I. Background of AdvanceMed Transaction:
AdvanceMed has a new parent. Last week, it was announced that NCI, Inc., one of the nation’s most successful information technology companies, had acquired the outstanding capital stock of AdvanceMed Corporation (AdvanceMed), an affiliate of CSC. While the acquisition went largely unnoticed by the health care provider community, the transaction may, in fact, be quite significant.
With this acquisition by NCI, a recognized powerhouse in information technology, Medicare and Medicaid providers should expect AdvanceMed’s expertise in data mining and investigations to continue to grow. As AdvanceMed continues to fine-tune its data mining efforts and further expands its ability to conduct “Predictive Modeling,” providers will likely find their actions under the microscope like never before. It is therefore imperative that all health care providers immediately implement an effective Compliance Plan or further enhance their current compliance efforts.
NCI first announced its plans to acquire AdvanceMed last February. As NCI’s February 25th News Release noted:
“The Obama Administration has emphasized reducing fraud, waste, and abuse in Federal entitlements. AdvanceMed is ideally positioned to support the program integrity initiatives of CMS and other Federal Government agencies. . . We are extremely pleased to have AdvanceMed join NCI and believe that this acquisition will provide NCI an outstanding platform to address this rapidly growing market opportunity.”
In recent years, AdvanceMed has positioned itself to where it now has multiple contracts with the Federal government. AdvanceMed serves as the Zone Program Integrity Contractor (ZPIC) for Zone 2 and Zone 5. Additionally, the contractor also serves as a Comprehensive Error Rate Testing (CERT) contractor. On the Medicaid side, AdvanceMed serves as a Medicaid Integrity Contractor (MIC). While a host of other contractors have been awarded contracts covering other zones and program areas, AdvanceMed’s growth has been undeniably impressive.
As NCI announced in its April 4th “News Release” covering the acquisition:
“AdvanceMed is a premier provider of healthcare program integrity services focused on the detection and prevention of fraud, waste, and abuse in healthcare programs, providing investigative services to the Centers for Medicare and Medicaid Services (CMS). Serving CMS since 1999, AdvanceMed has grown rapidly, demonstrating the value and return on investment of the Federal Government’s integrity program activities.
AdvanceMed employs a strong and experienced professional staff, which leverages sophisticated information technology, data mining, and data analytical tools, to provide a full range of investigative services directed to the identification and recovery of inappropriate Medicare and Medicaid funds. AdvanceMed supports healthcare programs in 38 states with a staff of more than 450 professionals, including information specialists, nurses, physicians, statisticians, investigators, and other healthcare professionals.
AdvanceMed has multiple contracts with CMS under the Zone Program Integrity (ZPIC), Program Safeguard (PSC), Comprehensive Error Rate Testing (CERT), and Medicaid Integrity (MIC) programs. All of these programs are executed under cost plus contract vehicles. The largest contracts-ZPIC Zone 5 and ZPIC Zone 2-were awarded in late 2009 and 2010 and have five-year periods of performance.
The acquisition price was $62 million. Included within the price is a recently completed, state-of-the-art data center to support the ZPIC Zone 5 and ZPIC Zone 2 contracts. Additionally, NCI will make a 338(h)(10) election, enabling a tax deduction, which is expected to result in a tax benefit with an estimated net present value of approximately $6 million to $8 million. NCI expects the transaction to be slightly accretive to 2011 earnings.
As of the end of March 2011, AdvanceMed has a revenue backlog of approximately $300 million with approximately $51 million of that amount being currently funded. Revenue for the trailing 12 months ending March 31, 2011, is estimated to be approximately $51 million, all of which was generated from Federal Government contracts, and 99% of the work performed as a prime contractor. NCI’s AdvanceMed 2011 revenue, covering the nine-month period of April 2, 2011, to December 31, 2011, is estimated to be in the range of $43 million to $47 million (the equivalent of $57 million to $63 million on a full 12-month basis), with the midpoint reflecting a full-year growth of approximately 16%. . .”
