Arriva Medical and Regulatory Over-Reach

Arriva Medical is a major provider of home delivery diabetes supplies. It is owned by Alere (Waltham, Mass.). Arriva distributes Blood Glucose Meters, test strips, diabetic testing lancets, lancing devices, and diabetic control solutions. It is said to have approximately 500,000 Medicare  patients throughout the United States. It is the nation’s largest supplier of diabetes supplies, and has a market share of more than 50%. According to Ed Roberts of CTFN.news, Arriva accounts for around 5% of Alere’s income.

Diabetes is a life-long affliction. Many patients have their diabetes medical supplies paid for by CMS. Unfortunately, in October of 2016, CMS revoked Arriva’s Medicare enrollment, meaning that it no longer could be paid. It had been found that 211 persons receiving diabetes supplies were deceased. Many of the patients had placed the order for their diabetes supplier prior to their death.

Given that Arriva was not notified of the deaths, it continued to ship supplies.

Pending Takeover by Abbott

Alere has entered into an agreement to be acquired by Abbott. But Abbott is considering backing out of the deal because the loss of the diabetes income is a significant and material change to the original deal.

Arriva Medical now is caught in the appeals process at the administrative law level. It is unable to make use of the courts until such time as the administrative law process has been completed. It is unlikely this will happen before the time expires on the takeover deal. All could be lost because the courts are too slow.

CMS Discretion and Over-Reach

Billing for dead patients sometimes happens, because the provider never is notified in a timely manner of the death. It is a common problem, and not only in the diabetes area.

In the normal course of events, the death of a patient is reported to Medicare, which then informs CMS. However, in this case, the database in CMS is not being kept up to date. So Arriva made its mistake by relying on faulty data from CMS itself.

Since the 211 dead patients is such a small percentage of the total patients served, it seems unlikely that this problem is more than a minor administrative matter. This is an error rate on the part of Arriva of 0.04% percent — that is, four one-hundredth of a percent.

Is this a question of administrative over-reach? Why should Arriva not be able to simply pay back what is owed for the 211 beneficiaries? That certainly would be preferable to having its legs chopped off, then causing massive disrupting in the marketplace, and also killing an important merger. Yet even when advised of all of these issues, CMS continued to push its punitive action.

Mitigate Risk Audit Insurance

Mitigate Medicare Risk with Audit Insurance

Health care providers can mitigate the risks of audits by purchasing insurance. But there are many types of insurance to choose from, and what is covered varies widely from one policy to another. Understanding a few of the basics will help a provider be a smarter consumer.

First, we will examine the threat, then look at ways to mitigate risk.  Finally, we will examine a few channels available to purchase what is needed.

In general, there are three categories of threat challenging a health care provider. The first is a traditional RAC-type audit; the second is the secondary threat of regulatory actions; the third is the possibility of class action suits that might be filed seeking gigantic damages.

Readers of RACmonitor are most familiar with an audit of claims by a RAC, ZPIC or CMIP or other authorized auditor. It starts with an innocent request to review a few claims, then eventually turns into a sample then statistical extrapolation demanding repayment of usually large sums of money. In order to handle this challenge, the provider must hire legal counsel, and a number of experts in statistical and claims analysis to develop a defense. this type of audit is increasing rapidly, so the chances of being audited is skyrocketing.

Regulatory actions pose a second and even more grave threat. The Office of the Inspector General (OIG) can follow up a RAC audit with a Civil Monetary Penalties Law (CMPL) (42 USC Sec. 13201-7) action that can be up to $5,000 per improper claim. But for health care providers, actually there is a vast regulatory shadow.  Other regulatory actions can come from the Health Information and Technology for Economic and Clinical Health Act (HITECH) (Title XIII of Pub.L. 111-5)* which governs your handling of Electronic Health Records (EHR); the U.S Office of Civil Rights (OCR) who is focuses on how you handle personal data; the False Claims Act (FCA) (31 USA Sec. 3729-33; 18 USC Sec. 287); The Anti-Kickback Statute (AKS) (42 USC 1320A-7b(b)); the Physician Self-Referral Law (Stark Law) (42 USC Sec. 1395nn); the Criminal Health Care Fraud Statute (18 USC Sec. 1347); and of course the Health Insurance Portability and Accountability Act (HIPAA) (Pub.L. 104-191; 110 Stat. 1936) which is comprehensive but is generally associated with privacy of patient medical records.  HIPAA is supplemented by a number of state privacy laws that may be triggered simultaneously, leading to a “double” investigation.

NOTE
(*) The HITECH act is Title XIII of Pub.L. 111-5 which was titled the “American Recovery and Reinvestment Act of 2009”.

RAC Bullying of Physical Therapy

HOW RACS BULLY SMALL PROVIDERS

RAC Bullying of small health care providers is an epidemic.

A line of crumpled elderly patients hobble into the office.  Some are permanently bent over, supported by a walking cane.  Others walk unsteadily, wobbling back and forth. They are of all ages, but mostly old. Lines criss-crossing their faces betray constant joint and muscle pain. For some it is the shoulder, for others the neck, or the hips, or chest, or knees, or lower back. All are patients of Dr. Nguyen.

The work is boring and repetitive, but Dr. Nguyen is cheerful, and listens to each patient as they express the frustrations with the fall season of their lives.

Parked out back is her 2007 Honda Civic. She purchased it used.  A few dents, and duck tape covering a few holes in the seats, but it works. The office is drab, but spotlessly clean. Being a doctor is not making her rich.

RAC-BULLYINGFigure 1 – Examples of RAC Bullying Tactics

On the wall, a small black and white photo taken from the time when she was trapped in an internment camp in Thailand. It seems like ages ago, but also like yesterday. This is what her life was like before coming to the United States, learning English, then working her way through medical school while serving Pho at a Vietnamese restaurant, scrubbing the floors at night, cleaning the grease traps and helping the owner with other matters.

For each of her patients, the procedure is the same.  First, a conversation to record the patient’s history. Then a diagnosis followed by treatment. The doctor either performs manipulation of the tissue or if the pain is severe, she will relax the muscles with an injection.  Apart from extraordinary knowledge of anatomy and an appreciation of true pain, for her the practice is not complicated. There are only three Medicare codes in her billing.

