Medical Director Agreements: Compensation Arrangements are Under the Microscope by HHS-OIG

June 11, 2015 by  
Filed under Featured, Medicare Audits

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Medical Director-Physician-Compensation-Pay(June 11, 2015): After a hiatus of almost a year, the Department of Health and Human Services, Office of Inspector General (HHS-OIG) has published a new “Fraud Alert” entitled Fraud Alert: Physician Compensation Arrangements May Result in Significant Liability. As this alert makes crystal clear, physicians who serve as Medical Directors for home health agencies, hospices and other organizations must exercise care to ensure that the business relationship does not violate the federal Anti-Kickback Statute.

This article briefly discusses the potential criminal, civil and administrative liability you may suffer if your Medical Director arrangement does not fully comply with the law.

I.  The Role of the Physician in the Care and Treatment of Home Health Patients:

In June 1995, HHS-OIG published its report, The Physicians Role in Home Health Care. As set out in HHS-OIG’s report, prior to 1995, Medicare covered home visits by a physician, but did not cover the services of physicians for managing the home health care of their patients. On December 8, 1994, the Health Care Financing Administration (HCFA), now known as the Centers for Medicare and Medicaid Services (CMS), published new regulations in the Federal Register which provided for separate payment to physicians for care plan oversight services.. As HHS-OIG’s 1995 report further details, the agency had little data to rely on when assessing the full nature of physician involvement in home health care. Nevertheless, there were a number of concerns (based on audits conducted and anecdotal evidence provided) that physicians were not appropriately involved in the planning and coordination of home health services.

II.  HHS-OIG’s Recent Fraud Alert on Physician Compensation Arrangements:

While the role of the physician in the care and treatment of beneficiaries referred for home health may have been unclear a decade ago, there is little doubt that HHS-OIG’s view of this relationship has now crystallized.

Earlier this week, HHS-OIG published its latest Special Fraud Alert, entitled “Fraud Alert: Physician Compensation Arrangements May Result in Significant Liability.” As this report reflects, HHS-OIG is very concerned that the relationships between physicians and home health agencies (or hospices) to whom they refer patients may violate the federal Anti-Kickback Statute. The federal Anti-Kickback Statute is a criminal statute, violations of which can result in fines of up to $25,000 and up to five years imprisonment. As you will recall, under the federal Anti-Kickback Statute (42 U.S.C. §1320a-7b(b)(1)(A):

“Whoever knowingly and willfully solicits or receives any remuneration (including any kickback, bribe or rebate) directly or indirectly, overtly or covertly, in cash or in kind – in return for referring an individual to a person for the furnishing or arranging for the furnishing of any item or service for which payment may be made in whole or in part under a federal health care program.” (emphasis added).

Unfortunately, HHS-OIG has good reason to be concerned. In recent years, a number of the so-called “Medical Director” relationships established between a referring physician and a home health agency have been shown to be sham agreements, the purpose of which has been to illegally compensate a physician for the number of referrals made to a given home health agency. As HHS-OIG’s fraud alert discusses, it is essential that both parties entering  into a compensation arrangement ensure that the arrangement fully complies with applicable laws and regulations. A key component to be considered is whether the physician’s compensation is reflective of the “fair market value” of the bona fide services he or she is required to provide (and does, in fact, provide) under the agreement. While both CMS and HHS-OIG expressly recognize the importance of a physician’s involvement in the plan of care and ongoing assessment of patients receiving home health care services, they are also very cognizant of the fact that some of these relationships have been little more than a disguised kickback. As HHS-OIG’s alert reiterates:

“if even one purpose of the arrangement is to compensate a physician for his or her past or future referrals of [f]ederal health care program business. [HHS-OIG] encourages physicians to carefully consider the terms and conditions of medical directorships and other compensation arrangements before entering into them.”

HHS-OIG’s fraud alert further notes that the agency recently reached settlements with “12 individual physicians who entered into questionable medical directorship and office staff arrangements.” Arrangements that take into account physician’s volume or value of referrals, are not for a least a year, and are not based on a flat fee are particularly suspect.

III. Impact of the Patient Protection and Affordable Care Act:

Under the Patient Protection and Affordable Care Act (Affordable Care Act), Public Law 111-148, a number of important revisions to the federal Anti-Kickback Statute were enacted, one of which expanded a health care provider’s potential liability for a Medicare or Medicaid-related kickback violation. As 42 U.S.C. § 1320(a)-7b(g) now provides:


(1) KICKBACKS.—Section 1128B of the Social Security Act

(42 U.S.C. 1320a–7b) is amended by adding at the end the following new subsection:

‘‘(g) In addition to the penalties provided for in this section or section 1128A, a claim that includes items or services resulting from a violation of this section constitutes a false or fraudulent claim for purposes of subchapter III of chapter 37 of title 31, United States Code.’’.

In other words, a violation of the federal Anti-Kickback Statute may now give rise to liability under the Civil False Claims Act. As you will recall,

As a result of this legislation, federal prosecutors (and possibly whistleblowers) could have also pursued this case under the civil False Claims Act. As you will recall, a violation of the False Claims Act can result in penalties of between $5,500 to $11,000, plus treble damages, per false claim. We are now seeing False Claims Act cases brought by both the government and by private parties (Relators / Whistleblowers) involving allegations of illegal kickbacks. This is especially the case in situations where the government for whatever reasons chooses to pursue this type of conduct civilly – whether or not the government chooses to also pursue a criminal cases varies from case-to-case, and often depends on the egregiousness of the conduct and the amount of the fraud. In any event, it is important for physicians and organizations to whom they make referrals keep in mind that violations of the Anti-Kickback Statute can lead to significant civil liability.

IV.  Liability Under the Civil Monetary Penalties Law:

While violations of the federal Anti-Kickback Statute can lead to both criminal and civil liability, HHS-OIG’s fraud alert also notes that physicians and other parties to an illegal compensation agreement are also subject to liability under the Civil Monetary Penalties (CMP) Law. The administrative sanctions that HHS-OIG may pursue under CMP laws can be nearly as severe as those that may be imposed under the civil False Claims Act.

V.  Role of ZPIC Auditors in Identifying Fraudulent Compensation Agreements:

While most questionable Medical Directorships and other compensation arrangements are identified by other means, it is important to keep in mind that Zone Program Integrity Contractors (ZPICs) are actively involved in the identification and referral of potentially fraudulent provider conduct to both CMS and HHS-OIG. In fact, most ZPIC audit letters for information now include two separate “silos” (our word, not theirs) of requests. The first silo of information sought is generally concerned with specific claims information (e.g. copies of medical records, test results, billing records, physician notes, treatment and care plans, etc.). In contrast, the second silo of requests is almost exclusively focused on a health care provider’s business-related records and business relationships. Typical requests falling into this category would include lists of current and former employees, receipts for supplies purchased, copies of any Medical Directorships, copies of marketing materials, copies of any equipment / space leases, employee salary information and copies of Accounts Payable records. When reviewing the materials produced in response to the second silo of questions, if it appears to a ZPIC that a health care provider is engaged in impropriety (such as paying a referring physician for the referral of patients), they will refer the matter to CMS and / or law enforcement for further investigation and action.

VI.  What Should You Do?

Move carefully before entering into any Medical Directorship or compensation arrangement. Prior to executing any compensation agreement, both a physician and the organization to whom he or she may send referrals should have the agreement carefully reviewed by a qualified health lawyer so that any potential violations of the federal Anti-Kickback Statute can be fully addressed. Depending on the facts, the health lawyer may be able to structure the arrangement so that is fails within a Safe Harbor. To be clear, it isn’t enough that an agreement appear to be legal on its face, the actual conduct between the parties is what will ultimately be examined by law enforcement.

Robert LilesRobert W. Liles, JD, MS, MBA serves as Managing Partner at Liles Parker, Attorneys and Counselors at Law. Robert represents home health agencies of all sizes around the country in connection with a full range of ZPIC prepayment reviews, postpayment audits and suspension actions. He also handles home health False Claims Act cases. For a complimentary consultation, please call Robert at: 1 (800) 475-1906.