II. Overview of the ZPIC Program:
Under the Medicare Prescription Drug, Improvement and Modernization Act of 2003 (MMA), CMS was required to take a number of steps intended to streamline the claims processing and review process:
- Using competitive measures, CMS was required to replace the current Medicare Fiscal Intermediaries (Part A) and Carriers (Part B) contractors with Medicare Administrative Contractors (MACs).
- After setting up the new MAC regions, CMS created new entities, called Zone Program Integrity Contractors (ZPICs).
- These actions were intended to consolidate the existing program integrity efforts. Over the last 2 — 3 years, ZPICs have been taking over PSC audit and enforcement activities around the country.
At the time of transition, there were twelve PSCs that had been awarded umbrella contracts by CMS. As these contracts have expired, CMS has transferred the PSCs’ fraud detection and deterrence functions over to ZPICs. Of the seven ZPIC zones established in the MMA, CMS has awarded contracts for a number of the zones. CMS is still working to issue awards for the final ZPIC zones. The seven ZPIC zones include the following states and / or territories:
- Zone 1 – CA, NV, American Samoa, Guam, HI and the Mariana Islands.
- Zone 2 – AdvanceMed: AK, WA, OR, MT, ID, WY, UT, AZ, ND, SD, NE, KS, IA, MO.
- Zone 3 – MN, WI, IL, IN, MI, OH and KY.
- Zone 4 – Health Integrity: CO, NM, OK, TX.
- Zone 5 – AdvanceMed: AL, AR, GA, LA, MS, NC, SC, TN, VA and WV.
- Zone 6 – PA, NY, MD, DC, DE and ME, MA, NJ, CT, RI, NH and VT.
- Zone 7 – SafeGuard Services: FL, PR and VI.
In many instances, these changes have been nothing more than a name change. ZPIC responsibilities are generally the same as those currently exercised by PSCs. While ZPIC overpayment review duties have not appreciably changed, the number of civil and criminal referrals appear to be increasing. In our opinion, ZPICs clearly view their role differently than that of their PSC predecessors. ZPICs clearly view themselves as an integral part of the law enforcement team, despite the fact that they are for-profit contractors. In consideration of their ability to recommend to CMS that a provider be suspended or have their Medicare number revoked, or even refer a provider to law enforcement for civil and / or criminal investigation, providers should take these contractors quite seriously.
Both ZPICs and PSCs have traditionally asserted that unlike their RAC counterparts, they are not “bounty hunters.” ZPICs are not paid contingency fees like RACs but instead directly by CMS on a contractual basis. Nevertheless, common sense tells us that if ZPICs aren’t successful at identifying alleged overpayments, the chances of a ZPIC’s contract with CMS being renewed are likely diminished. AdvanceMed’s recent announcement shows that they are a very profitable entity and are paid on a “cost-plus” basis (leaving room for bonuses and other incentives). Additionally, experience has shown us that despite the fact that ZPICs are expected to adhere to applicable Medicare coverage guidelines, a ZPIC’s interpretation and application of these coverage requirements may greatly differ from your understanding of the same provisions.
In recent years, ZPICs have been aggressively pursuing a wide variety of actions, including but not limited to:
- Pre-Payment Audit. After conducting a probe audit of a provider’s Medicare claims, the ZPIC may place a provider on “Pre-payment Audit” (also commonly referred to as “Pre-Payment Review”). Unlike a post-payment audit, there is no administrative appeals process that may be utilized by a provider for relief. Having said that, there are strategies that may be utilized by a provider which may assist in keeping the time period on pre-payment review at a minimum.
- Post-Payment Audit. Audits conducted by ZPICs primarily involve Medicare claims that have already been paid by the government. In many cases, the ZPICs appear to have conducted a strict application of the coverage requirements, regardless of whether a provider’s deviation from the rules is “de minimus” in nature. In doing so, it is not unusual to find that a provider has failed to comply with each and every requirement. Depending on the nature of the initial sample drawn, a ZPIC may extrapolate the damages in a case, significantly increasing the the alleged overpayment. In doing so, the ZPIC is effectively claiming that the “sample” of claims audited are representative of the universe of claims at issue in an audit.
