Articles Posted in Audit

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The American Hospital Association (AHA) sent a letter to the Department of Health and Human Services Inspector General Daniel Levinson on October 24, 2012, urging the Office of Inspector General (OIG) to focus on inappropriate claim denials by Recovery Audit Contractors (RACs). The letter stresses that RAC effectiveness needs to be evaluated and integrity programs need to be streamlined.

According to the AHA’s RACTrac survey data, seventy-five percent of appealed RAC denials are reversed. The AHA asserts that because the RACs are paid on a contingency fee basis, there is a strong financial incentive to deny more claims and increase contingency payments. The implication is that RACs are not monitored effectively and are thus allowed to inappropriately deny claims to increase contingency payments. The letter explicitly states that, “[d]enying payment for an entire inpatient stay is far more lucrative for the contractors than identifying an incorrect payment amount or an unnecessary medical service.”

The AHA further urges that more provider education is needed to improve the rates of payment errors. According to the RACTrac survey, more than half of the respondents indicated that they have received no education from the Centers for Medicare and Medicaid Services (CMS) on avoiding payment errors. The letter stresses that program integrity could be strengthened with provider education.
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Representatives Sam Graves (R-MO), Todd Akin (R-MO), Billy Long (R-MO), and Adam Schiff (D-CA) introduced a bill to Congress on October 16, 2012 which proposes to reduce the Medicare contractor audit burden on hospitals. The bill, called the Medicare Audit Improvement Act of 2012 (Act), proposes changes to the ways contractors may conduct audits and imposes additional requirements on contractors.

Medicare Audit Improvement Act of 2012.pdf

Among the requirements introduced in the Act are limits to the amount of additional documentation a Medicare contractor may request for complex pre-payment audits and complex post-payment audits. The Act would limit the additional documentation requests for hospitals’ Part A claims to the lesser of 2 percent of those claims for the year, or 500 additional documentation requests during any 45 day period.

The Act also proposes penalties for contractors that fail to maintain compliance with Medicare program requirements. Specifically, the Act calls for financial penalties when a contractor fails to complete an audit determination within the applicable timeframes, and when a contractor fails to provide communication in a timely manner regarding claim denials and appeals. Further, the Act proposes to impose financial penalties for appeals which are overturned. When a party successfully appeals a claim denial, the Act would require the contractor to pay a monetary penalty to the party that prevailed in the appeal. This aspect of the Act is notable given the number of claim denials, particularly in the area of short-stay inpatient admissions, that are overturned at the ALJ level of appeal.

Medical necessity audits are also addressed by the Act. Under the Act, pre-payment and post-payment medical necessity audits would only be allowed if it addresses a widespread payment error rate. A widespread payment error rate is defined in the Act as a 40 percent payment error rate as determined by a significant sampling of claims submitted, adjusted to take into account claim denials overturned on appeal. Also, the Act calls for a restoration of due process rights under the AB Rebilling Demonstration Program. This mean that the Centers for Medicare and Medicaid Services (CMS) could not require providers in the demonstration project to waive their right to the appeals process for inpatient claim denials which, under the demonstration, could then be re-billed under Medicare Part B for 90 percent of the Part B payment.

Contractors would also be required to publish performance data under the Act. Contractors would be required to publish data each year on:

• the aggregate number of audits conducted,

• the aggregate number of denials for each audit type,

• denial rates,

• the aggregate number of appeals filed by providers,

• the aggregate rate of appeals, and

• the appeal outcomes at each stage of appeal.

Additionally, publication of performance evaluations of contractors performed by independent entities, including error rates, would be required.
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The Region D Recovery Audit Contractor (RAC), HealthDataInsights (HDI), has posted a new issue which states that it will begin pre-payment review of medical necessity for MS-DRG 312 (syncope and collapse). The issue is part of the pre-payment review demonstration program, and is the first approved issue posted as part of the program.

HDI posted the issue for all Region D states, but the pre-payment review program has only been approved by the Centers for Medicare and Medicaid Services (CMS) for 11 states: California, Florida, Illinois, Louisiana, Michigan, Missouri, New York, North Carolina, Ohio, Pennsylvania, and Texas.

