Tag Archives: RAC

Medicare Appeal Backlog Finance Strategy


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.

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.


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.


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.


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

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!

Avoiding RAC/MIC Appeal Extrapolation Mistakes

In previous blogs we have explained the importance of using Statistical Extrapolation  to win your RAC or MIC appeals.

Here are the top five things to avoid in order to overturn the statistical extrapolation.

DO NOT Base your extrapolation argument on a sample size that is too small

Although it is true that in most cases, the sample size used is too small, this argument alone generally will not prevail in the appeal.

  • What often happens is that the trier of fact will simply verify if the  evidence that the statistical methodology used was generally consistent with the Medicare Program Integrity Manual (MPIM).
  • There is an unfortunate passage in the MPIM which states that any sample size can be valid as long as the underlying methodology is sound.

And the unfortunate result is that the widespread use of poor and inadequate samples in the extrapolation often leads to results not in your favor.

DO NOT Accept print-outs instead of real electronic spreadsheets

It’s common for contractors to send print-outs with tables of data to back up their statistical work.   Don’t accept them for the extrapolation.

  • Try to get the original electronic spreadsheet because this allows you to verify the statistical work, and to see the details of how it was done.
  • It also will allow you to run various tests to determine the quality of the work.

Always use the “best business record” rule to argue for the original sheets.

DO NOT Neglect to obtain the full universe file

Audit Contractors generally select a “frame” from the larger universe of all of your claims.  From this “frame”, they will select their sample for analysis.

  • Without the entire universe file containing all claims you have filed, it’s impossible for you to run several important statistical tests that will help uncover any flaws in the contractor’s statistical work.

DO NOT Accept the argument that poor precision works in your favor for the extrapolation

Poor precision in statistics  is a sign of bad work.   It is often argued that poor precision works in favor of the provider because the lower side of the confidence interval is chosen for the over payment demand number.

  • Using a confidence interval to adjust for poor precision is not good statistics practice.
  • Insist that the contractor meet the Federal precision standards that were published in the Federal Register.

DO NOT Ignore all aspects of the extrapolation’s statistical methodology

The statistical work is much more than simply the sample taking and calculation of the extrapolation.   ALL of it has to be checked.

  • In addition, there are a number of PIM rules that must be complied with.   Check what was done against each and every one of the PIM rules and that they were followed in every detail.

Breaking a single PIM rule is often is overlooked, but if there are a substantial number of violations, then it helps build the case that the statistical work is not to be trusted and the appeal will be decided in your favor.


Winning Medicaid Audit Appeals

Winning Medicaid audit appeals (or MIC audits), often depends on the statistical extrapolation which determines how much you will owe in claims.

Medicaid Audit Appeals are very similar to the process in Medicare, but with some important differences explained here.

As with a Medicare Appeal,  one of the most important parts of the review process is the Medicaid Audit Statistical Extrapolation, which based on the review of a small number of billing claims, is applied to all of your claims for a number of years.

It’s the extrapolation of the error rate of the claims that pushes the amounts so high.

Barraclough’s Litigation Strategy is to show that the extrapolation is incorrect. We disprove the validity of the statistics in your favor, so the amount you owe is either nothing or significantly less than originally asked for.

Please read our previous blog, Winning Medicare Audit Appeals for information on Medicare Appeals and the Barraclough Litigation process.

Medicaid vs. Medicare Audits

Here’s a  comparison between Medicare and Medicaid Audits. It’s important to note that since each State has different regulations, a health care provider may have a better chance of winning an appeal in the Medicaid area than in the Medicare process.

Medicaid and Medicare Audit Differences

Medicaid Chart-JFA Revised 2

The Barraclough Advantage for Winning Medicaid Appeals

Credentials matter in MIC audit appeals because rules apply to expert witnesses, and it is in Medicaid audits that  statistics can really make a difference. Barraclough’s expert team of statisticians is a significant asset in all appeals, but this is particularly true in MIC audit appeals.

