Articles Posted in Audit

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On March 13, 2013, the Centers for Medicare & Medicaid Services (“CMS”) released a Proposed Rule and Administrator’s Ruling that provide for significant revisions to Medicare’s Part B payment policy when a Part A hospital inpatient claim is denied as not medically necessary because the care was not provided in the appropriate setting. CMS’s Administrator’s Ruling (CMS-1455-R) was issued to address the significant number of pending appeals of Part A hospital inpatient reasonable and necessary denials while the new Proposed Rule entitled, Medicare Program; Part B Inpatient Billing in Hospitals, (CMS-1455-P), which proposes a permanent policy that would apply on a prospective basis, goes through notice and comment rulemaking. As a result, the Part A to Part B Rebilling Demonstration Program has been terminated.

CMS’s Interim Ruling and Proposed Rule differ in many important aspects from the Medicare Appeals Council’s longstanding position articulated in In re: O’Connor Hosp., that hospitals are entitled to full Part B payment, including observation and underlying services, following a denial of Part A reimbursement and that any Part B payment is subject to the rules governing administrative finality and will not be time-barred. For example, although the Interim Ruling and Proposed Rule would allow a hospital to submit a Part B claim for more services than just the limited number of ancillary medical and other health services listed in Chapter 6, Section 10 of the Medicare Benefit Policy Manual (“MBPM”), services that require an outpatient status, such as observation services, will not be reimbursed for the time period the beneficiary spent in the hospital as an inpatient.

In addition, although the Interim Ruling explicitly waives the potential timeliness of filing requirements with regard to the billing of a Part B claim following the denial of a Part A claim and provides hospitals with 180 days from the denial to bill for an outpatient stay, the Proposed Rule, should it become final it its current form, would deny Part B claims if filed more than 12 months after the date of service. Accordingly, if a RAC waits 12 months to deny a claim or should 12 months elapse from the date of service while a hospital is in the appeals process, the hospital will be left empty-handed.

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On January 31, 2013, the Senate Finance Committee released a report aimed at combating waste, fraud and abuse in Medicare and Medicaid. In May of 2012, the Senate Finance Committee invited interested stakeholders to submit white papers offering recommendations and innovative solutions to improve program integrity efforts, strengthen payment reforms, and enhance fraud and abuse enforcement efforts. In response, a variety of healthcare industry experts, including Wachler & Associates, submitted nearly 2,000 pages of input and recommendations. Wachler & Associates submitted instances of egregious contractor errors, including improper recoupment of alleged overpayments, contractors sending appeals correspondence to the wrong addresses and improper referral of alleged overpayments to the Department of Treasury. Based on the Finance Committee’s review, the white papers discussed five broad themes: improper payments, beneficiary protection, audit burden, data management, and enforcement.

Improper payment issues were discussed by 44 percent of health insurers and providers who submitted white papers. Solutions regarding improper payment issues included allowing reimbursement at the outpatient service level if inpatient status is denied or for certain types of complex cases; and clarifying the guidance on or abolishing outpatient observation status. Beneficiary protection was discussed by 57 percent of insurers and providers, many of whom discussed the use of outpatient observation status by hospitals to avoid recovery audit contractor’s (RAC) scrutiny of claims, as well as provider and patient frustration with payer documentation requirements, which may lead them to forfeit certain courses of treatment or care. Furthermore, 60 percent of providers and insurers discussed audit burden issues, and were specifically concerned with the number of audit entities involved, the volume and complexity of payment rules and regulations, whether payment rules are applied consistently and whether audit entities are inappropriately overturning medical necessity decisions, audit entities interactions with providers during the audit process, difficulty communicating with audit entities during the audit process, and financial burden of payment suspensions and the impact on business.

