether he or she was transferred to an SNF within 30 days of discharge from the hospital. While ensuring that the documentation shows that the beneficiary met the three-day stay and 30-day transfer requirements is relatively straightforward, it may be more difficult to demonstrate that a beneficiary had a "qualifying" stay in a hospital.

To be "qualifying," the treatment a beneficiary receives in a SNF must be for a condition for which the beneficiary was receiving inpatient hospital services, or one that arose while the beneficiary was in the SNF for treatment. Providers should be prepared to defend audit denials on this issue. Medicare contractors have been focusing attention on this, and they will deny a claim if the provider cannot show that SNF treatment was for a condition related to a hospital stay. It is also important to note that while Medicare guidance requires that skilled services be provided for a condition for which a beneficiary receives inpatient hospital care that condition does not have to be the primary diagnosis upon hospital admission.

Compliance efforts should be directed toward documenting in a manner that clearly links skilled services provided to a condition for which a beneficiary received inpatient services, or which arose during a hospitalization or associated SNF stay.

Psychiatric admissions raise special concerns with regard to the qualifying three-day stay issue. Medicare guidance states that a beneficiary with only a psychiatric condition is not eligible for Medicare coverage after being transferred from a psychiatric hospital. However, the relevant Medicare manual provision does not address specifically whether a beneficiary with a psychiatric condition can qualify for SNF services after being transferred from a non-psychiatric hospital.

SNF providers are well-advised to implement compliance measures addressing these issues not only to reduce the risk of audit by the MACs, PSCs and ZPICs, but also to reduce risk should the RACs gain approval for these issues in the future.

About the Authors

Christopher J. Laney is an attorney at Wachler & Associates, P.C. He graduated Cum Laude from Wayne State University Law School in 2010 where Mr. Laney served as an Associate Editor of The Wayne Law Review. Mr. Laney counsels clients in areas of healthcare law.

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November 2, 2011

Impact of an Untimely Hospice Face-to-Face Encounter: An Update

By Amy K. Fehn, Esq. and Jennifer Colagiovanni, Esq.

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A hospice provider's failure to comply with the timing requirements for the newly mandated face-to-face encounter may lead to claim denials in future audits.

Hospice providers are advised to take heed of the recent MLN Matters article issued by the Centers for Medicare & Medicaid Services (CMS) addressing claims processing issues when the required face-to-face encounter does not occur in a timely fashion.

To be eligible for the Medicare hospice benefit, a beneficiary is required to be certified by a physician as terminally ill. This certification must be issued in writing and must be on file prior to claim submission.

The Medicare Benefit Policy Manual requires specific elements to be part of a hospice certification or recertification, including: a) a statement that an individual's medical prognosis includes a life expectancy of six months or less if the terminal illness runs its normal course; b) specific clinical findings and other documentation supporting the life expectancy of six months or less; c) the physician's signature; and d) a brief narrative of the clinical findings supporting a life expectancy of six months or less.

Face-to-Face Encounters

Section 3132(b) of the Patient Protection and Affordable Care Act of 2010 (PPACA) added the requirement that a hospice physician or nurse practitioner conduct a face-to-face encounter with each hospice patient prior to the beginning of the 180-day recertification (i.e. the third benefit period) and prior to the start of each subsequent benefit period. Effective Jan. 1, 2011, the required face-to-face encounter must occur no more than 30 calendar days prior to the start of each benefit period.

Specifically, the recertification form must include a written attestation by the hospice physician or nurse practitioner who performed the face-to-face encounter. In cases in which the encounter is performed by a nurse practitioner, the attestation must indicate that the clinical findings of the encounter visit were provided to the certifying physician. The attestation, along with an accompanying dated signature, is required to be a separate and distinct section of the recertification form.

If all the above requirements are met, the beneficiary will be eligible for the Medicare hospice benefit. CMS recently released MLN Matters (MM7478) and Change Request 7478, which advise hospice providers of the repercussions of failing to meet the face-to-face requirements within the required time frames. Such a failing will cause the beneficiary to no longer be classified as terminally ill, and without this designation, the beneficiary will no longer be eligible for the hospice benefit.