I am visiting because of a RAC audit.  She explained the situation. The RAC had demanded a number of records, then wrote back denying almost 100% of the claims.

A hastily assembled extrapolation jacked-up the claw-back value. The money was due, pending appeal, and the doctor was very concerned about the interest that was being accumulated.

At the first level appeal, Dr. Nguyen had carefully written back to the RAC.  Everything had been explained and documented in detail. LCDs were quoted, specific errors in the RAC’s analysis were pointed out, and reference was made to the voluminous documentation that had been submitted. The doctor had experienced a fleeting sense that since everything had been clearly explained, the RAC would see what should at first have seen, and then things would be ok.

But the RAC had merely mailed back a form letter rejecting outright her first level appeal. The RAC was in no mood to reverse its own judgment. They rarely are. In contrast to the detail and specificity provided in the doctor’s first level appeal, the RAC letter was 99% boiler-plate, repeating platitudes about billing and responsibility. There was no analysis at all. Only cut-and-paste of off-the-shelf language of a general nature explaining the policies. There was no discussion of specifics. The wait was difficult, but the first level decision was discouraging.

Now it was time to make the second level appeal to the QIC. Even after being warned that the QICs usually are little more than a rubber stamp, she wanted to make every good effort to submit an even better appeal to this next level.

“I’m not worried.  Once we explain everything, it will be OK.
America is a fair place,” said she.

The QIC appeal document was a masterpiece. The doctor hired at attorney who instructed her to start with the rules and then show how the elements of each rule were satisfied in her documentation. She worked closely with the attorney. In order to save money, she made a deal to do most of the work with the attorney only directing what needed to be done.

The appeal was impressive. It started with each Local Coverage Determination (LCD) applicable to the appeal. For each LCD, she listed out the specific elements that must be present in order for a claim to be compliant. There are two types of elements: mandatory and advisory. Both types of elements were specified for each relevant LCD. In some cases, scientific articles were quoted to provide additional insight, and also a few notations from the Federal Register to supplement the record and clarify the applicable rules.

Then for each denied claim, the doctor showed with specificity exactly how the required elements were met, and pinpoint referenced where the information was located in the claim documents already filed with the RAC. Every single element was justified, and every single element was documented. The doctor was able to show also that even for those elements that were advisory and not mandatory, the bulk of those elements were met also.

Not only was the pinpoint reference made, but the actual information from the claim was quoted, so the RAC did not even need to look it up.

It had become clear that the RAC had made numerous mistake when it rejected so many claims. In some cases, it had mis-interpreted the LCDs; in others, it had simply not bothered to read through the documentation. But the RAC did more than that. It fabricated rules where none exist. It did this by taking many of the advisory elements and claiming that they were mandatory.

When Dr. Nguyen mailed the QIC submission, it was more than 1,300 pages. She took the large bundle down to the Sutter Street Post Office herself, a package almost as big as she.

Again, the doctor allowed herself to feel relieved. The second level appeal to the QIC was comprehensive, detailed, and able to match each element documented to specific requirements of the LCDs. She could not imagine that the result would be anything else but complete reversal of the denials. Nothing could be so clear.

But also nothing could be so straight. After the statutory time, the response from the QIC came back. The excitement felt upon opening the letter quickly faded. Like the RAC letter, the QIC response was mostly boiler plate. And like usual, the QIC rubber-stamped the RAC.

The QIC work was disturbing, and there were a number of anomalies. From the claim-by-claim spreadsheet supplied by the QIC, it was obvious that some denials were never even considered.

RAC demands treatment without diagnosis

One problem in the audit involved claims what included an evaluation component. It is standard for any doctor to examine patient before making a diagnosis. But when a patient came back for an entirely different problem, the RAC had rejected the need for an evaluation. They claimed the next visit was a “follow up” visit, and if a visit is a follow-up, then there can be no evaluation.

The problem is that each visit was to address pain in a different part of the body, and of course this was clearly documented, because each part of the body has a different diagnostic code. The doctor explained: “You will note that each evaluation was for a completely different condition,” she said, “We have a policy never to schedule follow-up treatments.”

It is important to understand the implications of the RAC’s decision. It means, in effect, that doctors are required to engage in prescribing treatment without having made an evaluation of the problem. Treatment without a diagnosis would be a classic case of malpractice, but that is what the RAC is demanding.

Arbitrary Time Cuts

Another policy of the RAC was to arbitrarily shorten all patient encounters to 15 minutes instead of the 45 minutes that were consumed. Every single patient encounter was documented completely with begin times and end times, and it is easy to see from the doctor’s calendar that she never engaged in the crooked practice of billing for large numbers of patients that would be impossible to service in the day. But in spite of all the documentation, and for no reason whatsoever, the RAC just said it would pay for 15 minutes, but not for the actual amount of time consumed, 45 minutes.

There is no justification for the RAC cutting back the time like this, and the RAC didn’t provide any justification, it just did it.

Re-writing the LCDs

The RAC also changed the LCD rules by making optional elements required. And the irony in all of this was that even in those cases where optional elements had been made mandatory, still the doctor had met those elements as well in her documentation. Yet still the claims were denied.

So first the RAC made some optional elements mandatory, and when the doctor met even those elements, still the RAC denied the claims. What is going on?

The bottom line is that there was simply nothing wrong with the doctor’s claims. Nothing.

As the doctor started to prepare the documentation to the third level appeal to the Administrative Law Judge (ALJ), a FedEx package arrived. It was from the RAC. The doctor was notified that she was being put on pre-payment review. Note that this is before any resolution of her outstanding case. Again, the RAC just decided to do it. It was a shock out of the blue.

The doctor’s cash has started to run short. In the last meeting, we discussed her future. The doctor looked off into the distance to a place known only to her. “I went into medicine to help people. Perhaps I’ll drop out of this and just go to an all-cash system.”

Something needs to be done to regulate the activities of the RACs or develop an entirely new approach to auditing.