- Suspension. While the number of suspension actions taken by ZPICs has steadily increased in recent years, Medicare providers should expect to see this number continue to grow. Under the Affordable Care Act (often informally referred to as the “Health Care Reform” Act), CMS’ suspension authority has greatly expanded.
- Revocation. As with suspensions, we have seen a sharp increase in the number of Medicare revocation actions taken over the last year. The reasons for revocation have varied but have typically been associated with alleged violations of their participation agreement. In some cases, the ZPIC contractors found that the provider has moved addresses and did not properly notified Medicare. In other cases, a provider was alleged to have been uncooperative during a site visit. Finally, there were a number of instances where the provider allegedly did not meet the “core” requirements necessary for their facility to remain certified.
- Referrals for Civil and Criminal Enforcement. ZPICs are actively referring providers to HHS-OIG (which can in turn refer the case to the U.S. Department of Justice (DOJ) for possible civil and / or criminal enforcement) when a case appears to entail more that a mere overpayment. However, just because a referral is made doesn’t mean that it will prosecuted. In many instances, HHS-OIG (and / or DOJ) will decline to open a case due to a variety of reasons, such as lack of evidence, insufficient damages, etc.).
III. Steps Providers Can Take Now, Before They are Subjected to a ZPIC Audit:
In responding to a ZPIC audit, it is important to remember that although they may not technically be “bounty hunters,” it is arguably to their benefit to find that an overpayment has occurred. These overpayments are often based on overlapping “technical” (such as an incorrect place of service code) and “substantive” (such as lack of medical necessity) reasons for denial. In recent years, the level of expertise exercised by ZPICs is often quite high — noting multiple reasons for denial and concern.
Unfortunately, the reality is that most (if not all) Medicare providers will find themselves the subject of a ZPIC, CERT, RAC or other type of claims audit at some point in the future. In our opinion, the single most effective step you can take to prepare for a contractor audit is to ensure that your organization has implemented and is adhering to an effective Compliance Plan. Several general points to consider also include:
Keep in mind your experiences with PSCs and other contractors. The lessons you have learned responding to PSC, CERT and RAC audits can be invaluable when appealing ZPIC overpayments. As you will recall, the appeals rules to be followed are virtually the same.
Monitor HHS-OIG’s Work Plan. While often cryptic, it can be invaluable in identifying areas of government concern. Are any of the services or procedures your organization currently provides a focus of HHS-OIG’s audit or investigative?
Keep an eye on RAC activities. Review the service-specific findings set out in annual RAC reports. Review targeted areas carefully to ascertain whether claims meet Medicare’s coding and medical necessity policies.
You never realize how bad your documentation is until your facility is audited. While many providers start out “over-documenting” services (to the extent that there is such a thing), a provider’s documentation practices often become more relaxed as time goes on – especially when the provider has not been audited for an extended period of time. In such situations, both physicians and their staff may fail to fully document the services provided. Moreover, the care taken to ensure that all supporting documentation has been properly secured may have also lapsed over the years.
Review your documentation. Imagine you are an outside third-party reviewer. Can an outsider fully appreciate the patient’s clinical status and the medical necessity of treatment? Are the notes legible and written is a clear fashion? Compare your E/M services to the 1995 or 1997 Evaluation and Management (E/M) Guidelines – have you fully and completely documented the services you provided? If dealing with skilled services, have you fully listed and discussed both the need for skilled services and the specific skilled services provided?
