New CMS Ruling Limits Scope of Audit Review

MACs and QICs limit their  Audit Review

In RACmonitor,  Dr.  Ronald Hirsch recently wrote that “Nothing is more frustrating to a provider than having a claim denied, preparing a comprehensive appeal, submitting that appeal, and then having the appeal denied – not because the appeal wasn’t compelling or correct, but because the auditor found a second issue and the denial was upheld based on that new issue.”

“Fortunately, this frustration should be going away very soon.”

The Centers for Medicare & Medicaid Services (CMS) have limited the scope of review in certain circumstances, whereby “MACs and QICs to limit their review to the reason(s) the claim or line item at issue was initially denied.”

And this Means…

This means that a claim review can not be modified later with additional objections. The auditor will not be able to “pile on” additional objections if they fail to have a claim rejected based on their initial review.  The auditor must submit all of its objections to a claim from the beginning, and after that, the auditor loses the right to add more objections.

For complete information on this new ruling, see RacMonitor, CMS Announces Limits on Reviews by MACs and QICs.

For more information on how to Reverse Medicare and Medicaid audits, and effectively deal with claims brought against you, contact Barraclough Health (email to  to talk about your issues. 

Medicare Claim Reversal Case Study

Successful Medicare Claim Appeal

After receiving an enormous demand for reimbursement based on a statistical extrapolation, it may be possible to get the extrapolation thrown out by the Administrative Law Judge (ALJ) for a Medicare claim reversal.

If this occurs,  you won’t have to pay the large extrapolated amount, but may need to pay only for any individual claims that have been ruled to be invalid, an amount that usually is much smaller.

How do you get this situation to be reversed in your favor? Barraclough Health does it by using an accurate statistical methodology rather than let the results of the inaccurate methodology  used by RACs stand.

In this Barraclough Health Medicare Claims Reversal Case Study, we show how using our statistical methodology saved the client $1,297,700  dollars.

Medicare ZPIC Claims Demand

Dr. X received a Medicare reimbursement demand for approximately $1,300,000 dollars.

But the auditor (the ZPIC) had examined only 35 of the thousands of Dr. X’s claims.

  • Of these 35 claims, they had rejected 17 of them.
  • The value of those claims was approximately $2,300 dollars.

Dr. X then contacted Barraclough LLC.

Barraclough’s VALID Statistical Methodology

Barraclough’s expert team  completed an extensive analysis of the 4 statistical methodology used by the ZPIC, a formidable task.

The Barraclough team checked:

  • all of the calculations that were made
  • the details of how the sample was taken
  • the formulas that were used in picking the sample size

By doing this extrapolation,  the general pattern of decisions was revealed.

The Barraclough team found that the contractor had made many errors in their work, including:

  • Manufactured data was an essential part of the calculations used in determining the needed sample size.
    • Picking sample sizes is not an arbitrary act – there should be a method behind it.
    • One of the formulas that is needed to determine sample size requires an input representing the underlying variation in the variable being estimated.
    • For an over payment analysis, this would mean that it is necessary to understand the underlying variation in the over payments.
    • The only way to get this information is to analyze a number of claims to make a measurement.

But the contractor had skipped this step entirely, and had simply manufactured this number, plugged it into the formulas, and decided to use a sample size of 35.

  • When the Barraclough Team double-checked the calculations, we put the correct number into the same formulas and found that the required sample size was more than 100 times larger.
    • During the hearing the contractor admitted that they had failed to make the required measurement.
  • After finding many other problems with the statistical work, it was possible to conclude that the contractor had failed to use an acceptable statistical methodology.

ZPIC Work Falls Short of Standard

Since the MPIM (Medicare Program Integrity Manual) requires that a valid statistical methodology must be used, we were able to show that the work of the ZPIC had fallen short of the standard.

Result: Medicare Claim Reduced Significantly  

The extrapolation was thrown out by the ALJ.

Instead of having to pay the extrapolated amount of approximately $1,300,000 dollars, Dr. X. ended up paying approximately $2,300 dollars, a difference of $1,297,700.