Medicare Appeal Backlog Finance Strategy

HOSPITALS LOOKING FOR SOLUTIONS TO THE MEDICARE APPEAL BACKLOG CRISIS

Part IV — Finance Strategy for Hospitals to Cope with the Medicare Appeals Backlog

This is the fourth part of a series covering the Medicare appeal backlog. In Part I, we examined a few backlog statistics. We concluded that the Office of Medicare Hearings and Appeals (OMHA) does not have the capacity to handle this case load.  It can process only around 72,000 appeals per year, which is less than one-fifth of the needed capacity. As of July 2014, the backlog had risen to over 800,000 appeals. Now it is said to be well over 1,000,000 appeals. (Does anyone really know?) Appeals are taking more than ten times longer than the statutory framework of 10 months to resolve.  That is more than 10 years!

MEDICARE-APPEALS-BACKLOG-BAR.001Figure 1 Medicare Appeals are Running Far Slower Than the Statutory Limit. This ties up hospital claims money for very long periods of time.

We suggested that one way to cut down the number of appeals would be to use audit contractors who make mistakes only 1-2% of the time, instead of 66% of the time, as is the case now. Although this would dramatically reduce the number of appeals, it seems as though we are asking too much.

Another option would be to charge the auditors a tax for each denied claim that is reversed on appeal, and hand that money over to the provider (not to the government). Or we could have the auditor be forced to refund all of the provider’s legal fees spent during the appeal. Even though this is a satisfying fantasy, none of it is going to happen.

In Part II we examined the proposal to insert a new actor into the appeals process. Under new proposals, Attorney Adjudicators (AAs) will take over part of the Administrative Law Judge’s (ALJ) work. We concluded that under the current proposals, even if they are adopted, it is unclear how this would help with the backlog except incrementally. In reality, it would take hiring a very large number of Administrative Law Judges to make substantial cuts in the current appeals backlog.

In Part III we examined proposals for bulk settlement through an alternative dispute resolution process called “Settlement Conference Facilitation” (SCF). We concluded that even if the program was doubled, it would amount to a solution for less than one-third of 1% of the backlog. This option is a form of “throwing in the towel”. That is, OMHA wants to have the appeals simply erased, and is willing to pay out around 66% of the amount in question, which happens to be the average rate for over-turned denials.

The problem with this approach is that it simply skips the carefully thought-out process of litigation. Since the claims themselves are not analyzed in this process, and no ruling is made on whether or not they are valid, this option would allow much fraud to slip through the system, and it would deprive the healthcare community of vital feedback information needed to take corrective actions in filing subsequent claims. It is a type of administrative ground hog day.

Finance strategies

Today we will look at some of the financial aspects of the backlog. Here, we find that hospitals are well aware of their problem. A large amount of their money is being held up in the appeals backlog, and we have shown that at least two-thirds of this money eventually will come back because the auditors are doing such a poor and inaccurate job in their work.

So now lets look at some of the strategies available for hospitals to adjust to a situation in which a large amount of their claims money is improperly withheld from them, and for indeterminate amounts of time. Some hospitals keep these future denial reversals on the books as account receivables for a while, before they are retired in to the bad debt pile.

For hospitals, in 2016, we can estimate there will be around 1,600,000 claims available for appeal. At current rates, approximately 708,000 will be appealed.

Given that there are 77 ALJs available to handle all of this appeals work, this is a rate of around 9,200 claim appeals per ALJ per year, which of course it far too many, and does not take into consideration either the standing backlog or other provider appeals. So there will be continued delays. Indeed, we see that in the first quarter of 2016, 75% of appeals to the ALJ were taking longer than the 90 days provided for in the statute.

We know that in 2015 approximately $1.3 billion was paid to 1,900 hospitals and that represented 68% of the value of the claims under appeal. These payments were made providing the hospital would withdraw its appeal. There was an average of 158 claims per hospital in this tranche. These numbers define an approximate value of $6,375 dollars per claim appeal.

We know that there are 4,818 hospitals registered with Medicare. So using ratio analysis, we can estimate that in 2016 the value of these claims to be held will be approximately $4.8 billion dollars for around 761,250 claim appeals.

One option would be to finance this amount. Such a bridge loan might come into play when triggered by the appeals process exceeding the statutory time limit, combined with the expectation that they will be resolved either with a bulk settlement, or with an ALJ hearing.

Since the backlog is greatly expanded to more than 130 months, instead of the statutory 10, then it is reasonable to use a 10 year mortgage type calculation, similar to a rolling home equity loan. So at a 3.5% interest rate, the payments would be only $48,000 per month for carrying the $4.8 billion that would be in play. If the interest rate were only 5%, then still the carry payments would be only $52,000 per month. Mere pennies, considering that these interest payments could be shared between all hospitals taken as a whole.

This type of arrangement could be set up through a forward-looking financial institution.  Alternatively, hospitals as a purchasing group could enter into a joint self-insurance arrangement so that each could draw upon the pool as needed. The interest payments, minus administrative expenses, would simply expand the amount of funds available to draw upon.

As soon as any settlement was paid out via a bulk negotiation, such as the 68% rule, or through an ALJ hearing, then the hospital would pay back the pool. In the meantime, for those many months that a hospital has its claims held, it will be able to make use of the money that it could expect, but at a small interest rate. For some hospitals, this might be well worth it.

This seems to be a reasonable opportunity for any financial intermediary who is interested in developing new products addressing new markets, particularly ones like Medicare appeals which seem to be rapidly expanding.

This type of financial solution will do nothing to relieve the appeals backlog, but it might help to make the financial pain more bearable for hospitals.

In Part V we will look at investments in IT as a strategy for many hospitals in building their capacities for both filing more acceptable claims, and also for better handling the information aspects of the claims appeals process when required. We will look at investments in Electronic Health Records (EHRs), patient portal software, e-prescribing and lab integration IT investments. For each of these massive investments, we will examine how it will have an impact on the backlog.

Note: Also appeared in RACmonitor.