If a beneficiary is ineligible for the hospice benefit due to lack of status, the hospice must discharge the patient from the Medicare hospice benefit. However, the hospice can readmit the patient to the hospice benefit if the patient later receives the face-to-face encounter and meets other eligibility requirements.

Potential Future Audit Reviews

In cases in which a patient is discharged from hospice care due solely to a face-to-face encounter failing to occur in a timely fashion, CMS expects the hospice to continue to service the patient at its own expense until the face-to-face encounter requirement has been met. By doing so, the hospice will be able to reestablish Medicare eligibility more swiftly.

This assertion by CMS suggests a potential focus for future audit reviews because hospice beneficiaries with delayed face-to-face documentation could have a lapse in coverage, which would be considered an overpayment to the hospice provider. Because of the new requirement under the PPACA's Section 6402, hospice providers have an affirmative duty to report and return any such overpayments.

The likelihood of such audits seems probable based on the scrutiny with which CMS audit contractors currently view hospice providers in regard to other requirements such as certification, level of care and six-month prognosis. The RACs also have taken aim at certain hospice-related issues on their current approved issues lists. For instance, HealthDataInsights, the RAC for Region D, has approved review of hospice-related services - specifically, services related to hospice terminal diagnosis provided during hospice period, which are included in the hospice payment and are not separately payable.

The Need for Policies and Procedures

Hospice providers are advised to develop and maintain effective policies and systems to ensure that face-to-face encounters are conducted in a timely fashion and documented appropriately. It is important to educate clinicians, coding and billing staff, and referring providers about the applicable time frames and documentation requirements connected to these encounters. Failure to have such policies in place could lead to future claim denials and place providers at risk of overpayment liability. These risks can be minimized by reviewing and understanding the recent guidance issued by CMS and its contractors.

Hospice providers also must be cognizant of the requirement to report and return any known overpayments, including those related to failure to perform face-to-face encounters in a timely fashion.

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The ROI of Extrapolation

LINKS:

MLN Matters MM7478: https://www.cms.gov/MLNMattersArticles/downloads/MM7478.pdf

Change Request 7478: https://www.cms.gov/MLNMattersArticles/downloads/MM7478.pdf

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December 7, 2010

Prepare for Increased RAC Activity in 2011

By Andrew B. Wachler, Esq. and Jennifer Colagiovanni, Esq.

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A review of the ever-changing audit landscape suggests that providers should be prepared for increased Recovery Audit Contractor (RAC) activity in both the Medicare and Medicaid programs in 2011.

Of particular importance is the expansion of the RAC program to Medicare Part C, Medicare Part D and Medicaid, pursuant to the Patient Protection and Affordable Care Act (Affordable Care Act). The act mandates the expansion of the RAC program to Medicare Part C (Medicare Advantage plans) and Part D (prescription drug coverage) by Dec. 31. This is also the date by which states are required to have contracted with one or more RACs to perform audits of Medicaid providers. States are expected to implement their individual RAC programs by April 1, 2011. CMS recently issued a letter indicating that state Medicaid directors need to submit a State Plan Amendment (SPA) attesting either that the state will establish a Medicaid RAC program by Dec. 31 or that the state will seek an exemption from the requirements. CMS has indicated that exemptions only will be granted under the most compelling circumstances.

States also are required to have adequate processes to handle appeals from adverse audit decisions made by the Medicaid RACs. As long as a state’s existing administrative appeals process (such as one used to handle Medicaid Integrity Contractor (MIC) appeals) is able to accommodate Medicaid RAC appeals, CMS is not requiring states to adopt new administrative review processes. It is important to note, however, that the Medicaid RAC program is active in addition to, not in place of, the Medicaid Integrity Program and audits being conducted by the MICs. Because of the existence of these multiple programs, Medicaid providers are faced with a greater likelihood of audits in the upcoming year.