New Medicare Penalties with Quality and Safety Incentive Programs

April 30, 2015 by  
Filed under Featured, Medicare Audits

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Penalty-Notice-Sign(April 30, 2015): Starting this year, the Centers for Medicare and Medicaid Services (CMS) will have three Medicare quality and safety incentive programs go into effect. As a result, more than three dozen hospitals across the U.S. will be penalized more than 3% on most of their CMS reimbursements.




I.  Medicare Quality and Safety Incentive Programs Now in Effect:

The three Medicare quality and safety incentive programs, established under the Affordable Care Act (ACA) that will take effect this year are the Hospital Value-Based Purchasing (VBP) Program, the Hospital Readmissions Reductions Program, and the Hospital-Acquired Condition (HAC) Reduction Program.

  • Hospital Readmissions Reductions Program: Hospitals can be penalized up to 3% of revenue for excessive 30-day readmissions. This is the highest amount allowed under the ACA, and is a significant increase from the readmission penalty in 2014, which was 35%.
  • VBP program: CMS will withhold 1.5% of payments for all hospitals and distribute incentive payments based on performance. This program establishes bonuses and penalties that will be based on different quality indicators.
  • HAC Reduction Program: There will be a 1% penalty to any hospital that falls into the bottom 25% nationally for hospital-acquired conditions, such as urinary catheter or bloodstream infections and other issues related to patient safety.

II.  Impact of Increased Penalties:

To show the effect these increased penalties will have on certain hospitals, Modern Healthcare did an analysis of CMS data and found that when the penalties associated with these three programs are combined, two hospitals in particular will have considerable Medicare payments docked over 4%. The 180-bed Palisades Medical Center in North Bergen, N.J., will face a reduction of 4.44% in reimbursements, and the 455-bed Pennsylvania Hospital in Philadelphia will face a reduction of 4.21% reduction.

The escalating penalties are receiving a lot of criticism from advocates for teaching hospitals and critical-access hospitals, which make up the biggest number of worst-performing hospitals. According to these advocates, CMS programs need to be refined to ensure they are not creating additional hardships. Members of the American Association of Medical Colleges (AAMC) say that AAMC hospitals are disproportionately affected by these penalties because by their very nature they take on more complex cases and are more likely to report bad outcomes. Therefore, their stance is that they should not be compared to and held to the same standards as hospitals with different types of patients and different types of procedures.

Modern Healthcare also found that academic medical centers were among the more heavily penalized hospitals in the nation:

  • The University of Colorado Hospital faces a 2.18% reduction from its Medicare reimbursements;

  • Peter’s University Hospital faces a 2.5% reduction from its Medicare reimbursements; and

  • Thomas Jefferson University Hospital faces a 3.01% reduction from its Medicare reimbursements.

Forty-two hospitals will face a combined penalty of 3% or higher on their 2015 Medicare revenue.

III. Improved Performance as a Result of New Programs

While some healthcare providers will surely struggle as a result of increased penalties, many facilities have already improved their performance from year to year and face low penalty rates. In fact, about 800 of the nation’s hospitals face either no penalties or will be earning rewards based on their performance in the value-based purchasing program.

For example, Bucks County Specialty Hospital in Pennsylvania earned the nation’s highest reward in the value-based purchasing program and will see a fiscal 2015 reimbursement boost of 2.09%. The acute-care hospital has not seen a 30-day readmission fine in the past three years, it will not face a HAC penalty in 2015, and it increased its VBP Program reward.

IV.  Conclusion:

There has been no suggestion from CMS that new rules or exceptions will be made for critical-access or academic medical centers who are disproportionately affected by increased penalties. Penalties are expected to increase over the years, having a large combined financial impact. By 2017, the combined penalties for HAC 30-day readmissions and value-based purchasing will put as much as 5.5% of inpatient Medicare payments at risk. CMS is constantly updating penalties for providers that don’t meet their arbitrary requirements, and these penalties are getting more expensive. If you have questions about these new penalties or any other pre-existing Medicare payment penalties that you may be at risk for violating, please give us a call, toll-free, at 1-800-475-1906.

Robert LilesLiles Parker attorneys represent health care suppliers and providers around the country in connection with regulatory compliance reviews, Medicare audits, HIPAA Omnibus Rule risk assessments, privacy breach matters, and State Medical Board inquiries. Robert W. Liles, Esq., is a Managing Partner at Liles Parker, Attorneys & Counselors at Law.  Call Robert for a free consultation at (800) 475-1906.

Understanding Prepayment Review in 2015

April 29, 2015 by  
Filed under Featured, Medicare Audits

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Medicare Prepayment FormThe Centers for Medicare & Medicaid (CMS) has instituted several methods to help combat the increase in waste, fraud, and abuse in the federal and state health care programs. One of the most recent trends involves pre-payment review of claims. In this process, government contractors will review a claim for problems before the claim may be paid. Unlike the traditional postpayment review process, if a health care provider is placed under prepayment review, there is very little you can do other try to identify the nature of deficiencies noted so that remedial action can be taken. Moreover, health care providers in prepayment review face expensive complications, including possible exclusion from Federal healthcare programs, if the problems which caused them to be subject to prepayment review go uncorrected. The key is to truly understand the prepayment review process and what you can do to minimize any potential problems.

I.  The Prepayment Review Process Comes to Life

In 2012, CMS introduced the Recovery Audit Prepayment Review Demonstration, which allows Recovery Auditors (RACs) to conduct prepayment reviews on certain types of claims that historically result in high rates of improper Medicare payments. The demonstration focused on eleven states: California, Florida, Illinois, Louisiana, Michigan, Missouri, New York, North Carolina, Ohio, Pennsylvania, and Texas. Prepayment Claim Review Programs apply to the National Correct Coding Initiative (NCCI), Medically Unlikely Edits (MUEs), and Medical Review (MR).

NCCI Edits are performed by Medicare Audit Contractors (MACs). CMS developed the NCCI to promote national correct coding methods and to control improper coding that leads to inappropriate payment in Medicare Part B claims. NCCI edits prevent improper payments when incorrect code combinations are reported. NCCI edits are updated quarterly.

MACs also perform MUEs, which were created to reduce the paid claim error rate for Medicare claims. MUEs and NCCIs are automated prepayment edits. MACs analyze whether the procedure on the submitted claim complies with MUE policy.

MRs are performed by MACs, Zone Program Integrity Contractors (ZPICs), and Supplemental Medical Review Contractors (SMRCs). These contractors identify suspected billing problems through error rates produced by the Comprehensive Error Rate Testing (CERT) Program, vulnerabilities identified through the Recovery Audit Program, analysis of claims data, and evaluation of other information, such as complaints. CMS, MACs, and other claim review contractors target MR activities at identified problem areas appropriate for the severity of the problem. A MAC can place a provider with identified problems submitting correct claims on prepayment review. If this happens, a percentage of the provider’s claims undergo MR before the MAC authorizes payment. Once providers re-establish the practice of billing correctly, prepayment review ends at the discretion of the contractor.

II.  Prepayment Review

A Medicare contractor will place a provider on prepayment review if they suspect the provider is billing the Medicare program inappropriately. Rather than paying these providers upon the submission of claims, the contractors require the providers to submit medical records and other documentation to support the claims. The records and documentation are then manually reviewed by nurses and other licensed practitioners. The submitted claims are then either approved or denied based on the manual review. Providers generally remain on prepayment review until their average rate of claims approval reaches a sufficiently high percentage, which is usually 80%.

CMS has directed its contractors to consider excluding physicians and other providers from Medicare and Medicaid if they have been on prepayment review for extended periods of time without correcting their “inappropriate behavior.” Exclusion from participation in Federal healthcare programs typically leads to other adverse consequences, such as loss of hospital privileges and being dropped from managed care networks.

Providers must make exhaustive efforts to avoid ending up on prepayment review and potentially facing exclusion. To do so, providers need to understand what contractors have the authority to put a provider on prepayment review, and what the contractors are looking for.