Medicare Settlement Conference Facilitation

HOSPITALS LOOKING FOR SOLUTIONS TO THE MEDICARE APPEALS BACKLOG CRISIS

Part III — Settlement Conference Facilitation (SCF) As a Way Out of the Medicare Backlog

This is the third part of a series covering the Medicare appeals backlog. In Part I of this series, we examined a few statistics behind the backlog. The Office of Medicare Hearings and Appeals (OMHA) does not have the capacity to handle this case load. It can process only around 72,000 appeals per year, which is less than one-fifth of the needed capacity. As of July 2014, the backlog had risen to over 800,000 appeals. Now it is well over one million appeals. The time it is taking to resolve appeals is more than ten times longer that the statutory framework: What is supposed to take ten months, now is taking more than 10 years! This means that for all practical purposes, the appeals system has completely crashed.

We noted that much of the appeals backlog can be explained by the use of computerized programs that automatically generate audits, and also by the astounding number of errors made by the audit contractors.

AUDIT-ACCURACY.001Figure 1 Audits of Healthcare Providers are Very Inaccurate. More than 2/3-rds are incorrect, but still cost a great deal to appeal.

The errors made by contractors are substantial. For example, in hospital appeals, the audit contractors are wrong 2/3-rds of the time. In other words, the audit contractors are “mostly wrong”.

We suggested that one way to cut down the number of appeals would be to use audit contractors who make mistakes only 1-2% of the time, instead of 66% of the time. This would dramatically reduce the number of appeals. Why the government tolerates contractors who are wrong most of the time is a mystery.

In Part II we examined the proposal to add a new actor in the appeals process. Attorney Adjudicators (AAs) will take over part of the Administrative Law Judge’s (ALJ) work during the appeals process. The Attorney Adjudicator is defined as someone who is a licensed attorney “employed by OMHA having knowledge of Medicare coverage and payment laws and guidelines”. The AA’s duties would include (1) performing reviews of the administrative record; or (2) drafting appropriate orders.

Since the Attorney Adjudicator at this time is merely a proposal, it is unclear if OMHA will end up going this route. Some provider associations have objected. Although there is a logic to the Attorney Adjudicator, given the astounding and disabling backlog, it is unclear how this would help except incrementally.

In other words, AAs might help, but the backlog is so large this solution by itself would have little effect.

Bulk Settlement

Today, in Part III, we will examine the proposal for bulk settlement. Bulk settlement of appealed claims can take place through an alternative dispute resolution process called “Settlement Conference Facilitation” (SCF). It is not entirely clear how a settlement is reached, except that there is a facilitator of the mediation process. The facilitator is not an external party, but instead works for the Office of Medicare Hearings and Appeals (OMHA).

This mediation is described as a discussion of the potential for “a mutually agreeable resolution for claims appealed to the Administrative Law Judge” (ALJ). If the settlement conference is successful, then a “settlement document” is drawn up, and that is the end of the matter.

The eligibility requirements are restrictive. The amount of each claim must be $100,000 or less. If the overpayment amount is extrapolated from a universe of claims, the total amount must be $100,000 or less. At least 50 claims must be at issue, and at least $20,000 must be in controversy.

There is a well-defined process that is quite specific regarding forms and decision points, but we have been unable to identify the rules for the actual settlement conference. For example, we have seen no published set of procedures or system of logic to follow in order to reach a settlement. What is peculiar is that the actual validity of the various claims is not reviewed. What do these meetings do instead? It is not clear.

This process was piloted in 2014, and so far around 2,000 Medicare Part B ALJ appeals have been handled. In 2015 Phase II of the pilot was started, and Phase III opened in February of this year.

This program, still in its pilot stage, does not cover all appeals, only a portion of them. It is not known how many appeals are in the $20,000 to $100,000 range. This is another example of where CMS data sets are lacking. But perhaps this “price” range accounts for the bulk of the claims in the backlog.

Even if 3,000 of the cases have been handled through this alternative dispute resolution process, that would amount to less than one-third of 1% of the backlog. So, like the prospects for the Attorney Adjudicators, it is difficult to view this relatively new process as being more than a drop in the bucket insofar as cutting down the backlog is concerned.

In the final part of this series, we will examine some of the financial impacts of this backlog on hospitals, and see what coping strategies are being employees.

Note: This also appeared in RACmonitor.

Hospitals Face Medicare Appeal Backlog Crisis

Part II — Attorney Adjudicators (AAs) Proposed to Help Administrative Law Judges (ALJs) handle Medicare Appeal Backlog Crisis

The backlog in appeals is so long that for all practical purposes the entire system has come to a halt. It has crashed. In Part I of this series we examined a few statistics behind the backlog. We noted that much of the appeals backlog can be explained by the astounding number of errors made by the audit contractors. In Part II we will examine the proposal to add a new role for Attorney Adjudicators (AAs) who can take over part of the Administrative Law Judge’s (ALJ) work during the appeals process. In Part III we will examine the proposal for bulk settlements based on a simple percentage of claims, but with no review of the claims themselves — the “Eighty Percent Rule”. In Part IV we will examine financial strategies being used by Hospitals to handle the massive impounding of their claim payments.

CMS recently published in the Federal Register(*) a proposal to relieve the burden on ALJs by adding a new class of persons to be called Attorney Adjudicators (AAs). As reviewed previously, the number of pending appeals now is more than 1,100,000 cases, and there are only 77 Administrative Law Judges. From 2009 until 2014, the number of requests for an ALJ hearing went up 1,222 percent! In 2014, each ALJ issued 1,048 decisions and 456 dismissals. There is a capacity for around 77,000 appeals per year, and that is expected to go up to 92,000 appeals per year by the end of 2016.  Still it is not enough. It does not take much math to realize there is a crisis.

OMHA has three strategies to address this backlog. First, try to get a larger budget; Second, “take administrative actions to reduce the number of pending appeals” (but we don’t know what these actions will be); Third, hire more adjudicators and “streamline” the appeals process.