Ninety-four percent of white papers included recommendations to combat waste, fraud, and abuse. Some of the recommendations included were:

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The Health and Human Services Department (HHS) and the Department of Justice (DOJ) recovered a record $4.2 billion from healthcare fraud investigations last year, according to their jointly issued Health Care Fraud and Abuse Control Program Annual Report for Fiscal Year 2012. DOJ and HHS reported that it deposited the $4.2 billion to U.S. Department of Treasury and Centers for Medicare & Medicaid Services (CMS) accounts. On average over the last three years, the federal government has recovered $7.90 for every dollar it spends investigating healthcare fraud and abuse. This is the highest three-year average return on investment in the 16-year history of the Health Care Fraud and Abuse (HCFAC) Program.

The bulk of these recoveries, it appears, are from pharmaceutical and device manufacturers and wholesalers. In July 2012, GlaxoSmithKline paid over $3 billion in a settlement deal to resolve its criminal and civil liability arising from the company’s failure to report certain safety data, its alleged false price reporting practices, and its unlawful promotion of certain prescription drugs. In November 2011, Merck Sharp & Dohme paid $950 million to resolve its criminal and civil liabilities related to its promotion and marketing of the painkiller Vioxx. In April 2012, McKesson Corporation paid $190 million to resolve claims that it violated the FCA by reporting inflated pricing information for a large number of prescription drugs, causing Medicaid to overpay for those drugs.

The DOJ also reported the number of its enforcement actions. In 2012, the DOJ opened 1,131 new criminal and 885 new civil healthcare fraud investigations. The DOJ also reported that 826 criminal defendants were convicted of healthcare fraud-related crimes during the FY 2012. Furthermore, the Office of Inspector General (OIG) excluded 3,131 individuals and entities based on criminal convictions for crimes related to Medicare and Medicaid, patient abuse or neglect, and as a result of licensure revocations.

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Senators Charles Schumer (D- NY) and Sherrod Brown (D – OH) are co-sponsors of the “Improving Access to Medicare Coverage Act of 2013 bill that would count observation stays toward the three-day minimum required for Medicare to cover the costs of follow up care after a serious hospitalization.

In recent years, the Centers for Medicare & Medicaid Services (CMS) has expanded its auditing programs in order to control the cost of Medicare and to prevent fraud and abuse. The auditing program scrutinizes claims for care that was not medically necessary and reasonable. If a Medicare contractor concludes that a beneficiary was allegedly improperly admitted as an inpatient, the contractor will request that the hospital return the identified overpayment. Although hospitals may appeal to challenge a Medicare contractor’s conclusion that an inpatient admission was not medically necessary and reasonable, it is evident that the audits have affected hospitals’ inpatient admission rates. Specifically, the unfortunate consequence of Medicare audit contractors’ aggressiveness is some hospitals may be motivated to place patients in observation status to avoid auditors’ scrutiny and potential financial penalties. An indication that this consequence is being realized is that the number and length of observation stays have skyrocketed. A study by Brown University reports a 34% increase in observation stays from 2007-2009. Currently, in order to receive rehabilitation or in home nursing care after a hospital stay, a Medicare patient must have a three-day inpatient hospital stay. However, hundreds of thousands of seniors are being denied Medicare coverage for therapy each year because they are admitted to the hospital under observation status instead of inpatient status.

Senator Schumer claims that correcting this “observation stay loophole” will save seniors money and will allow hospitals to provide better care for patients. CMS would have to cover the additional cost of follow up services for patients who have had a three-day stay in observation status. In the midst of the national budget debate, it will be interesting to see if the Improving Access to Medicare Coverage Act of 2013 will get any traction in Congress. In 2011 a similar act was introduced in both houses of Congress, but did not go anywhere.

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The American Taxpayer Relief Act of 2012, which became law on January 3, 2013, and is more widely known for addressing the fiscal cliff, also included a less publicized provision which changes the lookback period in the “Provider Without Fault” provisions of the Social Security Act from three years to five years. This provision is important for providers who are defending a Medicare audit. This provision previously provided that, absent evidence to the contrary, providers would be deemed to be “without fault” if an overpayment is discovered more than three years after it was paid. Thus, this provision could often be used as a defense in Medicare audits where the claims at issue were discovered more than three years prior to the audit results letter (although the “absent evidence to the contrary” language was sometimes difficult to overcome). The American Taxpayer Relief Act of 2012 in Section 638 amends section 1870 of the Social Security to allow CMS a five year reopening period.