Please contact Barraclough Health (email to  to reverse Medicare and Medicaid audits.


Barraclough Litigation Strategy for Extrapolation

Barraclough Litigation Process

RAC Appeal – The Right to a Fair and Speedy Trial

RAC Under Attack

Saying he fears “no retaliation from anyone,” the CEO of a small California hospital has filed suit in U.S. District Court claiming that $1.1 million in Medicare claims flagged by recovery audit contractors have been in limbo “for years.”

California’s only non-profit independent rehabilitation hospital has filed suit to force the federal government to resolve disputed Medicare billing appeals within its mandated 90-day window.

Felice Loverso, president and CEO of the 68-bed Casa Colina Hospital and Centers for Healthcare in Pomona, says the federal government has “for years, years” been holding about $1.1 million in claims that were flagged by recovery audit contractors. Casa Colina has appealed the claims denials, but, he says, HHS hasn’t come close to providing a hearing in front of an administrative law judge within the 90-day window mandated by Medicare law.

“Chasing a System that Seems to be Broken

Casa Colina generates about $11 million in net revenue each year, Loverso says, so the $1.2 million in deferred claims and the $2.1 million in reserves represent “a big chunk of money.”
“When you run a small hospital and you have to reserve $2.1 million, there is a lot of children with autism who could be treated with that money, there is a lot of free care I could be doing, prostheses I could be putting on people. There are a lot of things I could do with that $2.1 million rather than chasing a system that seems to be broken.”

The article is worth the read. Click on the link below for the whole story…

Rehab Hospital Takes on HHS Over RAC Appeal Delays


Contact  Barraclough for smart strategies

New Medicare RAC Bill

Medicare RAC Congressional Bill

A new Congressional bill, the Audit and Appeal Fairness, Integrity, and Reforms in Medicare (AFIRM) Act of 2015,  “provides for 119 new administrative law judge (ALJ) teams.”

But this does not solve the Medicare RAC backlog problem.

As Bob Soltis points out in Rac Monitor,

  • “Needing some work is its proposal to remand files back to the Medicare Administrative Contractor (MAC) if new evidence is submitted to the ALJ or the Medicare Appeals Council while allowing the Centers for Medicare & Medicaid Services (CMS) and its contractors an exception to the mandatory remand. Why not make CMS offer its evidence with its denial letters? Of further concern is U.S. Sen. John Thune’s amendment making Medicare magistrates contractors instead of federal employees.”

Read more about the activities, and what you can do, in When the RACSs Attack? Write your Congressman and Fight Back!

Texas Medicaid Claims Extrapolation: In the News

Medicaid Extrapolation Reform

Texas:  $16,000,000 Extrapolation Reduced to $39,000 Because of Faulty Extrapolation – OIG Employee Fired – Investigation Reveals Massive Falsification of Data and Invalid Statistical Methodology

According to the Texas Dentists for Medicaid Reform (TDMR), “the new Health and Human Services Commission Inspector General Stuart Bowen, Jr. has been taking on and overhauling the agency’s use of statistical sampling and extrapolation. This is the most controversial tool that the agency had been using to demand multi-million dollar settlements from Medicaid providers under investigation.”

The Termination Letter

According to the termination letter [] against the OIG employee:

  • The seed value in the statistical tool “actually did not generate the stratified sample embedded in that tool”.
  • Investigators found a hidden spreadsheet with embedded macros that would over-write any “incorrect sample”.
  • The OIG falsified a sheet that stated the sample was created by the software tool.

After a detailed investigation, the OIG employee “admitted . . . that [he] falsified the sample” and “had not reviewed the sample before sending it”.

Weeding out some bad apples in Medicaid Claims Extrapolation who have overcharged dentists for years, the Human Services Commission Inspector General  has instituted new extrapolation rules, and is settling older cases as well.

For more on the importance of extrapolation, and how dangerous the wrong extrapolation can be to Medicare and Medicaid claims, see New Inspector General Overhauling Agency Use of Statistical Extrapolation and Settling Cases.

We at Barraclough are sad to say that what happened in Texas is not as uncommon as you think.   Here the only difference is that it was exposed.