Attorney Adjudicators

Another part of the proposed solution will involve Attorney Adjudicators. It is noted that “well-trained attorneys” should be able to do a number of things that today are done by the ALJ.  These include (1) performing reviews of the administrative record; or (2) drafting the appropriate orders.  Examples of orders that might be drafted by the AAs include (a) issuance of dismissals, (b) remanding appeals in order to obtain additional information needed for a decision, or (c) carrying out reviews of QIC dismissals.

The Attorney Adjudicator is defined as someone who is a licensed attorney “employed by OMHA having knowledge of Medicare coverage and payment laws and guidelines”.

Consideration also is being given to allowing AAs to decide cases that are submitted without a request for an oral hearing. This would allow the AAs instead of ALJs to issue decisions when it is not required that an ALJ conduct an oral hearing.

An AA decision would have the same authority as one issued by an ALJ. For example, it would be possible to reopen or appeal AA decisions, just as if they were issued by an ALJ. The time frames involved, escalation options or rights of appeal to the Medicare Appeals Council would remain the same. By the way, from no on, the Medicare Appeals Council is to be referred to only as “The Council”.

The proposal also includes a pathway for the AA to pass along a case to an ALJ.  Example: The parties have agreed to waive their right to an oral hearing. The AA reviews the case and concludes that an oral hearing may be needed in order to clarify some crucial issue in the case. The AA then can refer the matter to an ALJ asking them to determine if an oral hearing should be ordered.

In sum, the Attorney Adjudicator proposal takes several important parts of the appeals work that today is done through the ALJ and hands it over to non-judges who have authority to make a narrow range of decisions. Not much is known about whether or not any aspect of the appeals process as seen from the outside will change significantly.  We must assume that appeals would be submitted the same way, and under the same set of statutory guidelines for timing that now are impossible to fulfill.

In addition, it is not clear why the proposal is not simply to hire more ALJs instead of creating an even more complex process. It may be a case of simply hiring judge-like people on the cheap, or “outsourcing” part of the work of the ALJs so that they can focus more on complex matters.

The comment period for this change has recently expired, so we are waiting to see the outcome. Apparently several important provider associations opposed creation of Attorney Adjudicators.

In Part III we will examine the proposed “80% rule”, and in Part IV we will look at emerging financial bridge strategies being used by hospitals.

Note:
(*) See Federal Register 81(128):43790, July 5, 2016. See also comments by the American Bar Association here.

This was previously published in RACmonitor.

Medicare Appeals Backlog

Part I — Statistics Show Hospitals Cutting Services, Damaged by Post-QIC Recoupment

The situation at OMHA continues to deteriorate. The backlog in appeals continues to explode, and different options are being considered to solve the problem. In Part I we will examine the statistics behind the backlog. In Part II we will examine the proposal to add a new role for Attorney Adjudicators (AAs) who can take over part of the Administrative Law Judge’s (ALJ) work during the appeals process. In Part III we will examine the proposal for bulk settlements based on a simple percentage of claims, but with no review of the claims themselves — the “Eighty Percent Rule”. In Part IV we will examine financial strategies being used by Hospitals to handle the massive impounding of their claim payments.

BACKLOG-STATISTICS.001Figure 1 The number of Medicare Appeals has increased so much that the entire system is frozen.

The recent ruling in American Hospital Association v. Burwell (*) keeps up the pressure on OMHA to dig out of the backlog.  In the ruling, we see that the exploding backlog is “especially harmful to hospitals because HHS recoups funds after the QIC stage” under 42 U.S.C. § 1395ddd(f)(2)(A). This is the time gap in the appeals process preceding the hearing with the ALJ. The essence of the backlog problem is that this time gap plus the time when an ALJ decision finally is rendered is rapidly increasing. The prospect for any hospital to get their money is running away into the distant future, thus draining the cash reserves of the hospital or leaving its banking account empty.

For hospitals that have a large share of patients relying on Medicare, this seizure of funds is particularly damaging. Some are faced with decisions to suspend some services, or even defer maintenance on physical plant. One hospital reported the inability to repair a leaking roof covering its ER facility.

In 2011, 59,600 appeals were filed. In 2013, the number had shot up to 384,000 appeals. The RAC program is responsible for 46% of these appeals.

Hospitals frequently appeal because statistics show there is a reasonable chance of success in turning around claim denials made by over-zealous auditors.  These are denials that never should have been made in the first place. For example, hospitals appeal around 52% of RAC denials, and hospitals win around 66% of the time. That amounts to a good chunk of change.

OMHA does not have the capacity to handle this case load. It can process only around 72,000 appeals per year, which is less than one-fifth of the needed capacity. As of July 2014, the backlog had risen to over 800,000 appeals.

Just as a reminder, here are a few of the deadlines:  Redetermination by MACS – 60 days (42 U.S.C. § 1395ff(a)(3)(C)(ii)); Reconsideration by QICs – 60 days (§ 1395ff(c)(3)(C)(i)); Hold hearing and render a decision by ALJ – 90 days (§ 1395ff(d)(1)(A); Review by DAB and decision or remand – 90 days (§ 1395ff(d)(2)(A)). This adds up to 10 months.

Simple math shows that at this rate, appeals easily could take more than 130 months to resolve. In simple terms, the amount of time to resolve claims is at least thirteen times greater than required by the statutory framework.

OMHA long ago went into “crisis mode”. Back in 2013, the Chief ALJ of OMHA notified hospitals that it was “temporarily suspending appeals to ALJ dockets” and that this suspension would last “at least 24 months”.

That is like saying “I would love to pay you back, but you have to wait at least two years for me to think about it again”.

In summary we can say: Medicare Appeals Backlog. The number of Medicare Appeals increased more than 900%. Statutory time for appeals has been exceeded. Backlog more than 10 years. No solution in sight.

In Part II we will examine proposals published in the Federal Register (**) to off-load some of the appeal work onto a new class of administrative lawyers to be called “Attorney Adjudicators” (AAs). In Part III we will examine the proposed “80% rule”, and in Part IV we will look at emerging financial bridge strategies being used by hospitals.

