Which States Use Extrapolation for Medicaid

A survey by the National Conference of State Legislatures (NCSL) identifies which states use statistical extrapolation for Medicaid Audits.   Here is some of the detail:

States Using Statistical Extrapolation with Medicaid Audits

  1. Connecticut;
  2. Iowa;
  3. Massachusetts;
  4. Nebraska;
  5. New Jersey;
  6. New York;
  7. North Carolina;
  8. Oklahoma;
  9. Oregon;
  10. Washington
  11. Rhode Island may be using extrapolation in the future.

States NOT Using Statistical Extrapolation with Medicaid Audits:

  1. Delaware;
  2. Maryland;
  3. New Hampshire;
  4. Pennsylvania;
  5. Vermont;
  6. West Virginia;
  7. Wisconsin

Under the Affordable Care Act (*) states contract with Recovery Audit Contractors (RACs) to identify under and over-payments and recoup the over-payments.

For Medicaid audits sponsored by the Centers for Medicare and Medicaid Services (CMS), a Medicaid Integrity Contractor (MIC) is used.

Medicaid Integrity Contractors (MMICs) work out of five jurisdictions:

  • New York (CMS Regions I & II)
  • Atlanta (CMS Regions III & IV)
  • Chicago (CMS Regions V & VII
  • Dallas (CMS Regions VI & VIII)
  • San Francisco (CMS Regions IX & X)

Notes:

(*) Affordable Care Act was passed by Congress and signed into law 23 March 2010.  It was reviewed by the Supreme Court and was upheld.  See USSC, National Federation of Independent Business et al. v. Sebelius, Secretary of Health and Human Services, et al. Syllabus, October, 2011.

RAC Contingency Fees

When do the RACs get paid their contingency fees?  

Generally, it is after the first level of appeal.    This rule is about to change, so that the RACs will get their fee only after the matter is completely decided, after the second appeal, or perhaps beyond.

What is the timing involved?   Generally, a first level appeal takes 100 days.   This means that the RAC gets their fee in about three months.   But if the new rules come into effect, then the RAC will need to wait to see if their audit withstands the second-level appeal, but that is an average of 400 days long — more than one year!

So obviously this would have an effect on the cash flow for the RACs.

This “second appeal” proposed rule appears to be a compromise because these matters often are decided at the Administrative Law Judge (ALJ) level at a hearing.   When does that take place?  The data is fuzzy, but it appears to be frequently more than 750 days, that is, more than two years later.

If the health care providers had their way, then the RAC would not get paid until a final decision is made.   Yes, the RAC would have to wait to get its money, it would not have the “free use” of money that it can hold until a final decision.

This is important because many ALJ decisions over-turn RAC audits.

Two  RACs evidently have protested this new rule.   The protestors include HMS Holdings (HealthDataInsights) and CGI Federal (which was fired after it botched the roll-out of the Obamacare enrollment website).     This new rule, after all, would disturb their financial model because they would not get paid until they actually earn their money.

What is the right answer to this?

There is no answer that is acceptable to everyone, but lets look at the dynamics.   Under the current “100-day” system, the RAC has every incentive to rush as quickly as possible through the first level of appeal.   In that way, it gets its money as fast as possible.   But after the first level appeal, the RAC has zero incentive to do anything but drag its feet and slow down the process.    It is incentivized to delay the process, because the longer the delay, the more it can hold on to money that later might be taken away should the final decision go in favor of the health care provider.

This delay behavior frequently is done through the standard practice of taking every day of available time to fulfill even the smallest request.   Even if something takes 10 minutes of work, if the RAC has 60 days to do it, then it will complete the 10 minutes of work on the 60th day.   The longer the RAC delays, the longer it holds on to its money.

The health care provider, however, suffers immensely from this practice.   It is guaranteed that the RAC will work for as long as possible and using every possible tactic to lengthen the appeal time.   There is little if any attention given to the difficulties faced by the health care provider.

So under the proposed system, the RAC will have have incentives to operate efficiently up through the second level appeal, then it can continue to drag its heels beyond that.

It is a compromise.

Barraclough has been in dozens of cases involving the statistical extrapolation part of Medicare appeals.   It always has amazed us how long it takes for the RACs to respond to even the most basic information.   This lack of responsiveness slows down the process, harms the health care provider, and perverts the course of justice.   Anything that can be done to curb these practices is a good thing.

Something potentially good from the Government Accountability Office (GAO).

 

 

Henry Ford and Medicare

 

SUTTON Circuit Judge.  “My effort is in the direction of simplicity,” once wrote the namesake of the Henry Ford Hospital.  Henry Ford, My Life and Work 13 (Garden City Publ’g Co. 1922).  Mr. Ford apparently had nothing to do with the creation of the Medicare program.

Henry Ford Health System, dba Henry Ford Hospital, v. Department of Health and Human Services, (6th Cir. 2010)

Medicare Appeals – 85% win rate for Fox Rehabilitation

Fox Rehabilitation, a health care provider located in Cherry Hill, New Jersey, “provides physical, occupational and speech therapy services – whether in a house, apartment, senior living community, adult medical day care, or outpatient clinic.”

Its CEO, Tim Fox, has reported on the costs of Medicare audits.  Here are some of the observations:

  • Fox Rehabilitation employs 905 persons, with 705 clinicians “who visit patients in their homes in eight states”.
  • Win rate on audit appeals: 85% are won at the third level of appeal.
  • Expected revenue 2014 is $90 million.

One of the big problems is compliance with the massive amount of document requests from audits.   The cost is so high that Fox Rehabilitation was forced to cut staff in other areas of the company.  The increased audits with a reduction of -15% in Medicare payments drove the company to lay off 62 employees.  IT also had to reduce the payments to its therapists.

 

Reference:  (1) Harold Brubaker, Costs of expanded audits aimed at Medicare fraud hit health-care firms, Philly.com, posted 28 July 2014; Jane Antonio, Senate committee pushes for RAC reform:  Overwhelmed provider calls audits ‘a brutal spanking’, FierceHealthPayer AntiFraud, blog, 28 July 2014.