Expect More RAC Audits

Providers also are more likely to be faced with significant RAC audits during the upcoming months due to the recent introduction of medical necessity reviews in all four RAC regions. Medical necessity reviews allow the RACs to apply a subjective standard to various services, thus creating increased risks for all providers – even those who believe they are billing and coding appropriately. The RACs steadily have been increasing the number of procedures and issues subject to medical necessity reviews. During the RAC demonstration project approximately 50 percent of identified overpayments were related to medical necessity issues.
It logically follows that medical necessity reviews will continue to be a highly targeted area for the RACs, as is evident by the recent approval of five additional and potentially broad medical-necessity approved issues in Region C. These approved reviews also may include the issue of outpatient reimbursement for inpatient denials.

False Claims Liabilities

In addition to expanding the RAC program, the Affordable Care Act also creates new risks for false-claim liability when auditors identify overpayments. The act amended federal law to require that an entity that has received an overpayment must return it and notify the appropriate entity (CMS, OIG, or the carrier) regarding the reason it existed. This must occur no more than 60 days from “the date on which the overpayment was identified” or “the date any corresponding cost report is due, if applicable.” Retention of an overpayment beyond this deadline creates liability under the False Claims Act (31 U.S.C. §3729).

These changes raise many questions for those involved with the RAC audit process, including:

Does a denial of an appeal create an overpayment that must be paid back in 60 days?

What are the responsibilities for a provider who realizes during the audit process that they received an overpayment?

What is the potential liability for a provider who cannot afford to pay back the overpayment?

The Office of the Inspector General (OIG) has yet to offer clarification of many issues surrounding this legislation, including when during the audit process the overpayment return obligations are triggered. Although the appeals process likely will provide temporary protection from an audit finding being deemed a “known” overpayment, there is some level of risk that the OIG under the False Claims Act could prosecute individuals or entities who do not repay overpayments in a timely manner, especially if there is no good-faith basis for appeal (e.g., no documentation to support the services provided).

False Claims Act liability is significant. Possible penalties include civil fines of $10,000 for each item or service, an assessment of three times the amount claimed for each item or service, and/or exclusion from participation in the federal healthcare programs as well as any state healthcare programs. Moreover, the mere failure to repay an overpayment (even without False Claims Act liability) can lead to exclusion from the Medicaid program.

As a result of these changes, it is important for entities involved in RAC audits to consider carefully whether at any stage of the process the facts show a known overpayment. If so, the entity should discuss with legal counsel its obligation to pay back the known overpayment promptly, or risk prosecution under the False Claims Act. Also, providers should be aware of this repayment obligation once the appeals process has been exhausted or abandoned.

The Road Ahead

After a year of audit expansion, providers can expect to see increased audit activities as we move into 2011. Providers are advised to prepare for audit activities proactively, to develop an effective process to appeal audit claim denials, and to evaluate the risks and potential penalties related to the retention of a Medicare or Medicaid overpayment.

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February 15, 2011

The Impact of Mandatory Compliance Programs on Reimbursement for Skilled Nursing Facilities

By Andrew B. Wachler, Esq., and Jennifer Colagiovanni, Esq., and Amy K. Fehn

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Effective compliance programs are an essential tool for identifying and mitigating audit risks. Due to the recently imposed mandatory compliance requirements in the Patient Protection and Affordable Care Act of 2010 (PPACA), the lack of an effective compliance program also could be a risk in itself.

The PPACA requires skilled nursing facilities (SNFs), as a condition of participation, to have a compliance program in place by March 2013. Because compliance with this condition is a prerequisite for payment, noncompliance could result in denied claims and pose a future audit risk for SNFs. Failure to meet the conditions of participation also has been used in the past as a basis for liability under the False Claims Act.

More specifically, section 6102 of the PPACA requires compliance and ethics programs to be implemented in all SNFs, which will be allowed flexibility in tailoring them based on the size and scope of services provided by each facility. But the programs must be followed by all employees and agents of the SNF and prove effective in the prevention and detection of criminal, civil and administrative violations. The programs also must identify and involve specific individuals with authority and resources who are assigned to oversee compliance.