Statistical examinations are different for the 50 States. Some States have very specific rules about how the statistics work. Barraclough will meet all of these State statistical requirements.

Local expertise is important since rules differ from State to State the rules regarding statistics and how the audits are done.  Barraclough has worked in many States and has the local knowledge, including the knowledge from previous cases

A strong discovery process is a key in winning a MIC audit appeal. With each State, discovery can be used as a tool to defeat the audit results.

Medicaid Audit Process Background

Medicaid Integrity Contract (MIC) audits are  conducted by private companies under contract to the Medicaid Integrity Group (MIG) of CMS.

MIC audits are contracted by CMS and paid under that contract. This is unlike Medicare RACs which are paid based on the amount of money in improper payments they identify.

Like the Medicare RACs, the  MIC audit utilize sampling and extrapolation. MIC audit sampling and extrapolation decisions take into account the circumstances of the particular audit and the laws and regulations of the State to which the provider submitted its Medicaid claims. Audit look backs are allowed for up to five years.

The MIC audit will use a variety of data during the audit process, including, but not limited to, Medicaid claims data, recipient medical records, and other provider records.

The States are responsible for collecting over payments from providers.

The MIC Audit Process

  • MIC auditors perform field audits and desk audits.
  • The MIC auditor prepares a draft audit report, which is first shared with the State and  then with the provider.
  • The State and the provider each have an opportunity to review and comment on the draft report’s findings. CMS will consider these comments and prepare a revised draft report.
  • CMS allows the State to review the revised draft report and make additional comments. CMS then finalizes the audit report, specifies any identifies overpayment, and sends the final report to the State.

The State will then pursue the collection of any overpayment in accordance with State law. Providers have full appeal rights under State law.

MIC auditors can examine:

  • Provider financial records
  • Client medical records
  • Employee records
  • Provider appointment books
  • Any other applicable records related to services billed to the Department

MIC audits may review claims looking back up to 5 years.

For More Information

Winning Medicare Audit Appeals

Winning Medicare Audit Appeals often depends on the RAC Statistical Extrapolation which determines how much you will owe in claims.

In this Guide, Barraclough LLC explains one of the more important aspects of the RAC review process: the RAC Statistical Extrapolation, which based on the review of a small number of billing claims, is applied to all of your claims for a number of years. Barraclough wants to remind you that it’s the extrapolation of the error rate of the claims that pushes the amounts so high.

Winning Medicare Audit Appeals

Barraclough’s Litigation Strategy is to show that the RAC extrapolation is incorrect. We disprove the validity of the statistics in your favor, so the amount you owe is either nothing or significantly less than originally asked for. This can mean that Winning the Medicare Appeal is a matter of looking at the numbers.

Medicare Audit Process Background

Medicare billing is investigated by subcontracted professional auditors. The Recovery Audit Contractor (RAC) program began in 2005. Medicare can and does investigate the medical billings of any practitioner who bills Medicare for services, including but not limited to: solo physicians, chiropractors, physical therapists, small or large medical practices, pharmacists, clinics or hospitals. This is referred to as the RAC review process.

RACs receive payment which is a percentage of what’s recovered for alleged billing errors. The remainder of the amount goes back to the Medicare Trust Fund.

Part 1:  RAC Statistical Extrapolation is a Key Determinant of Amounts

RACs use statistical sampling to calculate the overpayment demand following an audit. While the use of statistical sampling for overpayment estimation is limited by statute, the auditor will examine a small percentage of claims, and then extrapolation can range from the tens of thousands into the millions, depending on the size of the entity being audited.

Significant problems occur  because RACs  use faulty statistical methods. When this happens, health care professionals will be forced, unfairly, into paying large refunds that they  really do not owe.

The remedy for this is your own independent audit done by Barraclough’s experts.