III.  Providers and Prepayment Review – A Real Concern

Unfortunately, even the mere allegation of fraud leads to prepayment review. This, in turn, can harm even the most innocent provider. Last year in New Mexico, fifteen behavioral health care providers were put on prepayment review based on “credible allegations of fraud.” Because their Medicaid reimbursements were suspended, the providers could not afford to pay their staff, rent, or other bills. The providers tried suing the state and sought an injunction that would restore funding. The providers argued that they had been denied due process by not being told what the precise charges were against them, and that at the end of the day those suffering the most were their patients. However, they were denied the injunction.

As a result, the fifteen providers ended up filing for bankruptcy. Because the behavioral health care providers served 87% of New Mexico’s Medicaid recipients, the state of New Mexico had to bring in providers from Arizona to service residents. This caused state infighting, as New Mexico’s Legislative Finance Committee objected to the New Mexico Human Services Department moving $10 million from its budget to pay Arizona agencies to take over New Mexico providers. The deal with the Arizona providers eventually went through, and 2 of the fifteen New Mexico providers were ordered to make repayments to Medicaid.

IV.  What Can Providers Do?

Unfortunately, health care providers may not be able to ignore the fact that being placed on prepayment review has become an inevitability. So what is a practitioner to do faced with this ordeal? Well, the best way for a provider to avoid a tragic situation that befell the providers in New Mexico is to have an ironclad and effective compliance plan that is followed by all provider employees and affiliates. It is best to prepare for the worst and have solid documentation of accuracy to show auditors than to lose one’s livelihood over false allegations of fraud. Have you implemented your effective compliance plan?   If not, you increase the risk that your claims may not be paid for the services you have provided. Even if you do have a compliance plan in place, the plan may no longer be up to date or may simply be ineffective. It is imperative that you take action now to reduce the risks that come along with the prepayment review process. Give us a call today and we would be more than happy to assist you with the prepayment review process as well as implementing an effective compliance plan for your organization.

Robert LilesRobert Liles, Esq., serves as Managing Partner at Liles Parker, Attorneys & Counselors at Law.  Liles Parker attorneys represent a variety of health care providers around the country in connection with both regulatory and transactional legal projects. For a free consultation, call Robert at (800) 475-1906.

CMS Guidance on the Role of the Medical Director

April 27, 2015 by  
Filed under Featured, Medicare Audits

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healthy-business-diagramLong term care facilities are required[1] to employ a physician to serve as its medical director. Medical directors are responsible for overseeing the medical care as well as implementing resident care policies. The Centers for Medicare and Medicaid Services (CMS) has promulgated guidance for that position that outlines the specific roles and duties. Long term care facilities that accept Medicare should pay particular attention to the CMS guidance during the medical director hiring process. Furthermore, this guidance gives providers an idea of how to avoid an Office of the Inspector General (OIG) enforcement action against them for alleged questionable medical directorship arrangements with physicians.

I.  The Role of the Medical Director

Medical directors act as important leaders for long term care facilities and help them provide quality care. CMS requires all long term facilities to designate a physician to serve in this role in order to receive Medicare payments for services provided. That practitioner must be currently licensed in the State(s) in which the facility(ies) s/he serves is (are) located.

CMS guidance states that the Medical Director has two primary responsibilities:

  1. Implement resident care policies; and
  2. Coordinate medical care in the facility.

Moreover, the medical director’s roles and responsibilities require the practitioner serving in this capacity to be knowledgeable about current standards of practice in caring for long term care residents. That individual must be educated about how to coordinate and oversee related practitioners serving under his leadership. The medical director’s input promotes a facility’s goal of optimal resident outcomes, which may also be influenced by many other factors, such as resident characteristics and preferences, individual attending physician actions, and facility support.

II.  Implementation of Resident Care Policies and Procedures

Long term care facilities must obtain the medical director’s ongoing guidance in developing and implementing resident care policies, including review and revision of existing policies. While medical directors are the ultimate force behind resident care policies, they are not required to single-handedly put the policies into practice or monitor implementation. Instead, the medical director should collaborate and consult with facility leadership, staff, other licensed practitioners, nurse practitioners, physician assistants, and other registered health care professionals to help develop, implement, and evaluate the resident care policies and procedures.

The policies and procedures that are put into place must also reflect the current standard of practice. Moreover, although CMS guidance and regulations do not require the medical director to sign the policies or procedures, the facility must have documented evidence that its development, review, and approval of resident care policies included the medical director’s input.

III.  Coordination of Medical Care

The other critical role of the medical director is the coordination of medical care. In this sense, coordinating medical care includes organizing, directing, and managing care from appropriate health care providers to meet the health care and psychosocial needs of residents. The coordination of care must also meet current standards of practice and help the long term care facility meet its regulatory requirements.

The medical director is an important link between the facility, attending physicians, and other providers. That physician is tasked with promoting a common understanding of the “big picture” for individual residents. S/he should use the valuable information identified through the facility’s quality assessment and assurance committee and quality assurance program to address any issues related to the coordination of care.

IV.  What the CMS Guidance Provides to Long Term Care Facilities

To reduce the risk of non-compliance with CMS guidelines, facility boards should implement certain policies and procedures specifically dealing with medical directors that reflect the CMS guideline policies. For one thing, medical directorships should be reflected in the facility’s written policies and procedures manual and satisfy the requirements of all other relevant laws, including the Stark law and Anti-Kickback law. An electronic database – as well as a physical hard copy – of all these agreements should be maintained and should include a reliable tracking system to ensure that each agreement is reviewed periodically. Such monitoring on an annual basis of all medical director agreements can ensure that in each case the medical director is actually providing the services required and is being paid the compensation set forth in his agreement.

To prove that the medical director is implementing resident care policies, facility boards should check to make sure medical directorship services are legitimate and important in order for the facility to carry out its clinical functions. To prove their role in coordinating medical care in the facility, medical directors should complete a daily written log specifying each task performed and the amount of time spent performing the task.

V.  Conclusion

CMS’s guidance pertaining to the regulation on medical directors is a useful tool for all providers and medical directors. It shows what OIG will review to determine whether a legitimate, bona fide medical directorships exists at the long term care facility. If a medical director has real duties and responsibilities that are actually performed and documented, this will differentiate that physician from a sham medical directorship arrangement which is designed to reward referrals and pay kickbacks. This is especially important as the government continues to aggressively enforce efforts against providers who engage in illegal kickback practices and violations of the Stark law. As a long term care facility, it is important that you document all of the evidence related to the roles and responsibilities for, as well as the actions taken by, your medical director. These should be included in your facility’s compliance plan. Do you need assistance drafting policies and procedures related to an effective compliance plan? We would be more than happy to help you remain compliant with all CMS rules and regulations. Give us a call today.

Robert LilesRobert W. Liles, Esq., is a Managing Partner at Liles Parker, Attorneys & Counselors at Law.  He Liles focuses his practice on internal audits/investigations, fraud defense, and compliance and regulatory matters. The attorneys at Liles Parker represent a wide variety of health care providers and suppliers in administrative and civil proceedings. For a free consultation, call Mr. Liles at (800) 475-1906.

[1] 42 C.F.R. § 483.75(i).

Prepayment Review and the ADRs

March 13, 2015 by  
Filed under Featured, Medicare Audits

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paper-medical-recordsZone Program Integrity Contractors (ZPICs) and Medicare Administrative Contractors (MACs) have continued to focus on prepayment review. Unlike with post-payment audits, there is very little a provider placed on prepayment review can do to identify and remedy noted deficiencies. Prepayment audits have grave consequences for healthcare providers, as we’ve written previously . Often times, the result of a prepayment audit is that a provider will be placed on prepayment review for up to a year with little or no notice and no concrete way of getting out of the review.