Caution in Delegating

As part of implementing its programs, each organization must exercise due care in delegating authority so as not to hand control to individuals whom the SNF knew or should have known may a propensity to engage in criminal, civil or administrative violations. Furthermore, if an offense is detected, the organization must respond appropriately. Each SNF must take steps to educate its employees about its programs, and will be required to make efforts to achieve compliance with the standards it promulgates. A periodic reassessment of the programs and the implementation of any necessary changes also will be a required component.

Regulations addressing additional requirements for the programs have yet to be released by Secretary of Health and Human Services (HHS) Kathleen Sebelius, but they are required to be issued within two years of the PPACA's passage.

Compliance Program

SNFs also will be required to comply with the compliance program requirements promulgated pursuant to Section 6401(a) of the act, which includes all providers enrolled in Medicare, Medicaid and CHIP.

While a final rule has not yet been issued, a proposed approach and solicitation of comments in connection with the mandatory compliance program provisions were released in the Federal Register on Feb. 2. The solicitation of comments aims to gain input from various industry stakeholders about the proposed provisions. Specifically, HHS is seeking comments about the use of the elements of an effective compliance program as set forth in Chapter 8 of the U.S. Federal Sentencing Guidelines Manual. These core elements are based on the idea of preventing, detecting and correcting behavior that is detrimental to compliance with applicable laws and ethical standards within a facility or organization. HHS is looking to see how providers with compliance plans currently in place have integrated these elements. Moreover, the solicitation seeks to find any other elements beyond those set forth in the sentencing guidelines that should be integrated into future regulations.

The solicitation also seeks to generate comments on several other issues. Input related to the costs and benefits of compliance programs, the type of systems providers will need to implement effective programs, as well as the extent to which providers integrate the use of consultants, review organizations and auditors in their efforts all were sought in the recent solicitation. It is important to note that HHS indicated that it does not intend to finalize the compliance plan requirements in this final rule, but instead will continue with further rulemaking and issue proposals in the future.

Prepare Now

SNFs need to prepare themselves now for the changes ahead in the compliance landscape. Even if facilities currently have compliance programs in place, the administration should look to see that they are effective and contain all of the elements set forth in the statute and associated regulations, once published.

The sharp focus on SNFs in healthcare reform legislation also may reflect an indication of increased scrutiny on SNFs by the various audit contractors. As such, it is vital for SNF providers and administrators to increase compliance efforts.

An effective compliance program not only will help facilities to meet the conditions of participation, but also to identify and rectify potential audit risk areas.

To comment on this article please go to editor@racmonitor.com

About the Authors

Amy K. Fehnis a partner at Wachler & Associates, P.C.Ms. Fehn is a former registered nurse who has been counseling healthcare providers for the past eleven years on regulatory and compliance matters and frequently defends providers in RAC and other Medicare audits.

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February 15, 2011

The Impact of Mandatory Compliance Programs on Reimbursement for Skilled Nursing Facilities

By Andrew B. Wachler, Esq., and Jennifer Colagiovanni, Esq., and Amy K. Fehn

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afehn100 jColagiovanni100

Caution in Delegating

Compliance Program

SNFs also will be required to comply with the compliance program requirements promulgated pursuant to Section 6401(a) of the act, which includes all providers enrolled in Medicare, Medicaid and CHIP.

Prepare Now

An effective compliance program not only will help facilities to meet the conditions of participation, but also to identify and rectify potential audit risk areas.

To comment on this article please go to editor@racmonitor.com

About the Authors

Amy K. Fehnis a partner at Wachler & Associates, P.C.Ms. Fehn is a former registered nurse who has been counseling healthcare providers for the past eleven years on regulatory and compliance matters and frequently defends providers in RAC and other Medicare audits.

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"Digital Cowboys: Do RAC Auditors Need Auditors"

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October 5, 2011

The Landscape of Medicare and Medicaid Contractors

By Andrew B. Wachler, Esq., and Jennifer Colagiovanni, Esq.