This provision appears to have been included in the Act in response to the Office of Inspector General’s (OIG) assertions that the three year lookback period was an obstacle to overpayment recovery.

Providers should note that other provisions of the “Provider Without Fault” language in section 1870 of the Social Security Act may still present a viable defense to the extent that the provider complied with all pertinent regulations, made full disclosure of all material facts, and on the basis of the information available, had a reasonable basis for assuming that the payment was correct.
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According to the latest figures released by the Centers for Medicare and Medicaid Services (CMS), Recovery Audit Contractors (RACs) corrected a total of $2.4 billion in improper payments in fiscal year (FY) 2012, of which $2.29 billion was attributable to overpayments collected and $109.4 million was from underpayments returned. The amount of total corrections in FY 2012 was an enormous increase from the $939.3 million in total corrections reported in FY 2011. Since October 2009, the RACs have corrected a total of $3.43 billion, of which roughly 92% has been attributable to overpayments collected.

Medical necessity of cardiovascular procedures was reported to be the top issue for overpayments in RAC regions A, B and C. In RAC region D, the top issue for overpayments was found to be minor surgery and other treatments billed as inpatient. The top RAC issues for underpayments were not provided by CMS.

If you need assistance in preparing for, or defending against RAC audits, or implementing a compliance program geared toward identifying and correcting potential risk areas related to RAC audits, please contact an experienced health care attorney at Wachler & Associates attorney at 248-544-0888.

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Recently, CGI Federal, the RAC for Region B, added two new home health issues to its CMS-approved issues list. In the past, RACs have primarily focused their attention on hospitals due to the high bounty they receive for correcting improper claims. However, as displayed in the 2011 RAC statement of work, CMS has directed RACs to begin pursuing other provider types beyond hospitals. The newly approved home health issues for Region B include:

  • No skilled service: To qualify for the home health benefit, a patient must need a skilled service. When a skilled service is needed, dependent services may also be covered. Dependent services are not covered for a patient who no longer needs a skilled service. Claims with no skilled service billed will be reviewed to determine whether the qualifying criteria of having an ongoing skilled service has been met.
  • Skilled nurse length of stay: Late episodes (third and later) receive increased payments, therefore payment incentives exist for extended home health care. Medicare covers skilled nursing services when they are reasonable and necessary. Extended nursing care for observation and assessment may not be covered. Claims for nursing services into the third episode and after will be reviewed to determine if all Medicare coverage criteria is met.

In addition to the new home health issues, CGI Federal also added two new issues targeting physicians in Region B, which include:

  • Incorrect Billing of Diagnosis Codes for Colonoscopy and Sigmoidoscopy: This is an automated review to ensure correct reporting of diagnosis codes for colonoscopy and sigmoidoscopy services.
  • Professional Trastuzumab Off-Label Uses: The purpose for this automated edit is to identify claims for Traztuzumab (Herceptin®) being used for off-label indications

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Recently, the Centers for Medicare and Medicaid Services (CMS) released an MLN Matters article stressing the importance of providers preparing and maintaining legible medical record documentation. CMS contractors are required to deny a provider’s claim for repayment if the item or service is not reasonable and medically necessary. Submitting legible medical documentation is critical because CMS review contractors are required to rely on the submitted documentation when determining the medical necessity of the billed item or service.

When submitting medical record documentation to support a claim for payment, providers should ensure that the medical records are complete and legible. In addition, the medical records should include the legible identity of the provider and the date of service. In connection with submitting documents that contain amendments, corrections or delayed entries, CMS specified that providers must comply with the following principles: (1) any amendments, corrections or addenda must be clearly and permanently identified; (2) the author and date must be clearly indicated; and (3) all original content must be clearly identified.

Medicare also requires that providers properly authenticate any service ordered or provided. Such authentication is achieved by including the author’s signature, which can be handwritten or electronic. Contractors will disregard any order in which a signature is missing and will continue their review of the medical record as if the order was never received. When reviewing medical documentation that is not an order, the contractor will consider evidence in a signature log or attestation statement to determine the author’s identity when the original documentation is missing or illegible. However, contractors will not take into consideration a signature attestation for orders.