Notice of Prepayment Review

A peril of prepayment review is that MACs and ZPICs do not typically inform providers before they are placed on prepayment audit.  In rare cases, we have seen providers get a letter from the MAC, which informs the provider they are on prepayment review and that they should anticipate Additional Documentation Requests (ADR) soon.  Most of the time, a provider finds out it has been placed on prepayment review only after receiving the ADR. A provider may be subject to an unannounced visit from the MAC or ZPIC, who will be looking for additional documentation.  This lack of notice often takes providers by surprise.  Unfortunately, sometimes the mere allegation of fraud leads to prepayment review, which sometimes harms innocent providers. Last year in New Mexico, fifteen behavioral health care providers were put on prepayment review based on “credible allegations of fraud.”  Below is an interactive presentation outlining the ADR process (note: the outline focuses on CGS ADRs, but the information is useful for all other MACs)

Cost of Prepayment Review

Prepayment review is expensive for providers because claim determinations are made after the provider has already performed services, but before any claim payment is made.  Once an Additional Documentation Request (ADR) is received for a particular claim, providers are tasked with compiling information and justifying that specific treatment date.  CMS requires all pertinent records on that specific patient, not just the date under review, to not only justify the claim as billed, but also demonstrate medical necessity in general. Once receiving the ADR documentation, the MAC has 30 days to review the materials and make a decision on the status of the claim (60 days if the ADR is for third party Liability).[1]  Only once the claim has been reviewed will the provider receive an Explanation of Benefits (EOB) from its ZPIC or MAC.   As explained in detail in the above presentation, the claim is either allowed, partially allowed, denied, or marked as having illegible/absent signatures.  The previously referenced New Mexico Behavioral Health providers had their Medicaid reimbursements suspended during prepayment review and could not afford to pay their staff, rent, or other bills. They tried suing the state, seeking an injunction that would restore funding. The providers argued that they had been denied due process by not being told what the precise charges were against them, and that at the end of the day those suffering the most were their patients. They were denied the injunction

The Prepayment Review Solution

Upon receiving notice of prepayment review, providers often scramble for a solution, but there is no escaping the tedious process required to be released from prepayment review.  Once every ADR is received and responded to, it is incumbent on the provider to seize this opportunity to improve their business.  Prepayment reviews and ADRs are not randomly assigned, there are complex formulas and red flags that determine whether a provider is at risk for being placed under review.  We recommend an on-site gap analysis performed by experts, a thorough review of the entire practice, and a complete compliance plan tailored to your practice’s exact requirements.  While performing these tasks after receiving ADRs can go a long way to prevent further action, taking these crucial steps before an audit greatly improves your chances of quickly escaping prepayment review.  Call us toll-free at 1-800-475-1906 to discuss any aspects of prepayment review and MAC/ZPIC


Robert LilesRobert W. Liles, Esq., serves as Managing Partner at Liles Parker, Attorneys & Counselors at Law.  Liles Parker attorneys represent health care providers around the country in connection with both regulatory and transactional legal projects. For a free consultation, call Robert at (800) 475-1906.




Medicare Overpayment Demands: The Financial Timeline and Options

March 6, 2015 by  
Filed under Featured, Medicare Audits

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doctor-hundred-dollar-billThe process of Medicare contractors – such as Zone Program Integrity Contractors (ZPIC) and Recovery Audit Contractors (RAC) – issuing adverse medical review findings and Medicare Administrative Contractors (MAC) subsequently demanding repayment of alleged overpayments can be very daunting for providers. This is particularly true when Medicare contractors employ statistical sampling methodologies which expand overpayment sums to a designated universe of claims beyond just the actual claims reviewed. A few thousand dollars worth of claims suddenly becomes tens or even hundreds of thousands of dollars. In many instances, providers will choose to appeal adverse determinations, ready to defend the good faith provision of services based on the medical needs of its patients. Understanding the financial implications and timeline of an overpayment assessment is hugely important. Should the provider pay the overpayment up front? If the provider can’t pay the overpayment sum immediately, how can it work with Medicare to repay the sum in a financially feasible manner? What if the provider doesn’t want to repay the overpayment – what steps will Medicare take?  These questions are best addressed in reverse order.

I.  Recoupment: Short-term Strategies for Delaying

Medicare expects providers to repay any overpayment as quickly as possible. If Medicare does not receive payment within 40 calendar days from the date of the MAC’s first demand letter, Medicare will recoup the full overpayment amount beginning on day 41, meaning the overpayment will be recovered from current payments due or from future claims submitted. There are multiple ways to delay recoupment, including by submitting a rebuttal to your MAC within 15 days of the initial demand letter (no guarantee) and filing appeal requests for the first two levels of appeal within specified time frames. Specifically, a provider must file the first level appeal – called the redetermination level – within 30 days of the initial demand letter to prevent recoupment through the time that a redetermination decision issues. If the redetermination decision is unfavorable, the provider must file the second level appeal – called the reconsideration level – within 60 days of the redetermination decision. If the reconsideration decision is also unfavorable, Medicare will initiate recoupment 30 days after the reconsideration decision is issued. If the reconsideration is partially favorable, and the overpayment sum requires recalculation, recoupment will begin 30 days after the recalculated demand.

It is important for providers to understand that even while recoupment is stalled, interest accrues starting with the date of the initial demand letter and is assessed every 30 days thereafter. While capitalization does not occur, the interest rate is quite high, at 10.50% as of January 21, 2015. Even if a provider is successful at postponing recoupment, the reality is that if a provider is at all unsuccessful through the first two levels of the Medicare administrative appeals process, recoupment will begin if the provider does not repay the overpayment and the provider likely must wait years to have a hearing scheduled before an Administrative Law Judge. Given that interest accrues and recoupment delay measures are really a short-term strategy, providers should use these tactics to buy time for serious financial planning. If a provider can repay some or all of the overpayment upon demand, the provider can lower or prevent the interest penalty, not to mention control the repayment process.

II.  Extended Repayment Schedule or Cede to Recoupment?

A provider can set up an Extended Repayment Schedule (ERS) at any time once the first demand is made. If an unfavorable reconsideration decision is issued and the provider has not repaid the overpayment or established an ERS, the provider has two choices: allow Medicare to recoup or request an ERS. As long as a provider continues to appeal, Medicare cannot refer the debt to the Department of Treasury. Interest continues to accrue during recoupment and recoupment can be devastating to a provider whose payer mix is heavily weighted toward Medicare, effectively halting income. If an ERS is put into place, interest accrual ceases. Medicare also takes into consideration the financial hardship that an overpayment debt obligation imposes on a provider, and depending on whether the debt imposes a “hardship” or an “extreme hardship” on a provider, the ERS can be as long as 60 months. For a provider who is not a sole proprietor, the ERS application process can be tedious. The list of documents needed to support financial hardship is extensive, including balance sheets, income statements, cash flow statements, and lists of restricted cash funds, investments, and notes and mortgages payable. If a provider cannot establish genuine hardship, an ERS will be rejected or modified to reflect what Medicare believes is an appropriate repayment schedule based on the provider’s financials. Any repayments made under an ERS do not accrue interest in favor of the provider, if the provider is successful at reducing or eliminating the overpayment upon appeal; likewise, interest does not accrue in favor of Medicare either.

III.  Controlling the Overpayment: Paying the Overpayment Upon Demand

If a provider is able to repay some or all of the overpayment upon demand, the provider has better control over the repayment process during the administrative appeals process, even if the provider adamantly disagrees with the overpayment assessment. The provider can avoid or limit recoupment and interest accrual. The provider will get its money back if it wins on appeal, though not with interest. Of course, if the provider does not win, Medicare keeps the money.

It is important for providers to understand the financial landscape of an overpayment demand. A provider familiar with the recoupment timeline and repayment options can immediately assess its finances and determine the best strategy for addressing the alleged overpayment during the administrative appeals process.

Do you have the policies and procedures in place to effectively deal with a Medicare Recoupment?  Have you received correspondence from a ZPIC or RAC auditor and have delayed responding?

CONTACT US for a free consultation on these ZPIC issues.

IMG_1897Lorraine Ater, Esq. is a health law attorney with the boutique firm, Liles Parker, Attorneys & Counselors at Law.  Liles Parker has offices in Washington DC, Houston TX, McAllen TX and Baton Rouge LA.  Our attorneys represent health care professionals around the country in connection with government audits of Medicaid and Medicare claims, licensure matters and transactional projects.  Need assistance?  For a free consultation, please call: 1 (800) 475-1906.


