Category Archives: Medicare Audit Appeals

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.

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.

Extrapolate to Calculate Overpayments

This article concerns the use of self-audits. –Ed.

Written by Marla Durben Hirsch

If practices uncover large or systemic billing problems that led them to receive overpayments, they should conduct statistical sampling to quantify the total potential amount of overpayments received.

Doing so will reduce the time and resources some practices will need to spend dealing with overpayments in the wake of the final rule HHS released Feb. 11 (MPCA 3/16). Practices that conduct statistical sampling won’t have to review every claim that may have been overpaid, says attorney Ross Burris with Polsinelli in Atlanta.

Statistical sampling — also known as extrapolation — can be particularly helpful when complying with the rule because failing to meet the deadline to return overpayments is a violation of the False Claims Act. Penalties currently include fines of $5,500-$11,000 per claim, treble damages (damages times three) and/or exclusion from the Medicare and Medicaid programs.

The Accountable Care Act requires overpayments to be returned within 60 days of being identified. The rule clarifies how providers go about doing so.

Now that HHS issued the rule, providers are likely to see an increase in enforcement of the requirement that overpayments must be returned, Burris says.

Industry experts didn’t want to speculate on what percentage of providers might be receiving overpayments and might fall into the category of having large or systemic billing problems. However, all types of providers have at least some overpayments — many of which occur without bad intent.

Statistical sampling is a methodology to apply the rate of billing errors found in a sample of claims to a similar total population of claims. It is frequently used by the HHS Office of Inspector General (OIG), the Department of Justice, zone program integrity contractors (ZPICs), recovery audit contractors and other auditors to calculate providers’ overpayments.

The final rule specifically allows providers to use extrapolation proactively to quantify the amount to be returned, using “sound and accepted principles” that include randomly selecting claims from the applicable population of similar claims and extrapolating only within the time frame covered by the population from which the sample was drawn.

Statistical sampling is very accurate if performed correctly, experts contend.

How to apply statistical sampling

To determine whether your practice should use statistical sampling, first conduct a probe sample or audit. Do so after you receive credible information that there may have been an overpayment.

You’ll probably need to tailor the audit, say to particular years or a particular identified coding issue, Burris says.

If the probe audit reveals a larger, more systemic problem, extrapolation may be appropriate. Several decisions need to be made, in large part depending on the circumstances.

Most overpayments merely involve billing errors — say by a new coding employee — and will be returned to your Medicare administrative contactor (MAC). In these cases, you typically can (but don’t have to) conduct your own extrapolation following CMS’ program integrity manual section 8.4, which outlines what CMS is looking for in extrapolation and using a statistical sampling tool.

One of the most popular statistical sampling tools for this purpose is called RAT-STATS, which was created by the OIG and is available free on its website along with an instruction guide.

“It’s pretty easy to use and you don’t need to be a statistician,” says Gary Keilty with FTI consulting in Washington, D.C. RAT-STATS even allows users to utilize different “confidence” levels (the degree of certainty that the sample correctly depicts the total population) and “precision” levels (the estimated range of accuracy) percentages, he adds.

CMS accepts RAT-STATS as a statistical sampling tool for extrapolation calculation purposes, although its use is not required and a MAC may not have a preferred method.

Once your calculation is complete, go to the refund form from the MAC and submit the overpayment, Burris says.

“Most of the time the MAC will simply say ‘Thank you,’ and that’s the end of it,” he says.

If you’ve uncovered more than a simple error, the fraud and abuse or Stark laws(*) may be implicated. If the government is already involved, you’ll need more manpower and will want to engage an experienced attorney to handle the issue, including hiring an expert statistician, determining which government entity is involved to return the overpayment to (and what else that may involve), what the statistical sampling will entail and how best to approach the government.

Often the provider representative and the government will agree to negotiate smaller claims populations or timeframes subject to extrapolation, look at the sample together or use a statistician to provide a report, and then the parties come to a settlement based on those discussions, Burris says.

Using an attorney also will keep your investigation protected under attorney-client privilege, Keilty says.

It’s important to identify which government agency is involved, since different agencies prefer different methods of statistical sampling. For example, the OIG, which handles repayments under its self-disclosure protocol for issues involving the antikickback statute, prefers extrapolation using a 90% confidence level and a 25% precision level, Keilty says.

Consider 6 extrapolation tips

1. Don’t automatically assume that a discovered error requires extrapolation. A small error involving one or a few claims does not rise to a systemic issue that lends itself to extrapolation, Burris says.