We often find serious methodological problems, including use of wrong formulas, and falsification of data.   You just need to know where to look.   Barraclough knows where to look.

Don’t Mess With Texas!

ZPIC Audit: How to Avoid Civil Money Penalties

ZPIC Audit and Civil Money Penalties

Recently changed Medicare rulings can leave you libel for civil penalties even after you’ve satisfied the ZPIC audit by paying in full. But, there are ways to avoid civil money penalties.

Please contact Barraclough Health (email to to find about about the best ways to avoid civil money penalties and how to reverse Medicare and Medicaid audits.

In most cases, an audit of a Medicare or Medicaid provider will find a number of claims that are invalid.   When the health care provider already has submitted claims and then collected a payment from the government, then any money from improper claims must be returned.

But what happens if the government suspects that the improper claims aren’t the result of innocent mistakes?  If the government suspects that your mistakes were intentional?

Medicare Rule Changes and Drug Testing Advances

Up until January 1st, 2011, providers would bill Medicare once for each drug assay performed, even from the same urine sample.   For example, a single sample would be used for 11 assays, and 11 claims lines would be submitted for the patient, each for a different drug that was being tested for.

But technology became more advanced, and  testing improved to be more efficient.   Machines could now check for a number of drugs at the same time.   As a result, Medicare changed the rules so that testing for multiple drugs would be considered to be a single test.

This new rule would potentially reduce revenue by -90% for health care providers.

Outsourced Coding

Many providers use  outsourced coding specialists to perform the paperwork of claim entry.   In one case, the coders continued to submit 11 claims for each patient.

What was the result?  More than 19,000 bad claims.

A ZPIC audit found these mistakes.    It calculated the amount of improper payments and demanded reimbursement by the doctor, whereupon the doctor promptly paid all the money back.   The ZPIC sent back a letter stating that “the matter is closed”.

Civil Penalties

But the matter may not be closed when you are audited by a ZPIC and then you pay back the money.

The government may choose to impose civil money penalties defined in Sec. 1003.100 of 42 CFR.

How much?

It could be as much as $10,000 for each wrongful act.  Each improper claim would be considered separately.  Another option for the government to pursue is to collect 2-3 times the amount of the over payment.  So if you have paid back $250,000, then the additional penalty would be $500,000–$750,000.

The law is written so that even if you had no intent to defraud the government, that is not considered.

  • Under 42 USC 1320a–7a (i)7B “no proof of specific intent to defraud is required”.  What can trigger Civil Money Penalties?  The health care provider must “act[] in reckless disregard of the truth or falsity of the information” or could act “in deliberate ignorance”.

Blame it on the coder? 

For most health care providers, subcontractors do the coding.   Can they be blamed?  Well, perhaps they could, but this will not get you out of Civil Money Penalties because the rules are such that any provider is responsible for their “agents”, and billing companies are considered to be “agents” for the provider.

  • “A principal is liable for penalties, assessments, and an exclusion under this section for the actions of the principal’s agent acting within the scope of the agency.”

How to Avoid Civil Money Penalties

Perform a Self-Audit.   The law is written so that the way you act can make a difference.  

  • By promptly performing a self-audit, at your own expense, and then paying back any wrong claims that are discovered, it may help give the impression that you are not a criminal, but instead only a provider who has temporarily run into a coding problem.

Take Education Seriously.   When you receive an education letter, stop what you are doing and study the issue carefully.

  • Even if a doctor is not doing the day-to-day coding, they nevertheless should know the exact coding details of their services.

Document Your Actions.  Keep detailed records of your communications with your coders.

  • Document every event in which you discuss coding with them, and if you send instructions to your coder on how to file proper claims, get a confirmation back from them that they received it and will be making an needed changes to their procedures.

Maintain a Chronology.   If you get a letter from the OIG (Office of Inspector General) then have ready a complete chronology of every communication with your coders, ZPICs and others in connection to the matter.

  • This may be one of the most valuable things you can do to show that you are not acting recklessly.

The more you do these things, the less likely is the OIG to conclude that you deserve to pay back much more than you already have.