ZPICs in Virginia, North Carolina and Elsewhere Around the Country are Increasing Their Use of Unannounced Site Visits. Are Your Medical Necessity, Coding and Billing Practices Compliant with Applicable Legal and Regulatory Requirements?

July 17, 2013 by  
Filed under Medicare Audits

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tiny-target-crosshair(July 17, 2013):  Over the last few months, Zone Program Integrity Contractors (ZPICs) in the Eastern United States and throughout the South have steadily increased their use of “Unannounced Site Visits” (also sometimes referred to as “Unannounced Audits” in furtherance of their benefit integrity obligations as a contractor to the Centers for Medicare and Medicaid Services (CMS). 

I.          Background:

The size of the Medicare program is truly staggering – it has been estimated nearly one in three Americans was covered by either the Medicare or Medicaid programs.  According to CMS, the Medicare:

Medicare provides health insurance for more than 44.6 million elderly and disabled Americans.  Medicaid, a joint federal-state program, provides health coverage for some 50 million low-income persons, including 24 million children, and nursing home coverage for low-income elderly.[1]             

In addition to the Medicare and Medicaid programs, CMS is also responsible for administering the Children’s Health Insurance Program (CHIP).  Under CHIP, CMS began working with states around the country to provide health insurance coverage for needy, uninsured children in 1997.  Like Medicaid, the CHIP program is paid for by both federal and state funding and is managed by each state.  The program was reauthorized with the enactment and signing of the Children’s Health Insurance Program Reauthorization Act of 2009 (CHIPRA).[2]  CHIPRA appropriated funds to pay for care provided under CHIP through fiscal year (FY) 2013.  Over 5 million uninsured children are currently covered under the program. Together, CMS-administered health insurance programs cover over 90 million Americans.  Approximately 4.5 million Medicare claims alone are processed each day.[3]

II.         Despite the Extraordinary Size and Scope of these Entitlement Programs, CMS Manages to Operate these Programs with Less than 5,000 Employees.

Despite the extraordinary size and scope of CMS’ responsibilities, the agency employs less than 5,000 employeesTo accomplish these program obligations, CMS has contracted with various private entities to process and pay claims.  Additionally, these contractors serve as CMS’ representatives, interacting with health care providers regarding coverage questions and program participation issues.  CMS also relies on medical review and benefit integrity contractors (such as ZPICs and Recovery Audit Contractors (RACs)) to conduct medical reviews, site visits, and post-payment/pre-payment audits of Medicare claims.

III.        Current Assignment of ZPICs Around the Country:


ZPICs represent merely one of the nearly dozen various medical review / benefit contractors and governmental entities tasked with reviewing and auditing claims submitted to the Medicare program.  Seven ZPIC zones have been established and the following contractors have been awarded contracts by CMS to perform these duties around the country.  These seven zones cover the following states and / or territories:

  • Zone 1 – SafeGuard Services: CA, NV, American Samoa, Guam, HI and the Mariana Islands.
  • Zone 2 – Advancement (Health Integrity is reportedly serving as a subcontractor for Zone 2 at this time): AK, WA, OR, MT, ID, WY, UT, AZ, ND, SD, NE, KS, IA, MO.
  • Zone 3 – Cahaba SafeGuard: MN, WI, IL, IN, MI, OH and KY.
  • Zone 4 – Health Integrity: CO, NM, OK, TX.
  • Zone 5 – Advancement: AL, AR, GA, LA, MS, NC, SC, TN, VA and WV.
  • Zone 6 – SafeGuard Services: PA, NY, MD, DC, DE and ME, MA, NJ, CT, RI, NH and VT.
  • Zone 7 – SafeGuard Services: FL, PR and VI.

A map depicting these assignments is set out below:

ZPIC MAP 2 labeled












IV.        ZPIC Responsibilities:


ZPICs have traditionally asserted that, unlike their RAC counterparts, they are not “bounty hunters.”  ZPICs are not paid contingency fees like RACs but instead are directly compensated by CMS on a contractual basis.  Notably, ZPIC actions are not merely limited to post-payment overpayment audits.  In fact, their approach to reviews and audits has significantly changed over the last few years.  Rather than focus on post-payment audits, where CMS has already paid a health care provider for services rendered, ZPICs are now conducting reviews designed to identify wrong-doers and/or improper payments before monies have been paid to a provider out of the Medicare Trust Fund.

An overview of the current ZPIC review and audits activities we are seeing include, but are not limited to:

  • ZPIC representatives around the country (especially those in Zone 4, Zone 5 and Zone 6) appear to have increased their use of unannounced site visits of physician practices, clinics, home health agencies and Durable Medical Equipment (DME) suppliers)
  • ZPICs are expanding their use of pre-payment reviews to identify improper payment patterns and practices by physicians.  Understandably, the days of “Pay and Chase” are over – CMS has directed contractors to identify possible overpayment before they are ever paid in the first place. 
  • ZPICs are actively referring certain cases to State Medical Boards.
  • ZPICs are referring possible civil and criminal enforcement cases to law enforcement for investigation and possible prosecution.
  • ZPICs are recommending suspension and revocation actions to CMS.
  • Last but not least, it is important to keep in mind that even though ZPIC utilization of alternative review options (such as prepayment review), appear to be increasing, post-payment audits are, in fact, still taking place. When post-payment audits occur, ZPICs typically start by conducting either a post-payment probe audit or a more expansive post-payment audit of a “representative sample” of a health care provider’s claims previously paid by Medicare. After conducting a post-payment review of this representative sample, a ZPIC will then extrapolate the amount of alleged overpayments to the universe of claims previously identified by the contractor.


IV.        ZPIC Unannounced Site Visits / ZPIC Unannounced Audits:

Focusing on the “Unannounced Site Visit” / “Unannounced Audit” activities currently being performed by ZPICs in Zone 4, Zone 5 and Zone 5, it has been our observation that in most cases, a visit is conducted as a result of one of the two following activities:

(1)  Date Mining — A health care provider’s claim utilization practices have been identified as different from those of other professionals working in this specialty area.  As you will recall, the Medicare program has been in operation since 1965.  Since that time, the government has accumulated an impressive amount of data reflecting the use of certain medical services by health care providers of all types.  With this information, CMS (and its ZPIC contractors) can “slice and dice the data innumerable different ways in an effort to identify any “outliers.” At outlier is merely a health care provider whose coding and billing practices are different than those of other similarly-situated providers.

Despite aspersions to the contrary, an outlier is not necessarily someone engaged in improper or fraudulent conduct.  Rather, based solely on the information known at this stage of the process, an outlier is merely someone whose practices are out of the ordinary.  For example, the frequency of a health care provider’s Evaluation and Management (E/M) code may be higher or lower, than what one might expect to see when conducting an audit.  Importantly, there may be countless reasons why a health care provider’s utilization practices are irregular.  If, in fact, you determine that your coding and billings are different than those of your peers, you need to affirmatively review your practices and identity any possible reason(s) for these differences. As you conduct your internal review, it is important to keep in mind that one possibility is that you are, in fact, engaging in improper billing practices.  Should you find that you have improperly submitted one or more claims to Medicare for payment, you  must immediately report and return any overpayment identified.

(2)  Complaints — A second reason commonly identified as a catalyst for generating an unannounced audit / unannounced claims review is that a “Complaint” has been lodged against your organization.  Importantly, complaints can be lodged several ways:

  • Former Disgruntled Employee.
  • Current Employee.
  • Unhappy Patient.
  • A Competing Health Care Provider Organization. 
  • The Filing of a Whistleblower or Qui Tam Action.

Regardless of the underlying reason for an unannounced site visit, it can be quite unsettling when several auditors and investigators of the ZPIC assigned to your state shows up at your office and announces that it is conducting an audit.