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Recently, the Office of Inspector General (OIG) released a report focusing on various areas of concerns pertaining to Medicare appeals at the Administrative Law Judge (ALJ) level. In 2005, the responsibility for conducting ALJ appeals was transferred from the Social Security Administration to the Department of Health and Human Services (HHS). Upon this transfer, HHS established the Office of Medicare Hearings and Appeals (OMHA) which formed a group of ALJs committed to deciding Medicare appeals. In addition, ALJs were required to follow new regulations that addressed the application of Medicare policies, acceptance of new evidence, and the participation of the Centers for Medicare and Medicaid Services (CMS) in the appeals. In its report, the OIG assessed the impact of these changes on ALJ appeals by gathering and analyzing appeals data from fiscal year (FY) 2010.

The report contains several findings in which the OIG determined to be significant. For instance, the OIG found that 85 percent of all appeals decided by ALJs in FY 2010 were filed by providers, compared to 11 percent filed by beneficiaries and 3 percent filed by State Medicaid agencies. Moreover, the OIG found that a small subset of these providers were frequent filers, accounting for nearly one-third of all appeals.

The OIG also found that ALJs reversed prior-level appeals and granted fully favorable decisions to appellants 56 percent of the time. Meanwhile, Qualified Independent Contractors (QICs) decided fully in favor of appellants in only 20 percent of appeals. The OIG determined that these differences in fully favorable decisions were due to a number of key factors. One factor was the tendency of ALJs to interpret Medicare policies less strictly than QICs, finding that ALJs often granted fully favorable decisions when the intent of a Medicare policy was met, rather than the strict letter of the policy, whereas QICs strived to follow Medicare policies more strictly. Another reason stated in the OIG’s report for the favorable outcome disparity was due to the difference in the degree of specialization in Medicare program areas between ALJs and QICs. Each of the QICs specialize in a particular Medicare program area (e.g. Part A, Part B and DMEOPS appeals), while ALJs receive randomly assigned appeals that involve all Medicare program areas.

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On November 1, 2012, the Centers for Medicare and Medicaid Services (CMS) published its final rule detailing the durable medical equipment (DME) face-to-face encounter requirements. In response to the various comments submitted, CMS made several key revisions to the proposed rule that was released on July 6, 2012.

The DME face-to-face encounter final rule requires that a physician, physician assistant, nurse practitioner or clinical nurse specialist perform a face-to-face encounter as a condition of payment for certain DME items. Even though the face-to-face encounter may be performed by any of these practitioners, the encounter must be documented by the physician in order for the supplier to receive payment.

In its final rule, CMS states that the requirements contained in the final rule will only apply to new orders written on or after the effective date (i.e. the rule will not be applied retroactively to orders already written). The effective date for this provision is July 1, 2013, which CMS believes will give suppliers sufficient time to implement the new policy.
In addition, the final rule also made changes to the face-to-face timing requirements, which include: (1) the face-to-face encounter must occur within the 6 months preceding the written order, which is an expansion from the original requirement of 3 months; and (2) the option to perform the face-to-face encounter 30 days after the written order has been removed from the rule. Furthermore, Medicare beneficiaries discharged from a hospital do not need to receive a separate face-to-face encounter, so long as the physician or treating practitioner issues the DME order within 6 months after the date in which beneficiary was discharged from the hospital.

The final rule also states that for DME items that do not require written orders before delivery, verbal orders are sufficient for the supplier to dispense DME; however, the supplier must obtain written orders prior to submitting a claim for payment. In contrast, for DME items that do require written orders before delivery, the supplier must have the written order, including the face-to-face documentation, prior to delivery when submitting a claim for payment.

Finally, CMS removed the proposed requirement that DME orders include “necessary and proper usage instructions” and the diagnosis. However, CMS still expects to see related diagnoses included in the beneficiary’s medical records and expects suppliers to continue to provide instructions to the beneficiary or care giver for proper usage of the DME item.
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