CMS intends the pre-payment review demonstration program to prevent improper payments and lower the payment error rate. The program will focus on claims with high improper payment rates. The program will be concurrent with MAC pre-payment review programs, but CMS has advised that the contractors will make efforts to coordinate in order to prevent duplicate review of the same claims.
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On Wednesday, the Centers for Medicare & Medicaid Services (CMS) will host a Special Open Door Forum (ODF) to provide healthcare suppliers and providers an opportunity to learn more and ask questions about Medicare’s Prior Authorization for Power Mobility Devices Demonstration Program. CMS’ new demonstration program, which applies to orders written on or after September 1st, creates a prior authorization process for specified medical equipment provided to Medicare beneficiaries in California, Florida, Illinois, Michigan, New York, North Carolina, and Texas. CMS identified these states as containing the highest populations of fraud- and error-prone providers, and the new program seeks to ensure that CMS pays appropriately for medical equipment.

The demonstration will examine whether a beneficiary’s medical condition warrants the medical equipment under existing coverage guidelines. CMS also notes that the program will preserve Medicare beneficiaries’ ability to receive quality products from accredited suppliers.

In order to participate, dial (800) 837-1935 and use the conference ID: 34258271. Following the ODF, a transcript and recording will be available on CMS’ website.

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On September 11, 2012 the United States Court of Appeals for the Ninth Circuit held that a Recovery Audit Contractor’s (RAC’s) initial decision to reopen a claim is not subject to judicial review. The case, Palomar Medical Center v. Sebelius, involved Palomar Medical Center arguing that a RAC has to establish good cause for an initial reopening decision. The Court of Appeals affirmed the ruling of the United States District Court for the Southern District of California, which held that the issue of good cause for reopening a claim cannot be raised after the audit’s conclusion and the revision of a paid claim.

Palomar v Sebelius.pdf

In 2007, the RAC notified Palomar that a claim from 2005 totaling $7,992.92 was under review and that records were requested to support medical necessity. Subsequently, after it submitted the requested documentation, Palomar was notified that an overpayment had been identified and the overpayment must be repaid. The overpayment was affirmed at the redetermination and reconsideration levels. Palomar then requested a hearing with an Administrative Law Judge (ALJ).

The ALJ affirmed that the services were not medically necessary, but found that the RAC did not make a showing of good cause for the late reopening. Finally, the Medicare Appeals Council (MAC) decided that:

1. Neither the ALJ nor the MAC had jurisdiction to assess whether good cause existed for reopening because the RAC’s decision to reopen was not subject to the administrative appeals process, and
2. The services were not medically reasonable and necessary.

Palomar appealed to the District Court and then the Court of Appeals on the issue of reviewability of the reopening, but not on the issue of medical necessity of the services.

The Court of Appeals for the Ninth Circuit held that because Congress established the RAC program, and expressly stated that reopenings were allowed under regulations promulgated by the Secretary, the regulations would control. Since the regulations explicitly state that there may be no appeal of a reopening decision because reopening decisions are final, the question of good cause to reopen a claim cannot be litigated after a RAC has revised a claim determination.

Although the court determined that the issue of good cause for reopening is not appealable, the court conceded that it was not an easy question to answer because of two competing principles: (1) Congress wanted an effective recovery audit program to reduce Medicare payments with resulting benefits for Medicare beneficiaries and taxpayers, under procedures set by the Secretary and (2) the provider has a legitimate interest in finality of determinations on its revenue for medical services. Despite the competing principles, the court ultimately concluded that to allow a provider to challenge the good cause for reopening during the appeals process could lead to the waste of resources and administrative inefficiency if the good cause was later rejected during the appeals process.
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On August 15, 2012 the Recovery Audit Contractor (RAC) for Region A changed its name from Diversified Collection Services (DCS) to Performant Recovery, Inc.

According to the website, processes, people, and contact information will remain the same.
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On September 12, 2012, the Centers for Medicare and Medicaid Services (CMS) released a national provider Comparative Billing Report (CBR) targeting podiatry services. The CBRs will be released to a maximum of 5,000 podiatry service providers. This is the second time in which podiatry services have been the focal point of a CBR.