How should you respond when an unannounced site visit occurs?  As we have previously discussed in our article examining recent holdings on an individual’s 5th Amendment Rights, there is an uneasy balance of one’s obligation to cooperate as a Medicare participating provider and one’s right to remain silent.  As we detail in our July 3rd article:

“At the outset, we readily recognize that these are very complex issues.  Ultimately, the best course of action is to implement and adhere to an effective Compliance Plan, thereby greatly reducing your likelihood of both an audit and of an error.  Nevertheless, despite your best efforts to do the right thing for the right reasons, your practice, clinic, home health agency, hospice or other health care organization may still be visited by an HHS-OIG agent or other Federal auditor who has questions.  In such an event, as a Medicare participating provider, you have an obligation to cooperate.  You should not lie, should not exaggerate and should not be evasive.  If you feel uncomfortable with the questions being presented, ask to speak with your attorney prior to responding.  Continue to cooperate and provide access to any requested medical records (after the auditor’s identity has been established, of course).  As previously discussed, choosing to remain silent during non-custodial questioning can expose you to a variety of administrative sanctions and could ultimately be used against you if a criminal case is later pursued.”  (emphasis added).

V.         Post-Visit Administrative Enforcement Actions:

It is quite common for a ZPIC to request two separate silos or categories of information when conducting an unannounced site visit.  These two categories of information include:

(1)   Coding and Billing Information – When they arrive, a representative of the ZPIC will often personally deliver a written request for medical records related to specific dates of service. ZPICs will sometimes even bring a scanner with them.  They will then take a scan of a portion of the records requested and will often ask that you forward the supporting documentation covering the remaining claims within 15 to 30 days. It is imperative that you request an extension of time if is needed to comply with the ZPIC’s request. The failure to submit this information within the time period requested could result in the denial of these claims.

(2)  Business Relationships and Practices —   In addition to the Medicare claims information requested, it is now quite common for a ZPIC to also ask for business arrangement related information.  This information often includes a request for any leases, Medicare Director agreements, and the identities / contact information for former employees.  Essentially, ZPICs are seeking to determine the following basic information:

  • Is there any indication that a health care provider is receiving or paying anything of value in exchange for the referral of Medicare-covered services?
  • Where do you get your referrals from?
  • Where do you send referrals?

After collectively assembling all of the above information, a ZPIC will determine whether any deficiencies noted should be referred to law enforcement (as a possible violation of the civil False Claims Act, the Anti-Kickback Statute, Stark or another health care statute) or whether an action should be pursued merely as an alleged overpayment at this point in the process.

VI.        Avoiding a ZPIC Audit in the First Place:

Depending on the facts in your case, a ZPIC audit may be inevitable.  For instance, if you are an Internal Medicine physician and you are the only one providing pain management services for the Medicare beneficiaries in three counties, there is a high likelihood that your utilization ratios will be higher than those of your peers (on a national basis).  As such, your practice is likely to be identified as an outlier and your coding and billing practices will be audited.  

All health care providers, regardless of whether or not their billing practices are those of an outlier, has an obligation to ensure that their medical necessity, coverage, documentation, coding and billing practices fully meet all applicable CMS regulations and CMS contractor guidance requirements.  Several of the questions you should consider in this regard include:

  • Are the care and treatment services “Medically Necessary”?
  • Do the services at issue meet the applicable “Coverage” requirements set out by the responsible payor?
  • Even though the care and treatment services may meet all other requirements for coverage and payment, are the services still otherwise “tainted” by the violation of a statutory or regulatory requirement?
  • Are the care and treatment services at issue fully and properly documented, consistent with all applicable CMS regulations and / or contractor guidance requirements?
  • Do the provider’s coding practices meet applicable statutory and regulatory requirements?
  • Do the provider’s billing activities meet applicable statutory and regulatory requirements?
  • Do the provider’s actions meet ethical and professional conduct standards required by the State Medical Board?

These steps constitute part, but not all, of the “gap analysis” process.  Providers examining these issues on an ongoing basis will be much less likely to inadvertently make coding / billing mistakes or fail to fully document the services they are providing.

Ultimately, the only way to try and avoid trouble is to develop, implement and adhere to the requirements set out in an effective Compliance Plan.  ZPICs, RACs and other CMS-contracted audited are doing their best to meet their contractual obligations to the government.  As a participating provider in the Medicare program, you also have a complex of obligations which must be met.

Robert W. Liles is Managing Partner at Liles Parker, a boutique health law practice representing health care providers around the country.  Should you have questions regarding the ZPIC audit or review process, please feel free to call us.  For a free consultation, call Robert at: (202) 298-8750.

[1] U.S. Department of Health and Human Services, available at (last accessed July 17, 2013).

[2] Children’s Health Insurance Program Reauthorization Act of 2009, Pub. L. No. 111-3 (2009).

[3] Government Accountability Office, Medicare Recovery Audit Contracting: Lessons Learned to Address Improper Payments and Improve Contractor Coordination and Oversight, Report No. GAO-10-864T, available at (July 15, 2010) (last accessed February 2013).

Scrutiny Lingers for Texas HHAs

August 6, 2012 by  
Filed under Medicare Audits

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I.     HHS-OIG Report Concerning Texas HHAs.

A recent report by HHS-OIG found that a substantial number of home health agency (HHA) billings in Texas were fraudulent or inappropriate. The report noted that several common schemes were identified among home health agencies and used to sort out potentially fraudulent providers, including:

1. Overlapping with claims for inpatient hospital stays

2. Overlapping with claims for skilled nursing facility stays

3. Billing for services on dates after beneficiaries’ deaths

electron-microscopeThe HHS-OIG, CMS, and CMS Contractors (ZPICs, RACs, and MACs) are using comparative data mining to view HHS claims under a microscope, looking for any clues of impropriety, such as the errors above. Importantly, OIG found that one in four HHAs (25%) exceeded one of its sample thresholds that indicated questionable billing. Of all those HHAs with questionable billing, the majority were located in Texas.  HHS-OIG recommended to CMS that several processes occur:

1. Implement a claims processing edit or improve existing edits to prevent inappropriate HHA payments for the three specific errors identified above

2. Increase monitoring of billing for home health services

3. Enforce and consider lowering the 10-percent cap on the total outlier payments an HHA may receive annually

4. Consider imposing a temporary moratorium on new HHA enrollments in Florida and Texas

5. Take appropriate action (i.e. audits and overpayment recovery) regarding the inappropriate payments OIG identified in its sample.

II.     What Do These Things Mean To Your Texas Home Health HHA?

For Texas providers, the most important takeaway is that OIG has recommended (and CMS has stated it will implement) a moratorium on new HHA enrollment. That means no new agencies in the state of Texas, and, if the ban ever gets lifted, every new HHA application will be scrutinized with the utmost care. Moreover, if you close down your business, lose a provider number, or attempt to re-open an HHA, you may not be able to successfully accomplish that in Texas. In addition, CMS may even consider a reassessment of every re-enrollment application it receives from HHAs in the state of Texas.

Moreover, OIG recommended enforcement of the 10% cap on annual outlier payments. This means that an HHA who is an outlier (perhaps because of an unusually complex patient load or a large degree of business) may see their payments capped at 10% greater than the “standard” payment numbers. For an HHA that is expending a lot of resources on staff and providing high quality care to complex beneficiaries, this could represent a real problem.

Finally, CMS and Health Integrity (the Texas ZPIC) will likely closely monitor each and every HHA claim. While HHAs will continue to receive funding under the Prospective Payment System (PPS), expect a substantial increase of both post payment audits and prepayment audits. As Health Integrity begins administrative audits of those HHAs that were targeted in the sample (they may not even know their claims were reviewed since the process was entirely data-driven), many agencies may face increased scrutiny and across-the-board payment denials.

III.     What You Can Do for Your Family

There are 2 steps each HHA should take. First, if you haven’t already done so, implement an effective compliance plan. Second, retain an experienced Medicare post payment audit appeals attorney to represent you through the appeals process.