IV. Closing Thoughts:
Imagine a ZPIC hands you a claims analysis rife with alleged errors, an indecipherable list of statistical formulas, and an extrapolated recovery demand that will cripple your practice or clinic. What steps should you take to analyze their work? Based on our experience, providers can and should carefully assess the contractor’s actions, particularly the use of formulas and application of the RAT-STATS program when selecting a statistical sample and extrapolating the alleged damages based on the sample. Over the years, we have challenged the extrapolation of damages conducted by Medicare contractors around the country, including tens of thousands of claims. Regardless of whether you are a Skilled Nursing Facility providing skilled nursing and skilled therapy services, an M.D. or D.O. providing E/M services, a Home Health company or a Durable Medical Equipment (DME) company, it is imperative that you work with experienced legal counsel and statistical experts to analyze the actions take by a ZPIC.
Liles Parker attorneys and staff have extensive experience representing a wide range of Medicare providers in audits by ZPICs, PSCs and other contractors. Should you have questions regarding an inquiry from a ZPIC, PSC or RAC that you have received, please feel free to give us a call for a complimentary consultation. We can be reached at: 1 (800) 475-1906.
I. SNF Medicare Denial Letters Background
The Prospective Payment System (PPS) under which Skilled Nursing Facilities (SNFs) are reimbursed by Medicare has long been criticized by many concerned with curbing waste, fraud, and abuse in the Medicare program. Critics argue that, because the SNF reimbursement rate is prospective in nature and largely commensurate with the extent of skilled services provided to a beneficiary, SNFs will be more likely to provide unnecessary or unreasonable services for beneficiaries, thus increasing their reimbursement. For example, simply increasing the number of minutes of therapy a beneficiary receives (or providing a second or third therapy modality) could upgrade the Resource Utilization Group (RUG) to which the patient has been assigned, thereby resulting in a substantially higher reimbursement rate for the provider. This concern has prompted increased scrutiny of SNF billing practices and resulted in the issuance of SNF Medicare denial letters from Zone Program Integrity Contractors (ZPICs).
II. Questionable Billing Practices by Skilled Nursing Facilities
The Office of the Inspector General of the Department of Health and Human Services (HHS-OIG) recently released a report entitled “Questionable Billing Practices by Skilled Nursing Facilities”. The three chief objectives of this report were to:
- Ascertain the extent to which billing practices by SNFs changed between 2006 and 2008;
- Determine the extent to which billing varied by type of SNF ownership in 2008; and
- Identify SNFs that engaged in questionable billing practices in 2008.
HHS-OIG analyzed Part A SNF claim line items from 2006 and 2008, including the types of RUGs billed by SNF, beneficiary characteristics, and the average length of stay in the SNF for each beneficiary. OIG specifically focused on SNFs that billed frequently for higher-paying RUGs, namely those falling under the “Rehabilitation” or “Rehabilitation Plus Extensive Services” categories.
Based on the data it reviewed, OIG reached several conclusions regarding the billing practices of SNFs between 2006 and 2008, most notably:
- The percentage of “Ultra High” therapy RUG placements increased substantially between 2006 and 2008, while RUG assignment rates for all other categories decreased or remained static. This increase in “Ultra High” therapy RUG billing represented approximately $5 billion in additional Medicare payments to SNFs between 2006 and 2008.
- For-profit SNFs were more likely than non-profit or government SNFs to bill for higher paying RUGs.
- Three quarters of all SNFs had up to 39% placement rates in “Ultra High” therapy RUGs.
HHS-OIG then outlined several recommendations based on its conclusions, one of which entailed increased oversight of SNFs that bill for higher paying RUGs:
CMS should instruct its contractors to monitor the SNFs billing for higher paying RUGs using the indictors discussed in this report. Specifically, the contractors should determine for each SNF: (1) the percentage of RUGs for ultra high therapy; (2) the percentage of RUGs with high ADL scores, and (3) the average length of stay. CMS should develop thresholds for each of these measures and instruct contractors to conduct additional reviews of SNFs that exceed them. If SNFs from a particular chain frequently exceed these thresholds, then additional reviews should be conducted of the other SNFs in that chain.