The CBRs are produced by Safeguard Services under contract with CMS and will provide comparative data to help show how these individual providers compare to other providers within the same field. These comparative studies are designed to assist providers in reviewing their coding and billing practices and utilization patterns, and take proactive compliance measures by conducting self-audits through meaningful comparisons to other podiatry providers billing similar codes. It is also important to understand that CBRs do not contain patient or case-specific data, but rather only summary billing information as a method of ensuring privacy. CMS suggests that providers should view CBRs as an educational tool, rather than a warning, to help aid them in properly complying with Medicare billing rules. However, based upon our experience, it is clearly an indication that individuals receiving CBRs are prospective audit targets because their utilization of these codes exceeds their peers.

The recently released podiatry services CBRs are to serve as a follow up to the CBRs previously received by providers in April 2011. This repeat study is intended to serve the same educational and compliance goals as the prior study; however the newly issued CBRs provide more recent billing data–billed Medicare Part B claims data with service dates from May 1, 2011 through April 30, 2012 that were processed by July 27, 2012. Furthermore, the POS and CPT codes addressed in the recently released CBRs are identical to the codes utilized in the prior study; which include POS codes 11 (office) and 31 (skilled nursing facility), and the following CPT codes:

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On August 22, 2012 the American Hospital Association (AHA) published the results of a survey which indicates that Recovery Audit Contractor (RAC) claim denials were up in the second quarter of 2012 from the first quarter. The results of the survey include data collected from more than 2,000 hospitals nationwide.

The survey reveals that hospitals saw an increase in RAC denials in the second quarter of 2012 of 24%. Additionally, medical record requests rose 22% and the dollar value of claims denied increased 21%. Hospitals reported Short Stay Medically Unnecessary as the most common reason for denial. According to the survey 70% of denials were listed as Short Stay Medically Unnecessary, which is a rise of 1% from the first quarter of 2012.

Hospitals are spending an increasing amount on RAC issues. In the second quarter of 2012, 55% of the hospitals in the survey indicated they spent more than $10,000 on RAC issues. Hospitals also spent an average of $24,064 on external legal counsel in the same quarter.
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In a press release on August 15, 2012 Congressman Dan Boren, who represents Oklahoma’s second Congressional District, announced that letters have been sent to Secretary of Health and Human Services, Kathleen Sebelius; U.S. Congressman Dave Camp, Chairman of the House Ways and Means Committee; and U.S. Congressman Fred Upton, Chairman of the House Energy and Commerce Committee urging a congressional investigation into the Centers for Medicare and Medicaid Services (CMS) Recovery Audit Contractor (RAC), Connolly, Inc.

Congressman Boren accuses Connolly of, “overzealous predatory tactics against several…hospitals with their aggressive, overly critical approach.” He further states that, “[t]hese practices have the potential to create a life-threatening situation for patient care in impoverished rural communities….”

While speaking on a webcast on August 27, 2012, the Congressman said that Connolly treats rural hospitals more harshly than larger urban hospitals. As a result, rural hospitals, that frequently have a much smaller cash flow than their urban counterparts, are faced with a financial situation that could put patient care at risk. He indicated that if Connolly continues to put unnecessary financial strain on rural hospitals, some will be forced to shut down, leaving some rural areas without access to critical care facilities and putting residents in life threatening situations.
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On August 9, 2012, CGS, the MAC for J15, announced that it will begin complex medical review MS-DRG 312, syncope and collapse, based on findings that the claim denial rate for MS-DRG 312 during a probe conducted in Ohio was 79.9%. This means that providers in Ohio could see MS-DRG 312 claims audited as part of the prepayment review demonstration program and in post-payment reviews conducted by the MAC.

The potential for a double audit faced by providers in Ohio is contrary to statements made by CMS during the special open door forum on August 9, 2012. During the forum, CMS stated that a provider may hear from both a RAC and a MAC for claim review but it should not be on the same MS-DRG or the same claim. So far it is unclear how CMS will address this issue.
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