How We Work:

Barraclough’s Litigation Strategy for Medicare Audit Appeal


Medicare Audit Appeal
Medicare Audit Appeal

Part 2: The Audit Notification

You’ve just received a notification that you are under investigation for Medicare billing claims. This is the first that you, the doctor or health facility, knows of the audit. An analysis of billing has taken place behind the scenes.

It’s unclear why you are being investigated.  Perhaps it was a whistle-blower or an anonymous tip. But for the most part, audit targeting appears to occur as large  data mining programs sift through the billions of claims in order to uncover allegedly suspicious billing patterns.

The next step in the RAC review process is a demand to see some of your patient records. When these are sent in, a team of auditors examine each record. Medicare rules in the strictest possible manner.

Many of your billing claims which are being examined in the RAC review process may be rejected because they were “not medically necessary.” Others may simply be a case of minor clerical errors in paperwork. We have yet to see a true fraud case.

But it is the case that any error, no matter how trivial, will be highlighted. It is not uncommon in the RAC review process for some rules to be applied incorrectly or for other rules appear suspect.

The result is that the auditor will come up with an “error rate” based on this sample of claims.  If one-third of the claims have problems, then your stated RAC review error rate is 33%.

What’s critical to understand is that then the auditor takes that error rate and applies it to all of your claims for a number of years. This is why winning an Medicare Audit Appeal can be so difficult.

The result is a letter to you demanding return of one-third of all Medicare payments you have received over this entire period.

So, it’s not just the Medicare audit, it’s the extrapolation of the error rate of the claims that pushes the amounts so high.  For many small practices and medium sized health facilities, like clinics, this is enough to bankrupt the entire business.

 Part 3: Barraclough Litigation Strategy

 Show that the RAC Extrapolation is Incorrect

Examining the RAC statistical work is the key; the goal is to disprove the validity of the statistics in your favor, so the amount you owe is either nothing or significantly less than originally asked for, i.e., just the amount on the original small sample of cases.

Barraclough statistical and medical experts prove where the Medicare audit is incorrect.

Because there is a defined window of opportunity to object to the extrapolation, you need to pursue this immediately after you receive the judgementAfter that,  you lose the right to ever appeal anything you have not mentioned before, such as these statistics.

That’s why, getting correct statistical  extrapolation soon as possible is critical to winning your case.

In Barraclough’s many cases, we have examined a number of these demand letters, and looked carefully at the underlying statistical work. Thus far, we have yet to find even a single demand (statistical extrapolation) that used flawless statistics.

Examples of the problems we have uncovered include:

  • The contractor may use the wrong formulas for basic calculations.
  • The contractor may skip entire parts of the statistical procedure and “wing it” by making up crucial numbers.
  • The contractor may make complete ludicrous claims, such as that a statistical sample with no stratification was “actually stratified, but with only one stratum”.

There are other problems as well. The “explanation” to the doctor may be useless even though it’s full of lengthy statistical boilerplate, complete with a number of impenetrable formulas. In one case, the auditor even supplied a photocopy of a software manual as part of their justification.

Part 4: Reverse the Medicare Audit

Barraclough’s clients have had success in Medicare audit reversal because they have pushed back against these kinds of Medicare audit results.

Here are a few things you can do:

  1. As soon as you receive notice of an audit, contact an attorney who specializes in responding to Medicare Audits.
  2. Check to make sure they have specific and successful experience handling Medicare refund audits.
  3. Don’t expect the Medicare auditor to be forthcoming in providing you data.
  4. From the very beginning, insist on a complete statistical review of how all samples and calculations were made.
  5. No matter what you do, don’t settle for boilerplate.
  6. Make the auditor shows their work including every single calculation from beginning to end.
  7. Make them give you the spreadsheets.
  8. Challenge every single stage of the audit process from the initial targeting of your practice to the extrapolated refund demand.

Don’t take at face value anything written in your audit letter, especially the interpretation of the rules. Don’t expect your attorney or even the Judge to be able to understand the formulas. Instead, use a qualified statistical expert to review all materials.

With a successful statistical challenge, the extrapolation can be thrown out completely.

For More Information