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With much of the attention focused on Recovery Audit Contractors (RACs) during recent years, providers may be unfamiliar with the other audit contractors utilized by the Centers for Medicare & Medicaid Services (CMS). CMS recently released a MLN Matters article in an effort to increase provider awareness of the current contracting environment and the various entities that may request medical records or other documentation. It is important for providers to recognize these various CMS contractors and the different roles they play. Different contractors serve different functions, including claims processing, program integrity, specialty medical review, appeals and quality improvement.

Claims processing contractors are entities contracted by CMS to process provider enrollment applications and claims submitted by providers and suppliers, and to make payments in compliance with Medicare regulations and policies. Currently, these entities include carriers, Fiscal Intermediaries (FIs), Regional Home Health Intermediaries (RHHIs) and Medicare Administrative Contractors (MACs). Due to a provision of the Medicare Prescription Drug, Improvement and Modernization Act of 2003, claims processing authority currently is being transitioned to the MACs (much of the carrier, FI, and RHHI workload already has or will be shifted to MAC jurisdictions). The MACs also perform duties such as recovering overpayments on previously processed claims, handling provider enrollment issues, providing education on Medicare billing procedures and resolving issues pertaining to submitted claims. Recently CMS announced that MACs also will be responsible for issuing demand letters in connection with RAC-identified overpayments beginning in January 2012.

Program Integrity contractors are responsible for identifying cases of suspected fraud. Specifically, CMS contracts with Program Safeguard Contractors (PSCs) and Zone Program Integrity Contractors (ZPICs), which are in charge of implementing the Medicare Benefit Integrity program. PSCs and ZPICs use a variety of proactive and reactive techniques to identify and address potentially fraudulent billing practices. CMS is currently in the process of transitioning PSCs to ZPICs, which soon will perform all benefit integrity work. Seven ZPICs were created to perform program integrity for Medicare Parts A, B, C and D (prescription drugs), plus DME, home health and hospice, and Medi-Medi.

CMS also has contracted with the Recovery Audit Contractors (RAC) to carry out program integrity efforts. RACs conduct automated, semi-automated and complex reviews in an effort to identify and recover improper payments (i.e. underpayments and overpayments). There are four RAC regions, each with its own contractor: Diversified Collection Services (Region A), CGI (Region B), Connolly Consulting (Region C) and HealthDataInsights (Region D). The Tax Relief and Health Care Act of 2006 authorized the RAC program for Medicare Parts A and B. The Patient Protection and Affordable Care Act of 2010 expanded the program to cover Medicare Parts C and D as well as Medicaid. The Medicaid RAC program was created as a tool to fight Medicaid fraud and abuse, and the program shares some similarities with the Medicare RAC program. CMS released the final rule for the Medicaid RAC program on Sept. 14, 2011.

Medicaid Integrity Contractors (MICs) contract with CMS to perform program integrity work. There are three types of MICs: Review MICs, Audit MICs and Education MICs. Review MICs are responsible for investigating potential provider fraud, waste or abuse. Audit MICs are the Medicaid version of RACs in that they audit claims submitted by providers and identify improper payments. However, unlike the RACs, which are limited to a three-year lookback period, Audit MICs may review claims dating back up to five years. Education MICs are responsible for educating providers regarding payment integrity and quality-of-care matters.

Specialty Medical Review Contractors are tasked with preventing and minimizing improper payments.These contractors include the Medicare Coordination of Benefits Contractor (COBC), whose duties include overseeing all activities that support the collection, management and reporting of other insurance coverage for Medicare. Another specialty contractor is the Medicare Secondary Payer Recovery Contractor (MSPRC), which is responsible for recovering funds for which Medicare should not have been the primary payer. Finally, the National Supplier Clearinghouse (NSC) has been contracted by CMS to handle enrollment activities related to DME suppliers.