NOTES
(*) AMERICAN HOSPITAL ASSOCIATION, ET AL., APPELLANTS v. SYLVIA MATHEWS BURWELL, IN HER OFFICIAL CAPACITY AS SECRETARY OF HEALTH AND HUMAN SERVICES, APPELLEE, United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT, No. 15-5015, Appeal from the United States District Court for the District of Columbia
(No. 1:14-cv-00851) Feb. 9, 2016.
(**) See Medicare Program: Changes to the Medicare Claims and Entitlement, Medicare Advantage Organization Determination, and Medicare Prescription Drug Coverage Determination Appeals Procedures, Federal Register, Vol. 81, No. 128, Tuesday, July 5, 2016/Proposed Rules, p. 43790.

RAC Abuse of Local Coverage Determination

HOW RACS BULLY SMALL PROVIDERS

A line of crumpled elderly patients hobble into the office.  Some are permanently bent over, supported by a walking cane.  Others walk unsteadily, wobbling back and forth. They are of all ages, but mostly old. Lines criss-crossing their faces betray constant joint and muscle pain. For some it is the shoulder, for others the neck, or the hips, or chest, or knees, or lower back. All are patients of Dr. Nguyen.

The work is boring and repetitive, but Dr. Nguyen is cheerful, and listens to each patient as they express the frustrations with the fall season of their lives.

Parked out back is her 2007 Honda Civic. She purchased it used.  A few dents, and duck tape covering a few holes in the seats, but it works. The office is drab, but spotlessly clean. Being a doctor is not making her rich.

On the wall, a small black and white photo taken from the time when she was trapped in an internment camp in Thailand. It seems like ages ago, but also like yesterday. This is what her life was like before coming to the United States, learning English, then working her way through medical school while serving Pho at a Vietnamese restaurant, scrubbing the floors at night, cleaning the grease traps and helping the owner with other matters.

For each of her patients, the procedure is the same.  First, a conversation to record the patient’s history. Then a diagnosis followed by treatment. The doctor either performs manipulation of the tissue or if the pain is severe, she will relax the muscles with an injection.  Apart from extraordinary knowledge of anatomy and an appreciation of true pain, for her the practice is not complicated. There are only three Medicare codes in her billing.

I am visiting because of a RAC audit.  She explained the situation. The RAC had demanded a number of records, then wrote back denying almost 100% of the claims.

A hastily assembled extrapolation jacked-up the claw-back value. The money was due, pending appeal, and the doctor was very concerned about the interest that was being accumulated.

At the first level appeal, Dr. Nguyen had carefully written back to the RAC.  Everything had been explained and documented in detail. LCDs were quoted, specific errors in the RAC’s analysis were pointed out, and reference was made to the voluminous documentation that had been submitted. The doctor had experienced a fleeting sense that since everything had been clearly explained, the RAC would see what should at first have seen, and then things would be ok.

But the RAC had merely mailed back a form letter rejecting outright her first level appeal. The RAC was in no mood to reverse its own judgment. They rarely are. In contrast to the detail and specificity provided in the doctor’s first level appeal, the RAC letter was 99% boiler-plate, repeating platitudes about billing and responsibility. There was no analysis at all. Only cut-and-paste of off-the-shelf language of a general nature explaining the policies. There was no discussion of specifics. The wait was difficult, but the first level decision was discouraging.

Now it was time to make the second level appeal to the QIC. Even after being warned that the QICs usually are little more than a rubber stamp, she wanted to make every good effort to submit an even better appeal to this next level.

“I’m not worried.  Once we explain everything, it will be OK.
America is a fair place,” said she.

The QIC appeal document was a masterpiece. The doctor hired at attorney who instructed her to start with the rules and then show how the elements of each rule were satisfied in her documentation. She worked closely with the attorney. In order to save money, she made a deal to do most of the work with the attorney only directing what needed to be done.

The appeal was impressive. It started with each Local Coverage Determination (LCD) applicable to the appeal. For each LCD, she listed out the specific elements that must be present in order for a claim to be compliant. There are two types of elements: mandatory and advisory. Both types of elements were specified for each relevant LCD. In some cases, scientific articles were quoted to provide additional insight, and also a few notations from the Federal Register to supplement the record and clarify the applicable rules.

Then for each denied claim, the doctor showed with specificity exactly how the required elements were met, and pinpoint referenced where the information was located in the claim documents already filed with the RAC. Every single element was justified, and every single element was documented. The doctor was able to show also that even for those elements that were advisory and not mandatory, the bulk of those elements were met also.

Not only was the pinpoint reference made, but the actual information from the claim was quoted, so the RAC did not even need to look it up.

It had become clear that the RAC had made numerous mistake when it rejected so many claims. In some cases, it had misinterpreted the LCDs; in others, it had simply not bothered to read through the documentation. But the RAC did more than that. It fabricated rules where none exist. It did this by taking many of the advisory elements and claiming that they were mandatory.

When Dr. Nguyen mailed the QIC submission, it was more than 1,300 pages. She took the large bundle down to San Francisco’s Sutter Street Post Office herself, a package almost as big as she.

Again, the doctor allowed herself to feel relieved. The second level appeal to the QIC was comprehensive, detailed, and able to match each element documented to specific requirements of the LCDs. She could not imagine that the result would be anything else but complete reversal of the denials. Nothing could be so clear.

But also nothing could be so straight. After the statutory time, the response from the QIC came back. The excitement felt upon opening the letter quickly faded. Like the RAC letter, the QIC response was mostly boiler plate. And like usual, the QIC rubber-stamped the RAC.

The QIC work was disturbing, and there were a number of anomalies. From the claim-by-claim spreadsheet supplied by the QIC, it was obvious that some denials were never even considered.

RAC demands treatment without diagnosis

One problem in the audit involved claims what included an evaluation component. It is standard for any doctor to examine patient before making a diagnosis. But when a patient came back for an entirely different problem, the RAC had rejected the need for an evaluation. They claimed the next visit was a “follow up” visit, and if a visit is a follow-up, then there can be no evaluation.