2. If you’re handling your own extrapolation, make sure it’s a method the government accepts. This includes utilizing RAT-STATS as a statistical sampling tool and utilizing preferred confidence and precision levels. If you hire an outside statistician, ask what method he/she uses and whether the government finds that method acceptable. The government may be more likely to challenge your sampling — and overpayment amount — if it’s less accepting of the method being used.

3. Make sure you choose the right type of sample and sample size. For example, the sample needs to be randomly generated. RAT-STATS and even Microsoft Excel contain random generators, Keilty says.

4. Be careful about what you’re including in the extrapolation. For example, extrapolation assumes the total population it’s being applied to is very similar. If it isn’t, you may be including too many claims and triggering a higher overpayment than you should be repaying.

5. Note that if you use extrapolation, you don’t need to make two repayments — one for the errors uncovered during the probe audit and another covering the extrapolated amount. You can include them in just one payment, Burris says.

6. Include documentation explaining how the extrapolation was conducted and what method was used. The final 60-day overpayment rule requires this information be included when reporting and returning the overpayment, Burris says.

Notes:

(*) Stark Law: 42 U.S.C. § 1395nn – Limitation on certain physician referrals.

“This article was printed with permission of  Medical Practice Compliance Alert. To subscribe, visit [www.decisionhealth.com/hhl or www.decisionhealth.com/mca]”.

Original Title: “Save time and money — extrapolate to calculate overpayments”

The Missing Billions

Health care providers who have been audited suffer from billions of dollars being held in escrow until their cases are settled.

This situation is being exacerbated by the growing backlog in appeals.  It places tremendous strain on a provider when their payments are being impounded. According to Bryan Cave LLP “the appeals process for claims deemed improper by RACs is far too slow and leaves significant funds tied up for … years. . . . [T]his has a significant impact on the ability of hospitals and providers to serve patients. They have had to cut jobs and delay purchasing new equipment.”

Health care providers appeal because appeals work.  In 2014, hospitals reported that 52% of RAC denials had been appealed, and the success rate was 66%.  It appears that 43% of all Administrative Law Judge (ALJ) appeals are successful.

Exclusion Law

Exclusion from Medicare and Medicaid (and all Federally funded health programs) is a serious penalty.

The Department of Health and Human Services, Departmental Appeals Board, Civil Remedies Division, publishes its decisions, and from these it is possible to ferret out a few rules of the road.

There is a great variety of cases leading to exclusion.  A surprising number involve fines against convenience stores that sell cigarettes to minors.  Many concern doctors or registered nurses who are excluded from Medicare and Medicaid because of loss or suspension of their license in the state where they work.  A number of cases involve health care providers who argue the number of years for exclusion is too great.

Sadly, there are all too many cases of Skilled Nursing Facilities being fined or shut down because of abuse of their patients, usually helpless elders.  It was a shock to see how many suppliers of medical equipment are kicked out of the program because on the day an inspector showed up, they were not open during their posted hours.

The harshest penalties come from those excluded because of being convicted of a felony.  These include actions such as “unlawful manufacture, distribution, prescription, or dispensing of a controlled substance” Baldwin Ihenacho, DAB CR4002 (2015); five years exclusion for “criminal sale of a prescription for a controlled substance” (the narcotic PercocetShaikh M. Hasan, M.D., DAB CR3663 (2015) or forging prescriptions for narcotics Marcie A. Conlon, DAB CR3338 (2014) or “unlawfully writing multiple prescriptions for Oxycodone in exchange for direct cash payments of $200 per prescription.” Jose C. Menendez Campos, M.D., DAB CR2923 (2013).

From these various cases, it is possible to derive a number of lessons regarding the administrative law and how it is applied to the facts.

Nolo Contendere

A plea and acceptance by the court of nolo contendere to an offense qualifies as “convicted” within the meaning of section 1128 of the Act, thus triggering mandatory exclusion.  Gustavo E. Borjas, DAB CR3334 (2014) (solicitation to purchase cocaine)

“Good Faith” Billing Mistakes or Reliance on Billing Expert

No excuse allowed.  Proof of culpability is not needed to justify revocation under 42 C.F.R. Sec 424.535(a)(8).  Louis J. Gaefke, D.P.M., DAB No. 24554 at 5-6 (2013).  “On its face 42 C.F.R. § 424.535(a)(8) does not distinguish between false claims that are filed accidentally and those that are fraudulent or filed with willful disregard of their truth.”  Access Foot Care, Inc./Robert Metnick, D.P.M., DAB CR4113, at 3, (2015).