CMS also has contracted with entities to conduct first- and second-level provider appeals of claim denials. First-level appeals (redeterminations) are conducted by carriers, FIs, RHHIs and MACs.For second-level appeals (reconsiderations), CMS has contracted with Quality Independent Contractors (QICs), which conduct independent reviews of the initial determination, any redetermination and other issues related to payment of the appealed claim. There are seven QICs in total: two Part A QICs, two Part B QICs, one Part C QIC, one Part D QIC and one DME QIC.

Administrative Law Judges (ALJs) oversee the third level of the appeals process. ALJ hearings may be conducted in person, by video teleconference (VTC) or by telephone. During these hearings, parties have an opportunity to present documentary evidence, legal arguments and witness testimony, which may involve internal clinicians and experts. The ALJ will examine the issues, question parties and other witnesses, and review documents material to the issues. An ALJ’s decision is based on the hearing record and is required to be made within 90 days from the date a request for the hearing was received (unless the time period is extended or waived).

If a provider is unsatisfied with an ALJ decision, it may appeal the decision to the Medicare Appeals Council (MAC). A MAC decision typically is issued within 90 days of receipt of a request for appeal. The MAC’s decision binds all parties unless the decision later is modified by a federal district court; if the MAC does not issue a decision, dismissal or remand within the required time frame, a provider may request that the case be accelerated to federal district court.

Quality Improvement Contractors, also known as Quality Improvement Organizations (QIOs), are private organizations (mostly nonprofits) whose staff consists mostly of physicians and other healthcare professionals. Each state, as well as the District of Columbia, Puerto Rico and the Virgin Islands, has its own QIO. The role of the QIO is to provide quality-of-care review services and to implement quality improvement projects. QIOs are tasked with improving quality of care for beneficiaries and ensuring that care is medically necessary, reasonable, provided in the appropriate setting and rendered in accordance with recognized healthcare standards.

While the audit landscape and its numerous acronyms can be intimidating, providers are advised to arm themselves with knowledge about the roles of the various contractor entities. Understanding the focus of each can provide significant insight if and when a provider receives a record request or experiences an audit of claims.

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September 1, 2011

Using Data Mining as a Component of Audit Defense

By Andrew B. Wachler, Esq., and Jennifer Colagiovanni, Esq.

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j-Colagiovanni During the last several years, the Centers for Medicare & Medicaid Services (CMS) have been focused on preventing and detecting Medicare fraud and abuse more than ever.

With the installment of the permanent Recovery Audit Contractor (RAC) program and the transition to Zone Program Integrity Contractors (ZPICs), methods of preventing fraud and abuse have become increasingly more organized and targeted. Several of these methods revolve around technical innovations used as a way to increase efficiency and accuracy when dealing with potentially improper claims submitted to Medicare. Of these technological innovations, one of the most prevalent is the use of data mining.

CMS has compiled an extensive computerized database of claims and services billed to Medicare by providers. RACs, ZPICs and other audit contractors use this database to analyze coding and billing practices of Medicare providers across the country. Contractors in doing so identify specific data (i.e. the most frequently billed codes, practice locations, etc.) and use it to create a model physician profile for a particular provider type.

These profiles then are used as reference points to compare against individual providers' coding and billing practices. This information allows contractors to identify unusual billing patterns as well as identify outliers by comparing providers' practices to those of other providers within the same specialty area. Upon identifying any billing abnormalities or outliers, contractors may take action, such as the initiation of an audit of a provider's services, in an effort to retrieve any overpayments issued by Medicare. For example, RACs conduct automated reviews using data mining techniques to identify payment errors (i.e. duplicate claims for the same service) whereby upon discovery, they send an overpayment demand letter to the provider. However, RACs also conduct complex reviews when they determine that a payment error likely has occurred, leading to requests for medical records and further review of claims.

The audit contractors' use of data mining is a key element of the potential audit risk facing many Medicare providers. If and when an audit occurs, the provider often is faced with significant overpayment return demands and the prospect of weathering the five-step Medicare appeals process in an effort to defend against claim denials. This process can be ominous and time-consuming. As such, it is imperative that providers proactively prepare to defend claims on a clinical basis as well as develop legal challenges as part of an audit defense strategy.