Contractors should use this information to target their efforts to more effectively identify and prevent inappropriate billing. Contractors could conduct medical reviews of a sample of claims from SNFs that exceed these thresholds. Contractors could use their findings to recover inappropriate payments, to place certain SNFs on prepayment review, and to initiate fraud investigations.
The message to Medicare contractors is crystal clear: SNFs, especially those that have a significant placement rate for “Ultra High” therapy RUGs, should be increasingly targeted for audits. Expect SNF Medicare denial letters to rise precipitously Meanwhile, OIG has shown no signs of relenting in its scrutiny of SNFs, noting in its 2011 Work Plan that:
We will review the extent to which payments to SNFs meet Medicare coverage requirements . . . We will conduct a medical review to determine whether claims were medically necessary, sufficiently documented, and coded correctly during calendar year (CY) 2009.
Providers should ensure that their medical records and documentation satisfy applicable regulations and that they have an effective compliance plan in place to deter future audits. Otherwise, facilities targeted for review could face the imposition of prepayment review status, SNF Medicare denial letters, payment bans, or even civil monetary penalties (CMPs).
III. Areas of Focus by Medicare Contractors:
Based on the concerns raised by HHS-OIG, ZPICs, RACs, MACs, and other Medicare contractors conducting audits of SNFs are likely to focus on the following issues:
Proper RUG Placement: SNF care must be provided at the appropriate level. This means that all services are necessary and reasonable and information entered on all Minimum Data Sets (MDS) for each beneficiary is complete and accurate. Contractors will closely scrutinize all RUG assignments, particularly those falling under the “Ultra High” therapy category.
Necessity and Reasonableness of Therapy Care: All therapy services must be consistent with the nature and severity of the beneficiary’s illness or injury. In many instances, contractors may question the therapy modalities provided to a beneficiary, the amount of therapy a beneficiary receives, or even the activities in which a beneficiary participates during therapy.
Provision of Skilled Care: All care provided by an SNF must be “skilled,” meaning that it can only be safely or effective provided by technical or professional personnel, such as nurses or therapists. Contractors will often conclude that skilled care is not supported by documentation that is vague, generic, or repetitive.
Providers should review their medical documentation and related policies to ensure that, at a minimum, all of the elements and requirements discussed above are adequately addressed. There are also a number of additional steps providers can take to limit their liability in any future audits and reduce the chances of receiving the dreaded SNF Medicare denial letters.
IV. How to Avoid SNF Medicare Denial Letters and What To Do if You Get One
1. Tailor Each Care Plan to the Beneficiary’s Individual Needs: As discussed above, care provided by an SNF must be necessary and reasonable, meaning that it is consistent with the beneficiary’s illness or injury. This is essentially a principle of proportionality. Providers should ensure that all RUG classifications and care plans created for beneficiaries- especially therapy care plans- are tailored to the beneficiary’s individual needs and designed to address the beneficiary’s functional deficits. Contractors will be on the look out for RUG assignments or care plans that provide for overly extensive services or excessive treatment modalities.
2. Maintain Detailed Medical Records: SNFs must provide beneficiaries with “skilled” care, so all documentation should be sufficiently detailed to reflect the technical or specialized knowledge of the SNF staff. SNFs should also amply document all activities related to management and evaluation of beneficiary care plans, observation and assessment of beneficiaries’ medical conditions, any beneficiary education services regarding self-care, or any therapeutic exercises conducted with the beneficiary.
3. Ensure that the MDS is Consistent with the Beneficiary’s Clinical Record: The first document a contractor will scrutinize when it questions a RUG placement will be the MDS. Contractors will often argue that the information coded on the MDS is inconsistent with the clinical record. Providers should thus ensure that all data entered on every MDS is supported by the corresponding clinical record. A more robust record will make it much harder for a contractor to successfully challenge a RUG classification.