Community Service and Character References

Some attempt to get their penalties reduced by showing they are well respected, or service special communities.  No go.  This information is irrelevant.  See George John Schulte, DAB CR3667 at 3, (2015) “The regulations require me to exclude irrelevant or immaterial evidence from the record.  . . .  the only issues I may decide in this case are whether the IG had a basis for excluding Petitioner and, if so, whether the length of exclusion imposed is not unreasonable. . . .  letters concerning Petitioner’s character, are not relevant.” See also Dinesh R. Patel, M.D., DAB CR3355, at 2, (2014) (community service of doctor is not relevant).

Payment of Restitution

Many bring up that they have paid restitution for the problem, and suggest this is a mitigating factor.  No go. “[R]egulations direct me to consider the entire amount of financial loss ‘regardless of whether full or partial restitution has been made.’ 42 C.F.R. § 1001.102(b)(1).”  Donald Kent Blaine, DAB CR3427, at 3, (2014).

Hearsay

Documents containing hearsay may be included in hearings, which are not bound by Federal Rules of Evidence.  There is no automatic hearsay exclusion rule. Karen R. Morgan, DAB CR3331, at 2, (2014).

Mitigating Factors

The wrong-doer has passed away; the company paid restitution; the company needs to continue operating in order to pay off the penalty.   None of these are considered mitigating factors. 42 C.F.R. § 1001.102(c).” Kirpa, LLC, DAB CR3247, at 4, (2014) (emphasis added) 

There are a number of interesting features in the litigation of the Departmental Appeals Board.   This blog post was meant to give you a taste of a few interesting features in this unique environment.

GAO Report Slams RAC Operations

GAO Report Ignores RAC Statistical Methodology Problems 

In a new report “Changes Needed to Improve CMS’s Recovery Audit Program Operations and Contractor Oversight,” the U.S. Government Accountability Office (GAO) has found that as of May 2015, CMS collected “less than $10 million in improper payments, and had not approved new audit work since March 2014.”

Although CMS wrote  a “statement of objectives” for how RACs should identify improper payments, the RACs are lagging behind their targets.  And, CMS is also behind schedule in making regular performance evaluations of RACs.   In addition, CMS has not yet set up clear performance metrics that can be used to measure RAC activities.

RAC Methodology Lacking

One of the key problems is that there still is no clear accepted methodology for RACs to determine improper payments.   In fact, it does not appear that the methods currently used are consistent, or even completely understood by the government.

Statistical Methodology is Absent

A glaring omission in the Report is a lack of discussion of the statistical methodologies used for doing sampling of claims and making extrapolation of over payment amounts.

Even though the term “methodology” appears nine times in the report, it never is mentioned in connection with statistical methodology.

Barraclough on RACs and Stats

Our experience has shown that much improvement is needed in how contractors go about their statistical work.   In almost every case we have examined, the work would almost never pass the equivalent of a Daubert (rule of evidence regarding the admissibility of expert witnesses’ testimony during United States federal legal proceedings) test for scientific quality.

Summary

It’s hard to know if the assumption that “CMS collected “less than $10 million in improper payments” is correct since the methodology usually doesn’t support the initial RAC claim amounts. The amount of “improper payments” probably is much lower.

In Barraclough’s review of statistical work, our team has seen everything from use of the wrong formulas, to outright fabrication of data on the part of the RAC contractors.

These practices need to stop, but for the time being at least, it appears that the GAO is unaware of the problem.

Please contact Barraclough Health (email to info@barracloughllc.com) for the best statistical methodology in order  to reverse Medicare and Medicaid audits.

Corporate Integrity Agreements are on the Rise

Corporate Integrity Agreements

A Corporate Integrity Agreements (CIA) is a document that outlines the obligations a health care provider agrees to as part of a civil settlement.

The provider agrees to the CIA obligations in exchange for the Office of Inspector General (OIG) agreement that it won’t seek to exclude the provider from participation in Medicare, Medicaid or other Federal health care programs. The OIG is part of the Department of Health & Human Services.

CIAs are put in place at the discretion of the OIG, and are designed to get a provider back on the path of compliance.

As shown in the figure below, the number of CIAs has increased steadily.  In a 5 year period (2009 to 2014), the number of CIAs has increased more than 10 times.

Why Does a CIA Happen?