Much like audit contractors, providers also can take advantage of a form of internal data mining. Specifically, as providers challenge denials through the Medicare appeals process, they can collect key data elements about the specific claims at issue and the outcome of appeals at the various stages of the appeals process. This data from previously audited claims then can be applied in the defense of current claim appeals.

This approach can be particularly effective for institutional providers, including hospitals and health systems, which process a significant volume of audit claim appeals. For instance, when appealing claim denials, providers can track specific elements of RAC-approved claims and successful appeal results at the redetermination, reconsideration and ALJ stages, then compare those findings with their present appeal case(s). This comparison may provide additional support and a persuasive analogy for a current appeal in the case that payment was approved in an identical or substantially similar past case, giving the provider no reason to believe that its current appeal would not be approved. Such data mining also may serve to bolster a provider's waiver of liability defense, which allows payment when a provider did not know nor reasonably could have been expected to know that payment would not have been made for services at issue. While appeal decisions in other cases are not binding when it comes to ALJs, they may provide persuasive support for Medicare coverage based on both the medical necessity of the services and the waiver of liability defense. Providers are advised to redact any protected health information (PHI) on ALJ decisions or forwarded information tied to similar appeals.

An example of providers using data mining tactics can be highlighted by RAC denials of inpatient hospital admissions, which often is a dicey proposition because the distinction between "inpatient" and "outpatient" is often vague and difficult to ascertain. Hospitals can look at the characteristics of past RAC approvals and successful appeals for individual patients, then draw analogies to claim details connected to appeals in progress. The provider should isolate key elements - including length of stay, type of diagnosis (primary or secondary), type of services, common risk factors, etc. - and then use data mining to compare this information to claims approved in the past.

Providers are advised to make these data mining considerations early in the appeals process and track favorable appeal decisions at each level of appeal. Due to the requirement of early presentation of evidence at the reconsideration stage of appeal, this evidence should be submitted prior to the issuance of a reconsideration decision.

The burden of challenging audit denials through the Medicare appeals process can place a significant strain on providers, making it vitally important for them to put the necessary tools in place to defeat claim denials. The use of proactive data mining can be an extremely valuable defense tool, aiding providers in successfully appealing RAC, ZPIC, and other audits - and ultimately getting their claims approved.

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June 13, 2011

Contractor Involvement in the Medicare Appeals Process

By Andrew B. Wachler, Esq. and Jennifer Colagiovanni, Esq.

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Providers challenging audit claim denials through the Medicare appeals process can expect to encounter varying degrees of contractor involvement at each stage of appeal. Providers should be aware of the contractor's role in each stage, the information requests to make at each level and the limits on the scope of the contractor's participation.

Requests for Information

Providers undergoing a Medicare or RAC audit typically are notified of the contractor's findings by way of an audit results letter. Often this letter will provide general conclusions about the audit, and it may include a spreadsheet listing each claim or claim line determination.

After reviewing the audit letter, providers often are left with unanswered questions about the claim denials and the nature of the audit review conducted by the contractor, information that would be helpful in deciding on an appeal. In our audit experience, it is important to begin requesting additional information that may be available in the contractor's audit file. This information may include reviewers' credentials, data necessary to recreate the statistical sampling and applied projection, internal notes, memos, correspondence addressing the audit denials, plus guidelines or policies referenced in making the claim determinations. These requests can be made to the contractor by the provider in connection with the appeal and may reference the federal Freedom of Information Act (FOIA) as a basis for the release of information. Providers are advised to calendar the date they submit their requests and to continue to follow up with the contractor on the status of the release of information. Documentation of a provider's ongoing efforts to procure requested information may provide future support of a good-cause argument for the admission of additional evidence at subsequent levels of appeal.