A compliance plan will give your organization the tools and understanding it needs to ensure that claims are coded and billed in an appropriate fashion and that your company’s business practices and arrangements comply with the numerous laws concerning patient referrals and illegal payments. An effective compliance program begins with a gap analysis and usually includes all seven elements of a compliance plan as a framework. It is important that your staff receives comprehensive training and clear, consistent guidance on what you and your organization expect from each individual member with regards to compliance. For more ways to do this, call us today.

Second, if you have received any correspondence from Health Integrity, you should not hesitate to call an experienced Medicare appeals attorney. Both before the audit results come and after, an attorney skilled in Medicare audits and appeals can give you the guidance you need to give your claims their best chance at eventual payment. While the process can be long and arduous, in many cases it is “do or die” for your business. Health Integrity regularly imposes overpayment demands of one million dollars or more when auditing HHA claims. When the stakes are that high, you need someone on your side you can trust and who knows how this process works.

Robert LilesRobert W. Liles represents providers in Medicare post-payment audits and appeals, and similar appeals under Medicaid. In addition, Robert counsels clients on regulatory compliance issues, performs gap analyses and internal reviews, and trains healthcare professionals on various legal issues. For a free consultation, call Robert today at 1-800-475-1906.

MACs Flex Their Muscles with Recent CERT Audit Findings

November 23, 2011 by  
Filed under Medicare Audits

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I.  What is a CERT Audit?

MACs are targeting providers with a CERT AuditThe “Comprehensive Error Rate Testing” (CERT) program was created as a tool for the Centers for Medicare and Medicaid Services (CMS) to assess whether Medicare Administrative Contractors (MACs) are paying claims properly. Essentially, the CERT audit serves as an integral management tool for CMS as well as an important feedback mechanism for the MACs. When problem areas are identified, they can be addressed by Medicare contractors with audit responsibilities.  Notably, several of the MACs around the country have been aggressively reasserting their program integrity roles.

Essentially, MACs write reimbursement checks on behalf of CMS.  As a result, they play a central role in the Medicare reimbursement process. Therefore, when a CERT auditor finds that a MAC has been incorrectly reimbursing providers for claims which may not qualify for coverage, it is very important that the MAC immediately address this system-wide deficiency.

II.  Recent Actions Taken by MACs in Response to CERT Audit Findings

In response to certain CERT audit findings, one MAC recently sent notification to providers of Evaluation and Management (E/M) services explaining that new “stringent corrective actions” will be taken to address some of the more common claims errors identified by the CERT auditors when conducting their reviews of MAC payment practices.  As recent correspondence to a provider reflects, MACs are taking the results of CERT audits quite seriously, and are expanding their program integrity efforts.  As one MAC recently wrote, the contractor stands ready to:

  • Suspend a provider if that provider has “too many” payment errors (it does not state how many is “too many”);
  • “[R]efer every physician” to that region’s ZPIC if those providers continue to bill for services which may constitute payment errors;
  • “[R]efer every physician” to the ZPIC if there is a pattern of past payment errors; and,
  • “[C]onduct prepayment reviews” of future claims, up to 100% of a provider’s claims.

To be clear, none of these potential corrective actions represent new authorities.  Nevertheless, the fact that MACs are now reasserting these points is reflective of CMS’ ongoing concerns regarding the prevalence of improper claims.  Indirectly, CMS is making it crystal clear that as the initial recipient and screener of Medicare claims submitted by providers for payment, MACs play an essential role in screening out improper claims and bad providers.  As Medicare’s primary gatekeepers, MACs are responsible for identifying both improper claims and providers who may be engaged in abusive and / or fraudulent practices.

III.  What Should You Do if You Are Notified of a CERT Audit?

Should you receive a CERT audit request for documents from a CERT Documentation Contractor (CDC), it is important to keep in mind that your practice or clinic is not being accused of fraud or wrongdoing.  Fundamentally, a CERT audit is primarily designed to identify deficiencies and mistakes made by Medicare contractors.  Nevertheless, it is imperative that you take a CERT audit request quite seriously.  At the end of the day, it will be you, not the MAC, who is responsible for any overpayments identified as a result of the audit. Moreover, bad results on a CERT audit may lead to further auditing in the future.

IV.  What Actions Should a Compliance Officer Take to Avoid Being Audited?

As an organization, if you are subjected to a CERT audit, the horse is already out of the barn,” so to speak.  Your goal is to review and monitor your organization’s coding, billing and utilization practices on an ongoing basis so that improper claims are never submitted to your MAC in the first place.   In most cases, you can check your MAC’s website to determine if their CERT auditor has already identified certain areas of concern. For instance, one MAC recently reported that out of 508 errors identified in a CERT audit of certain Medicare claims, the contractor found that:

  • 311 errors were due to “insufficient documentation.”  Notably, a majority of the errors in this category were because the medical record “did not contain a valid physician’s signature” or because a diagnostic test performed “did not contain a valid physician’s order” or an identification of the provider who rendered the service.
  • 132 errors were due to “lack of medical necessity” based on the medical documentation submitted.
  • 37 errors were due to “incorrect coding” (primarily related to laboratory testing).
  • 10 errors were due to “invasive procedures that were assessed to be without medically necessity.”
  • 9 errors were due to an “incorrect procedure code” used when billing the service.
  • 6 errors were the result of “billing for services that were not rendered.”
  • 2 errors were due to “other errors.”
  • 1 error was due to an “incorrect discharge code being used.”

Compliance Officers can take these “general” risk areas, add them to the “practice-specific” risk areas already noted, and take special note of these concerns when conducting internal reviews. The only way to avoid the scrutiny of Medicare’s various administrative contractors (MACs, ZPICs, RACs and CERT auditors) is to avoid payment errors altogether.  While no provider is perfect, the development, implementation and adherence to an effective Compliance Plan can significantly reduce the number of improper claims submitted by a provider to a MAC for reimbursement.

V.  What Actions Should a Compliance Officer Take After Receiving a CERT Audit Letter?

As Compliance Officer, upon receipt of a CERT audit request, you should carefully review the request and take steps to assemble a complete set of medical records and other supporting documentation related to the specific claims at issue.  It is important not only to make sure that your documentation is complete when sending in records to a CERT contractor, but to make sure that compliance is a daily part of your practice. Ensuring that your documentation is appropriate and accurately documents both medical necessity and the level of services performed can greatly assist you in avoiding trouble down the road.

Now, more than ever, it is important that you have an effective Compliance Plan in place.  Your Compliance Plan should explicitly set out your organization’s policies about how to correctly assess the need for, and document the services provided to a Medicare beneficiary. Otherwise, as demonstrated by the tough stance being taken by the MAC discussed above, CERT audits and other Medicare post-payment audits could raise serious problems for your practice.

Robert LilesLiles Parker attorneys represent health care providers in CERT, MAC, ZPIC and RAC audits and investigations.  Our attorneys have extensive compliance experience and can conduct “gap” analyses designed to place your practice or clinic on solid regulatory footing.  To speak with one of our attorneys, call 1-800-475-1906 for a free consultation today.

5 Fundamental Medicare Compliance Concepts

July 15, 2011 by  
Filed under Medicare Audits

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Introduction to Medicare Compliance

Medicare Compliance Goes Beyond Billing Audits

There are “rules of life” we have learned that can really bring certain essential Medicare compliance concepts into focus. While perhaps cliché, these sayings and principles can be quite helpful when explaining fundamental Medicare compliance concepts to new staff or non-compliance personnel.  These 5 essential Medicare compliance concepts include:

(1)  If it isn’t yours, give it back 

Sound familiar? This is one of the first principles we are taught as children.  Nevertheless, it is as true today as it was back then.  Medicare providers have a legal obligation to promptly return any overpayments identified. In fact, with the passage of the Affordable Care Act (ACA) in 2010, it is now a requirement that providers return Medicare overpayments to the government within 60 days of identification or face significant liability under the False Claims Act.