The problem is that each visit was to address pain in a different part of the body, and of course this was clearly documented, because each part of the body has a different diagnostic code. The doctor explained: “You will note that each evaluation was for a completely different condition,” she said, “We have a policy never to schedule follow-up treatments.”

It is important to understand the implications of the RAC’s decision. It means, in effect, that doctors are required to engage in prescribing treatment without having made an evaluation of the problem. Treatment without a diagnosis would be a classic case of malpractice, but that is what the RAC is demanding.

Arbitrary Time Cuts

Another policy of the RAC was to arbitrarily shorten all patient encounters to 15 minutes instead of the 45 minutes that were consumed. Every single patient encounter was documented completely with begin times and end times, and it is easy to see from the doctor’s calendar that she never engaged in the crooked practice of billing for large numbers of patients that would be impossible to service in the day. But in spite of all the documentation, and for no reason whatsoever, the RAC just said it would pay for 15 minutes, but not for the actual amount of time consumed, 45 minutes.

There is no justification for the RAC cutting back the time like this, and the RAC didn’t provide any justification, it just did it.

Re-writing the LCDs

The RAC also changed the LCD rules by making optional elements required. And the irony in all of this was that even in those cases where optional elements had been made mandatory, still the doctor had met those elements as well in her documentation. Yet still the claims were denied.

So first the RAC made some optional elements mandatory, and when the doctor met even those elements, still the RAC denied the claims. What is going on?

The bottom line is that there was simply nothing wrong with the doctor’s claims. Nothing.

As the doctor started to prepare the documentation to the third level appeal to the Administrative Law Judge (ALJ), a FedEx package arrived. It was from the RAC. The doctor was notified that she was being put on pre-payment review. Note that this is before any resolution of her outstanding case. Again, the RAC just decided to do it. It was a shock out of the blue.

The doctor’s cash has started to run short. In the last meeting, we discussed her future. The doctor looked off into the distance to a place known only to her. “I went into medicine to help people. Perhaps I’ll drop out of this and just go to an all-cash system.”

Something needs to be done to regulate the activities of the RACs or develop an entirely new approach to auditing.

NOTE: This also appeared in RACmonitor.

CYBER-ATTACKS ON HOSPITALS: HOW RANSOMWARE AND BITCOIN THREATEN AMERICA’S HEALTH PROVIDERS

The scenario is a nightmare for any hospital. Suddenly, all computer screens are stuck on a warning message:  “All of your data has been encrypted. In order to unlock access to your system, you must pay $250,000 in Bitcoin.” Immediately, the entire hospital is plunged into a crisis. It is impossible for staff to look up patient conditions, or learn what treatments are required. Lives of patients are threatened. Your IT group has no idea what to do. This is the threat of so-called “ransomware” — hospital data is kidnapped until a ransom is paid.

Why do cyber-extortionists use Bitcoin? And what is Bitcoin? Bitcoin called a cryptocurrency, or a decentralized digital currency. It relies on a peer-to-peer system, which means there is no central point of control. It is open source software, so no company owns or controls Bitcoin. There is no intermediary for moving the currency from one party to another, no records, no taxes to pay, and no way to identify the party receiving the payment. All Bitcoin transactions are recorded in a giant ledger which is distributed from one network node to another. This ledger is called the blockchain. There are Bitcoin ATMs. The amount of Bitcoin is well over $10 billion dollars. In 2015, the UK bank Barclays announced it will accept Bitcoin. The price changes, but in November 2015, one Bitcoin was equivalent of around $500 dollars. There is no central repository, like a Central Bank (Federal Reserve), and no one controls the currency supply.

Bitcoin is a viable currency, and it is accepted for payment by many vendors. But it also is a favorite of criminals because there is no record of its use or transfer. No tracking, and of course no taxes. According to the FBI, “Criminals prefer Bitcoin because it’s easy to use, fast, publicly available, decentralized, and provides a sense of heightened security/anonymity.”

Ransomware

Ransomware, or “cyber extortion” is said to have originated in Eastern Europe in 2005. The scourge of ransomware is spreading rapidly. In the United States, attacks are expected to top $1 billion in 2016. But these estimates probably ignore the vast majority of Ransomware attacks that never are reported. According to the FBI(*), a typical ransomware payment is between $200 and $10,000. By early 2016, there were more than 4,000 reported ransomware attacks. The current rate is around 3,000 attacks per day. It is big business.

The names of ransomware programs read like a twisted hacker’s nightmare: CryptoWall, CTB-Locker, TeslkaCrypt, Samoas (SAMSAM), Locky (very popular), Conflickeer work, Chanitor, Nivdort bot, HummingBad, Triada, Ztorg, GameOverZeus. The Android OS is particularly vulnerable. There are a few groups of cyber extortionists known for exploiting ransomware. These include: the Cyber Caliphate Army (CCA), and the Brazil-based TeamXRat. But there is need to worry about these identities, because you will never know who hit you. Table 1 summarizes a few of recent ransomware attacks against hospitals.

ransomware-audit-23-001

How Hospitals Can Protect Against Ransomware

Unlike financial institutions, hospitals in general do not have as much experience in handling computer emergencies. Even though healthcare represents a large part of the economy, spending on cyber-security is less than 10% of overall security spending. In other words, the healthcare sector is under-investing in security. And this needs to change.

There are a number of steps hospitals can take to improve their defenses against ransomware. Any hospital might start with a ransomware audit. This audit would aim at developing a strategy or “Playbook” to improve network security, help educate healthcare employees on good security practices, putting in place a computer recovery plan, and developing a protocol to handle emergencies. A few options to consider are summarized in Table 2.

ransomware-audit-2-001

It is important to note that ransomware is not only an IT issue. There are important legal considerations. For example, if patient records are compromised, the healthcare provider must make notification. And this means tens of thousands of persons must be contacted, and in a timely manner.

No matter what measures a hospital takes against cyber-extortionists, the reality is that it is impossible to have 100% reliable protection against hackers. But there is much that can be done to (1) lower the chance of being hacked; and (2) ensure that if a ransomware incident takes place, it can be dealt with expeditiously and with the least harmful disruption to what is really important — helping patients.