At the Administrative Law Judge (ALJ) stage of appeal, providers may request a copy of the audit file. Throughout the appeals process, the appeal record is developed as the audit file is passed on to the various contractors at subsequent levels of appeal. Providers should direct their requests for audit files to the office of the ALJ assigned to hear the appeal. The Medicare appeal regulations at 42 CFR 405.1042 provide that a party may request and receive a copy of all or part of a record. Obtaining a copy of the audit file can reveal internal contractor correspondence, including the guidelines and policies applied in their review, which also may reveal inappropriate standards or inconsistencies that can be used to challenge the claim denials. Furthermore, the audit file allows the provider to see what documentation the ALJ has in his or her possession going into the hearing so that a determination can be made whether additional information should be submitted.

In a recent audit appeal, review of an audit file revealed that the Medicare contractor that conducted the initial audit review ultimately had discarded the statistical sampling and extrapolation originally applied in favor of a claim review. In a conclusion based on the language of the audit letters and appeal decisions, the provider understood the audit to involve an extrapolated overpayment. It was not until a review of the audit file was performed at the ALJ hearing that the claim-by-claim overpayment calculation was discovered. This type of information is vital to challenging the propriety of an audit.

Contractor Participation

In recent audit appeals, we also have experienced increased contractor participation in ALJ hearings. CMS contractors may elect to participate either as parties or non-party participants in an ALJ hearing (the nature of the contractor's involvement in the hearing often is impacted by how they choose to participate). In our experience, contractors more commonly participate as non-party participants. As participants, contractors may not call witnesses or cross-examine a provider's witnesses, nor may the provider call the contractor as a witness. Pursuant to 42 C.F.R. 405.1010, participation as a non-party participant may include filing position papers and providing testimony to clarify factual or policy issues of the case.

ALJs vary on the scope of involvement they permit from contractors acting as non-party participants. In some instances the ALJ simply will allow the contractor to listen to the hearing or will pose a few questions to the contractor's representatives for clarification. In other instances ALJs have allowed a contractor representative to offer testimony on the substance of the audit review. This can be problematic when the contractor is not placed under oath and when the provider or their attorney is not permitted to engage in cross-examination. That said, contractor participation does not always have a negative impact on a provider's appeal; in some instances contractor testimony and position papers actually have been helpful in revealing shortfalls in an audit review. Regardless, it is helpful for providers to know in advance of the hearing whether contractors plan to participate.

CMS or its contractors also may elect to act as parties to an ALJ hearing on a provider appeal. When acting as a party, the contractor is permitted to call witnesses or cross-examine the witnesses of other parties as well as submit position papers and provide testimony to clarify issues. Notably, limited discovery rights are permitted when a contractor acts as a party to a hearing. While contractors are required to advise the ALJ and the provider of their intent to participate in the hearing as a party or non-party participant within 10 days of receiving a notice of hearing, it is not uncommon to have a contractor attend on the day of the hearing with little or no prior notice. Providers should contact the ALJ's office in advance of the hearing to determine if any of the CMS contractors involved have indicated their intent to participate in the hearing or submit a position paper.

Providers and their attorneys must recognize the potential impact of contractor involvement during the appeals process and utilize to their advantage contractor contact through information requests and hearing appearances. Providers are advised to monitor contractor participation in light of current Medicare regulations and to raise objections when their involvement goes beyond the permissible scope.

About the Authors

Andrew B. Wachler is the principal of Wachler & Associates, P.C. He graduated Cum Laude from the University of Michigan in 1974 and was the recipient of the William J. Branstom Award. He graduated Cum Laude from Wayne State University Law School in 1978. Mr. Wachler has been practicing healthcare and business law for over 25 years and has been defending Medicare and other third party payor audits since 1980. Mr. Wachler counsels healthcare providers and organizations nationwide in a variety of legal matters. He writes and speaks nationally to professional organizations and other entities on a variety of healthcare legal topics. Mr. Wachler is a member of the American Health Lawyers Association and American Bar Association (Health Law Section). He sits on the Editorial Board of the ABA Health Law Section publication The Health Lawyer, Fraud and Abuse Section and is the Vice Chair of the ABA Health Law Section Payment and Reimbursement Interest Group. Mr. Wachler is a member of the State Bar of Michigan, Health Care Law Section.

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