While the prompt, mandatory return of a known overpayment is clearly required, we were recently asked about a provider’s obligations when it comes to less clear potential overpayments.  For example, suppose that a provider identifies a specific claim that was improperly submitted and paid by Medicare.  When reviewing how the overpayment occurred, the provider also learns that a former employee mistakenly believed that a certain service was covered by Medicare.  While the provider may only have evidence that a single claim was improperly submitted and paid by Medicare, the provider may suspect that the former employee may have incorrectly handled similar claims.  The issue therefore becomes whether a provider has an obligation to further investigate and determine whether other, unconfirmed overpayments may exist.  In considering this issue in furtherance of Medicare compliance, we believe that the general principle still applies, regardless of the fact that the exact language of ACA may not cover this situation.  Remain unconvinced?  In addition to being the ethical and right action to take, it is important to keep in mind that even if the 60-day repayment provisions of the ACA may not apply (although CMS may believe differently), a provider who turns a blind eye to potential overpayments is possibly exposing the practice to a whistleblower suit under the False Claims Act. Do you know of a potential overpayment?  More than likely, someone else in your practice is also aware of the problem. The bottom line is simple – “If it isn’t yours, give it back”. 

(2)  “Participation in the Medicare program is a privilege, not a right.”

Remember taking driver’s education in high school?  I still remember my driver’s education teacher repeatedly reminding us that we did not have a right to have a driver’s license.  Rather, it was a privilege – a privilege that could be taken away as quickly as it was granted if we failed to follow the laws of the State and the rules of the road.  Frankly, Medicare compliance is no different.  Health care providers do not have a right to participate in the Medicare program.  It is a privilege that must be earned and maintained.  Should a provider fail in their Medicare compliance activities, this privilege can be taken away.  With this in mind, providers must actively work to better ensure that their  Medicare compliance initiatives meet Medicare’s coding and billing requirements. Should they not fully understand the program’s guidelines, it is the provider’s responsibility to learn Medicare’s rules and ensure that the provider’s business practices fully comply with the program’s provisions.

(3)  “If it sounds too good to be true, it probably is.”  

Physicians, small group practices and clinics should exercise caution when dealing with ‘consultants’ or ‘experts’ who boast of guaranteed increases in revenues or profits.  Unfortunately, many providers are dealing with steady declines in both Federal and private payor reimbursement rates.  In the current economy, unemployment rates have remained high and many patients are having a difficult time meeting their financial obligations.  In this environment, the promises of “innovative” business models or ways to modify a provider’s billing practices which will significantly increase revenues can be tempting to a provider experiencing financial difficulties.  Have you been approached by someone with a “deal” which sounds too good to be true?  Check out HHS-OIG’s “Fraud Alert” titled “Special Advisory Bulletin: Practices of Business Consultants.”  While published a decade ago, the lessons and concerns discussed in the bulletin are as current today as they were a decade ago.  And remember – the adage “If it sounds too good to be true, it probably is,” is especially true when it comes to health care business opportunities.

(4)  “Everyone does it, so it must be okay.”

In years past, a number of drug companies and medical device companies played fast and loose with Medicare’s rules, showering physicians with lavish gifts, inviting them to attend paid vacations and entering into sham “advisory” or “consulting” agreements which paid the physicians regular stipends for little, if any, work.  Why did these companies engage in these practices?  In many instances, the companies wanted to influence the physicians’ decision-making when it came time to prescribe certain drug or order medical devices for their patients. These actions amount to kickbacks – plain and simple.  Today, drug and medical device industry representatives have made great strides in educating their members to eliminate these illegal practices.  At the height of these practices, many physicians appeared to take the position that since their peers accepted kickbacks, it must be okay.  Clearly, this mindset is just flat wrong.

Unfortunately, it isn’t limited to drug and medical device companies. Generally, physicians should exercise care before accepting any thing of value from a company or clinical practice with whom the physician works – especially when the physician either makes referrals to the company or prescribes items or devices sold by that company to their patients.  In considering this issue, it is often helpful to ask, “Where do I send my referrals?” Additionally, ask yourself, “Who refers patients to me?” Once answered, these business relationships should be carefully reviewed to ensure that there are no transactions that could give even the appearance of being improper. A typical example which repeatedly arises involves the use of “Medical Director” agreements where a physician is paid a monthly stipend which exceeds the fair market value of any services which are provided under the agreement. This is an important area in Medicare compliance, as it also implicates potential criminal activities.

(5)  “Neatness and accuracy count.”   

We represent a wide variety of health care providers when responding to Medicare post-payment audits conducted by ZPICs and other Medicare contractors. Over the last two years, we have noted a significant increase in the number of claims being denied because medical documentation is either illegible or incomplete. From a Medicare compliance standpoint, these problems are among the easiest for a provider to remedy.

Handwritten Portions of a Medical Record Must be Legible When assessing denial reasons cited by ZPICs, our attorneys are often required to go through medical records as we assemble responsive arguments in support of payment.  More often than not, we don’t have any problem deciphering the records which the ZPIC alleges are “illegible.”  Having said that, ZPICs and other contractors have an enormous audit caseload, meaning they don’t spend a lot of time trying to make sense out of poorly written passages.  As a result, if their reviewers cannot readily read a passage, they merely deny the claim and move on.

The lesson to be learned is clear – physicians, nurses, therapists, counselors and others must ensure that any handwritten comments, signatures, dates or other information entered into a medical record can easily be read by an outside third party who is not experienced in reading the handwriting of your staff.  It is important to keep in mind that if there is an audit or review of this information by a ZPIC or another government contractor, it is likely to be several years in the future. During that period, the writer may no longer be with the practice and it may be difficult (if not impossible) to easily locate the writer for assistance in deciphering handwritten passages.  For Medicare compliance, regular self-audits can prove quite helpful in identifying possible problems.

If you are conducting a self-audit and find that words or passages are illegible or incorrect, you should consider taking the following remedial steps:

Advise your staff of the problem and follow-up to ensure that future entries are legible and accurate Physicians, nurses and staff should be educated regarding the importance of ensuring that their handwriting is easily legible and the information they are providing is accurate. In most instances, once this is identified as an issue, most staff are willing to work with you so that future problems do not arise.  We recommend that regular follow-ups are conducted to ensure that problematic handwriting does not again deteriorate to where it is again illegible.

Correcting illegible or erroneous words, phrases or passages Should you find that certain portions of a patient’s record documenting prior services rendered are illegible, you cannot merely erase it or use white out to hide the original handwritten section  before re-writing the passage so that it is legible. We recommend that you contact your Compliance Officer or legal counsel before making any changes to a medical record (regardless of whether the record is handwritten or electronic).  Legal counsel can guide you on the correct way to make changes or corrections to a medical record which documents services previously rendered. If a change or correction to a word or passage is necessary, you should not erase, white-out, scratch out or use a marker to conceal the original remark.  Instead, we usually recommend that a single line through the incorrect or illegible phrase or passage is made. If you are audited, an outside reviewer will be able to readily see the original passage. Next, the corrected entry should be carefully written next to or above the original entry. It should then be signed and dated by the individual making the correction.  In this fashion, an outside reviewer will not be misled in any way about what was originally written, when the corrected entry was made and / or the identity of the person making the change to the record.

As set out in Chapter 3 of the Medicare Benefit Policy Manual, the Centers for Medicare & Medicaid Services (CMS) advises ZPICs to consider the following:

3.3.2 – Medical Review Guidance

For example, ZPIC staff looks for some of the following situations when reviewing documentation:

 Possible falsification or other evidence of alterations including, but not limited to: obliterated sections; missing pages, inserted pages, white out; and excessive late entries;

 • Evidence that the service billed for was actually provided; or,

 • Patterns and trends that may indicate potential fraud.” (emphasis added).

 As a participating provider in the Medicare program, it is essential that you ensure that the care and treatment you provide is factual, accurate and recorded in a legible fashion. Ultimately, providers who diligently work to achieve these points will have made significant strides towards Medicare compliance in their  practice.

Robert LilesLiles Parker attorneys have extensive experience assisting providers in establishing an effective Medicare Compliance Plan. Should you have questions regarding Medicare compliance or how to instill a compliant culture in your clinic or practice, please give us a call at 1-800-475-1906 for a complimentary consultation. 

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