Notes

(*) FBI, Criminals Continue to Defraud and Extort Funds from Victims Using Cryptowall Ransomware Schemes, Public Service Announcement, June 23, 2015. See also: U.S. Government, How to Protect Your Networks from Ransomware, Interagency Technical Guidance Document, n.d., available here.

Published also in RACmonitor.

DRG Down-Grades

 

BIG DATA AND THE FUTURE OF MEDICARE AUDITS

PART IV – DRG Downgrading: Is it auditing or racketeering?

Edward M. Roche, Ph.D., J.D.
Prior to joining the California Bar, Dr. Roche served as the Chief Research Officer of the Research Board (Gartner Group), and Chief Scientist of the Concours Group, both leading IT consulting and research organizations.

Interviews with hospitals facing a tsunami of DRG downgrades reveal that auditors are engaging in a pattern of abuse and intimidation that resembles the type of scams usually prosecuted by the Racketeer Influenced and Corrupt Organizations Act (RICO). Here are some of the facts; you judge for yourself.

Unilateral Re-Diagnosis of Patients

It is very common the the auditor to re-diagnose a patient. The result of this usually is a substantial cut in the revenue paid to the hospital.

For example, in one case a patient had pneumonia plus a cardio problem. The auditor said that it would pay for treatment of the pneumonia, but that the cardio problem was merely “incidental”. When the hospital pointed out that the heart condition was so bad it required installation of a pacemaker, the auditor then said it would pay for the cardio treatment, but that the pneumonia was incidental, and thus would receive no payment. This was the same pneumonia that in the first round had been approved. When asked to explain, the auditor didn’t answer.

In one case, the patient had streptococcus pharyngitis and also sepsis. Sepsis is a “life-threatening organ dysfunction caused by a dysregulated host response to infection.” (*) It is a very dangerous condition that can lead to death, and frequently occurs in conjunction with other conditions. The patient presented five (5) of the American Medical Association (AMA) diagnostic criteria for sepsis (e.g., Fever, tachycardia, etc.), even though the AMA requires only two be present for a sepsis diagnosis. The auditor wrote that although “the patient presented symptoms that warranted consideration of sepsis” it was not there, and only the pharyngitis would be paid for. Of course, sepsis is more expensive to treat.

(*) See Singer, M. et al., The Third International Consensus Definitions for Sepsis and Septic Shock (Sepsis-3) , J. of the Am. Med. Assoc., (2016) 315(8):801-10, doi:10.1001/jama.2016.0287. (Soon a new criteria “Sepsis-3” will replace the current criteria “Sepsis-2”.)

What is the hospital to do?  If they rely on the AMA diagnostic criteria which is used by CMS, and these criteria are followed, and consequently the diagnosis is valid, then how can the auditor simply ignore it? To put it another way, of the hospital and coders are unable to rely on the AMA diagnostic criteria, then what are they supposed to do?

In another case, the hospital was treating a functional quadriplegic who had dementia. In particular, the patient was treated so as to avoid Stage 4 decubitus (bed sores and ulcers). The auditor said that the decubitus was “clinically insignificant”, so the hospital would not be paid. In addition, the patient was not considered to be a “real” quadriplegic.

“Flavor of the Month”

The auditors seem to roam from one area to another in their targeting. According to the interviewee, “Sepsis is the current flavor of the month”.

These examples show the general pattern. If the patient is treated for more than two major problems, the auditor will always ignore the more expensive DRG and pay for only the cheaper DRG.

Cheap Tricks to Cheat the Hospital

One of the must alarming practices by the auditors is the continued use of a number of cheap tricks. For example, appeals have a cut-off time of 30 days from the date of the demand letter from the auditor, but letters routinely are mailed as much as a week or more after the letter date, usually leaving the provider with only a few days to appeal.

The auditor refuses to use trackable mail, and fully one-third of appeals are lost because the provider never even receives the demand letter.

The auditor refuses to accept any electronic records, leaving the provider hospital with a requirement to send physical copies of all the documentation by certified mail.

Unlike most correspondence, the time of submission of an appeal is counted from when the documentation is received, not when it is mailed. This tends to take another week out of the 30-day time window for an appeal.

No Transparency

When the auditor is asked to explain their opinion, they refuse. When asked about the credentials of the person(s) making the decision, the auditors point out that they are not required to provide this information. When shown how a claim meets the criteria set forth by the American Hospital Association, the auditor simply says it disagrees.

How much money is seized?

We asked for specific examples of DRG downgrading to get a picture of the amounts of money involved. In the pharyngitis/sepsis case, the billing was $23,000 and this was downgraded to $3,000 dollars. In the cardio case, the billing of $53,000 was downgraded to $35,000 dollars.

Administrative Cost to the Hospital

To give an example of the costs involved, we spoke with one hospital that is a 600 bed facility. Since the wave of DRG downgrading started, it has been forced to hire two RN who possess AHIMA certification in coding, one physician advisor, and two certified coding specialists acting as consultants, plus administrative support just to keep up.

No Due Process

Some of the most egregious abuse takes place in cases where state medicaid services are sub-contracted to a private insurance company. In these cases, there frequently is not appeal possible at all. Or if there is, then is is limited to a one-level appeal (to be reviewed by the same company). Most contracts have not external appeals process at all. What this really means, is that the auditor can simply remove money from payment to the hospital, and there is no due process to review to see if it is justified.

From a legal standpoint, this is insanity. It is un-American, and goes against every concept of due process known in our legal system.

Application of RICO

Under 18 U.S. Code § 1961(1) “racketeering activity” has a very broad meaning and includes “any act . . . involving . . .  robbery [or] extortion.” It perhaps would be a stretch to apply RICO to what is happening with DRG downgrades. But lets ask a simple question: Do you know of any other legal process in the United States where an organization can simply take more than $50,000 dollars from a party with no due process, no explanation, and no serious review? And if that is happening, then how would it be characterized? The reality is that the auditors are in a position where they can act this way because there are no constraints on them. They can simply take the money from the hospital, but without any clear explanation, and with no meaningful medical analysis. How would you characterize this?