Articles Posted in Audit

Medicare providers understand that a claim may be denied if the services do not satisfy applicable coverage requirements. The more difficult question is whether a provider must repay Medicare when a coverage determination is later overturned and recouped, or when the provider reasonably believed the services qualified for coverage at the time they were furnished. That question was recently addressed by the U.S. Court of Appeals for the Sixth Circuit in In Home Health, LLC v. Kennedy, a decision that could have significant implications for Medicare providers facing post-payment audits and overpayment demands.

The Social Security Act provides for a Waiver of Liability doctrine wherein a provider is not liable for a Medicare overpayment where the provider did not know and could not reasonably have been expected to know that payment would not be made. Waiver of Liability issues typically arise where Medicare coverage guidance is vague, open to interpretation, or non-existent. However, the doctrine typically gets extremely short shrift in the Medicare claims appeal process, where most reviewers simply conclude that it does not apply without performing any substantive analysis.

In Home Health involved a hospice provider that faced a demand for nearly $1 million in alleged overpayments after Medicare contractors, and further levels of administrative review by a Qualified Independent Contractor and Administrative Law Judge (ALJ), that numerous hospice claims did not meet Medicare’s coverage requirements.

A Medicare denial is not necessarily the end of the road. For providers, physicians, and healthcare organizations, it can be the beginning of an administrative appeal that ultimately reaches an Administrative Law Judge (ALJ), the Medicare Appeals Council, or even federal court. But successful appeals rarely begin at the hearing stage. They are built from the earliest stages of the dispute.

For Original Medicare Part A and Part B claims, CMS identifies five levels of appeal: redetermination by the Medicare Administrative Contractor (MAC), reconsideration by a Qualified Independent Contractor (QIC), an ALJ-level proceeding through the Office of Medicare Hearings and Appeals, review by the Medicare Appeals Council, and judicial review in federal district court. That structure creates a practical lesson for providers: the appeal record matters from the beginning.

A common mistake is to treat the first two appeal levels as relatively informal requests for review and assume that the “real” case can be developed later at the ALJ hearing stage. That approach can be costly. The early levels of appeal, especially reconsideration, are an opportunity to identify the precise reason for the denial, assemble the relevant medical and billing evidence, and establish a coherent explanation for why Medicare payment was appropriate. Timing matters, too. Evidence and medical records that are submitted at the earlier appeal levels may be excluded from consideration before the ALJ and later appeal level.

For healthcare providers enrolled in Medicare, a claims audit can present significant operational and financial challenges. When an audit results in denied claims, the appeals process often becomes lengthy, with cases taking months—or even years—to reach a final resolution. Successfully navigating each stage requires careful planning, strategic decision-making, and close attention to procedural deadlines.

Most Medicare audits begin with a request for medical records from a Medicare contractor. From the outset, providers should determine the purpose and scope of the review. Identifying the contractor conducting the audit—whether a Medicare Administrative Contractor (MAC), Unified Program Integrity Contractor (UPIC), Recovery Audit Contractor (RAC), or Supplemental Medical Review Contractor (SMRC)—can offer valuable insight into the government’s objectives. It is equally important to understand the type of audit involved. Is the review occurring before or after payment? Is it part of a Targeted Probe and Educate (TPE) initiative, a Comprehensive Error Rate Testing (CERT) review, or a Provisional Period of Enhanced Oversight (PPEO) audit? Providers should also evaluate whether statistical sampling or extrapolation may be part of the review.

The provider’s own circumstances should also factor into a response strategy. Previous audit activity, recent ownership changes, or situations where records are maintained by another organization may all influence how the audit should be handled. Depending on the issues presented and the potential exposure, providers may choose to supplement the record with additional documentation, obtain an independent clinical review, communicate directly with the auditing contractor, or prepare a comprehensive legal response. In lower-risk situations, however, submitting the requested records and waiting for the contractor’s determination may be the most appropriate approach.