Wachler & Associates Health Law Blog

The Department of Health and Human Services Office of Inspector General (“OIG”) recently announced that it would closely examine data relating to new Medicare hospice provider enrollments. These efforts build on existing practices by the Centers for Medicare & Medicaid Services (“CMS”) to increase oversight of certain Medicare hospice providers.

Hospice provides palliative care and support for patients who are terminally ill and for their families. Medicare covers hospice care only where certain criteria are met, including that a qualifying physician has certified that the patient has a terminal illness and a life expectancy of six months or less. Medicare-enrolled hospice providers are also required to be certified by CMS, be licensed as required by State and local law, and meet Medicare Conditions of Participation to receive payment.

For the past several years CMS has been concerned with hospice compliance and with fraud, waste, and abuse by hospice providers. To this end, CMS has increased audits of hospice providers, adjusted the 36-month rule restricting certain sales of hospice providers, and implemented the Provisional Period of Enhanced Oversight (“PPEO”) pilot program. Pursuant to the PPEO program, since mid-2023, CMS audits all “newly-enrolled” hospice providers in Arizona, California, Nevada, and Texas. “Newly-enrolled” is not limited to hospice providers enrolling in Medicare for the first time, but also includes those that undergo a Change of Ownership (“CHOW”) as that term is defined under the Medicare program, those that undergo a 100% change in ownership, and those reactivating Medicare enrollment after being in a deactivated status. PPEO audits function similar to TPE audits, but tend to be more rushed and less forgiving in terms of the education provided to the hospice under review. Hospices under PPEO audits should treat them with due caution and take measures to ensure that their claims and documentation meet Medicare requirements.

The US Department of Health and Human Services (“HHS”) Office of Inspector General (“OIG”) recently released a report wherein it found what Medicare providers have long known, that Medicare Administrative Contractors (“MACs”) frequently commit significant errors and do not comply with Medicare requirements when they conduct audits of Medicare providers.

Specifically, OIG reviewed MAC audits of Medicare costs reports and found that, for federal fiscal years 2019–2021, each of the 12 MAC jurisdictions failed to comply with the contract requirements for audit and reimbursement desk review and audit quality for at least 1 of the 3 years. The Centers for Medicare & Medicaid Services (“CMS”) also identified 287 total audit issues among all MAC jurisdictions during that period, including MACs not performing proper reviews; inadequate review of graduate medical education and indirect medical education reimbursement; improper review of allocation, grouping, or reclassification of charges to cost centers; improper calculation and reimbursement for nursing and allied health programs; and inadequate review of bad debts.

Issues with MAC reviews are nothing new to Medicare providers. In addition to auditing cost reports, MACs also audit claims under Medicare fee-for-service and perform the first level of claims appeals, referred to as Redetermination. In regard to audits, MACs are often criticized for misinterpreting criteria, applying the wrong criteria, using nurse reviewers with little to no experience in the clinical area under review, and taking excessive amounts of time to complete reviews. However, MAC audit issues might not present such a significant issue if MACs did not also perform the first level of appeal – Redetermination – of their own audits.

Multiple changes have been announced or proposed at the federal Department of Health and Human Services (“HHS”), which will likely impact healthcare providers engaged in Medicare audit appeals and regulatory compliance activities. Although, in some ways, these changes may simply be a return to the status quo experience 5 to 10 years ago.

HHS has announced that that it will further reduce its head count and rearrange some of its many divisions. Specifically, it will cut another 10,000 full-time employees in addition to the approximately 10,000 employees that have left the department since January. The bulk of the new cuts will be to the FDA, CDC, and NIH. The Centers for Medicare and Medicaid Services (“CMS”), which oversees the Medicare program and the many Medicare contractors, is expected to lose about 300 employees. While the reduction at CMS may be small relative to other divisions, the loss of experienced decision-makers is being keenly felt as established agency norms, contacts, and priorities can no longer be relied upon. For CMS to change is not necessarily a bad thing in the long term, but it in the short term, it creates significant uncertainty among providers.

Several divisions relating to Medicare appeals and compliance are also being rearranged. The Health Resources and Services Administration (“HRSA”) is being combined with several other divisions into the new Administration for a Healthy America (“AHA”). HRSA has administered – often poorly – the Provider Relief Fund (“PRF”) and the many provider disputes related thereto. It is not clear whether this change will reinvigorate HRSA’s handling of PRF disputes, but given the policy statements of the new AHA, PRF disputes do not appear to be a priority. Further, two divisions closely related to Medicare appeals, the Office of Medicare Hearings and Appeals (“OMHA”) and the Departmental Review Board (“DAB”), will both be reassigned under a new assistant secretary of enforcement. OMHA and DAB already work together closely, so providers in the various Medicare appeals processes are unlikely to experience significant disruption from this change.

Healthcare providers are no strangers to Medicare audits and the havoc they can impose, but with careful billing, attention to detail, and adequate documentation, it is possible to turn the tide. However, a recent trend indicates that these audits are being examined much more closely and are quickly morphing into something far more serious—an investigation under the False Claims Act (FCA).

The Medicare audit process typically involves a review of healthcare claims, medical records, billing codes, and supporting documentation. When alleged discrepancies are found—such as improper coding, overbilling, or inaccurate claims—providers may face repayment demands and other related consequences, usually contained within the administrative Medicare framework and not escalated to a matter under the FCA… Until now.

What is the False Claims Act (FCA)?