In a typical scenario, a provider has been audited and found to be afoul of various OIG regulations. The provider has then been forced to make a repayment of faulty claims and also possibly suffer a Civil Money Penalty (CMP).  CMPs can be a fine of up to $10,000 per claim.

What Relief Does a CIA Offer?

In many cases, adopting an integrity agreement has been the only way to stay in business.  The alternative is a suspension of the right to do business with the Federal Government.

If this happens, the provider is cut off of Medicare and also Medicaid.  Their name is placed on a “do not do business with” list, and for all practical purposes, this means the end of their medical business.

CIAs and the Health Care Provider Obligation

CIAs place a heavy burden on the health care provider, and failure to comply with the terms brings heavy penalties.

Among the more popular components of a CIA are:

  1. Mandatory hiring of a permanent compliance officer;
  2. Written standard operating procedures for all activities;
  3. Extensive training and education activities for all employees;
  4. Hiring an Independent Review Organization (IRO) to double-check filed claims;
  5. Detailed retention of records (liable to inspection);
  6. Systematic claims review and validation;
  7. Numerous mandatory disclosures that includes tracking of excluded service providers; and
  8. A number of annual reports and certifications.

What Barraclough Interviews Reveal about a CIA

Our interviews indicate that providers which need to set up a CIA face a number of hurdles.

  • The most significant complaint is the cost and complexity of putting everything into place and the inherent difficulty of designing the mandatory procedures that must be completely documented.
  • This is done with a combination of legal expertise, feedback from the IRO, and use of consultants. None are particularly cheap, but the provider has no choice.

There is no standard CIA.  Each one is customized to fit the particular circumstances of the provider.

Although there are a number of predictable complaints as the CIA is being put in place, our interviews reveal that after a time, the health care provider comes to appreciate its protection against further audits.

Please contact Barraclough Health (email to info@barracloughllc.com)  for further information on CIAs.

Number of CIA Agreements

RACs and The Two-Midnight Rule Enforcement

The Two-Midnight Rule Enforcement

Elizabeth Weeks Leonard, Professor of Law at the University of Georgia Law School in Athens, Georgia,   has written a clear and concise article on the issues surrounding the Two-Midnight Rule: “CMS’ Proposed Changes To The Two-Midnight Rule: Partial Restoration Of Medical Judgment” in the Health Affairs Blog.

An expert on health care issues, Professor Leonard is widely published in the field and teaches courses on Health Care Financing and Regulation and Health Care Fraud and Abuse at the University of Georgia Law School.

Barraclough LLC recommends this article to our readers; it is available at this link.

Summary

The CMS Two-Midnight rile “clarifies the circumstances under which Medicare will consider a given hospital stay to be an inpatient service (and therefore reimbursable at a higher rate under Medicare Part A), versus an outpatient service (and therefore reimbursable at a lower rate under Part B).”

“The Two-Midnight Rule largely replaced medical judgment with regulatory benchmarks for inpatient versus outpatient admissions.”

Professor Leonard further explains:

  • The Two-Midnight Rule was precipitated by a number of factors. One was a trend of aggressive Recovery Audit Contractor (RAC) claims reviews, identifying a high error rate for medically unnecessary Part A inpatient services that should have been submitted by the provider as lower reimbursement Part B outpatient services.
  • The RAC Program is a component of the federal government’s crackdown on health care fraud. RACs are essentially private bounty hunters, authorized to ferret out improper payments. They are paid on a contingency basis, typically receiving 9 percent to12.5 percent of any amounts recovered.

RAC Involvement and Rise in Appeals

“Short-stay hospitalizations became a favorite RAC target. But given the regulatory uncertainty and complex medical judgment involved in determining the appropriateness of an inpatient versus an outpatient stay, RAC audits also spawned high rates of provider appeals.”

Barraclough notes that  “The number of pending appeals overwhelmed the Office of Medicare Hearings and Appeals, leading to CMS’ offer to settle hospitals’ claims for partial payment—68 cents on the dollar—of net allowable amounts.”

Hence, one of the reasons for all the settlements that have been in the news lately.

As a result,  CMS recently proposed incremental changes to the Two-Midnight Rule.”

Read more about how the RACs lost control of the Two-Midnight rule and the issues of claims and settlements going forward.

 

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 info@barracloughllc.com)  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 info@barracloughllc.com)  to reverse Medicare and Medicaid audits.

 

Barraclough Litigation Strategy for Extrapolation

Barraclough Litigation Process