4. Consult Qualified Counsel: The consequences of an audit can be financially devastating to a provider. In light of increased scrutiny from Medicare contractors and the overall complexity of the medical review process, providers should consult qualified counsel if they have concerns regarding the sufficiency of their medical documentation or a potential audit. Counsel can assist providers with designing and implementing a comprehensive compliance plan or, if necessary, effectively responding to an audit initiated by a Medicare contractor. Liles Parker attorneys and staff have extensive experience handling both (a) administrative appeals of denied claims in post-payment audits by ZPICs and PSCs, and (b) working with therapy and other providers to devise effective compliance plans and provisions designed to assist these providers in meeting their statutory, regulatory and administrative obligations under the Medicare and Medicaid programs.
In our opinion, Medicare contractors (including ZPICs, PSCs and RACs), acting at the direction of CMS and HSS-OIG, will continue to expand their audit efforts against SNFs, particularly those with a significant number of beneficiaries assigned to “Ultra High” therapy RUGs, and issue SNF Medicare denial letters. Accordingly, SNFs should review the quality and sufficiency of their documentation and implement comprehensive compliance efforts to deter potential audits. Therefore, it is imperative that affected providers immediately take steps to assess their current practices and take remedial steps to correct any deficiencies identified.
Liles Parker attorneys and staff have extensive experience representing Medicare providers in post-payment audits of therapy and related skilled claims by ZPICs and other contractors. Should you have questions regarding this article or the appeal of Medicare post-payment audits, please give us a call for complimentary consultation. We can be reached at 1-800-475-1906.
The Zone 7 ZPIC Has Recommended Revocation of 82% of CORFS and 79% of CMHCs in South Florida – Is Your ZPIC Next?
(October 9, 2010): In late 2008, SafeGuard Services LLC (SafeGuard) was awarded one of the first two contracts to serve as a Zone Program Integrity Contractor (ZPIC) for Zone 7, an area which includes Florida, Puerto Rico and the U.S. Virgin Islands. The contract covered a base year plus four additional years. SafeGuard’s appointment was one of the first actions taken to consolidate the work previously performed by Program SafeGuard Contractors (PSCs) and Medicare Drug Integrity Contractors (MEDICs). Among its consolidated duties, SafeGuard is responsible for handling medical reviews and benefit integrity functions for Medicare claims under both Part A and Part B (hospital, CMHCs, skilled nursing, home health, provider and durable medical equipment). These claims are the focus of this article. SafeGuard became fully operational in Zone 7 on February 1, 2009.
Working together to promote the integrity of the Medicare and Medicaid programs, in recent years Safeguard has developed close working relationships with CMS, HHS-OIG, U.S. Attorney’s Offices, the FBI and other Medicare contractors. .
As with other ZPICs, SafeGuard employs a number of techniques, both proactive and reactive, to address fraud. In recent years, SafeGuard appears to have been one of the leading ZPICs in terms of “data-mining.” The primary source for Medicare claims data is CMS’ National Claims History system. Many of the audit and investigative processes developed by SafeGuard appear to now be employed by other ZPICs
CMS’ Proposed Rule issued September 23, 2010, provides an overview of how CMS and HHS-OIG intend to implement a number of new enforcement tools authorized under the Health Care Reform bill passed last March. In reviewing the Proposed Rule, we unexpectedly learned about several audit initiatives that the “Zone 7 ZPIC” has been pursuing. As the Proposed Rule states:
In addition to GAO and HHS OIG studies and reports, a number of Zone Program Integrity Contractors (ZPIC) and Program Safeguard Contractors (PSC), organizations used by CMS in helping to fight fraud in Medicare, have taken a number of administrative actions including payment suspensions and increased medical review, for the provider and supplier types shown above. For example, the Zone 7 ZPIC contractor in South Florida has conducted onsite reviews at 62 CORFs since January 2010 and recommended revocation for 51 CORFs, or 82 percent of the CORFS in the area. The same contractor has conducted an onsite reviews at 38 CMHCs located in Dade, Broward and Palm Beach County since January 2010, and recommended that 30 CMHCs be revoked for noncompliance (79 percent of the CMHCs in the area). In each instance where the ZPIC requested a revocation, the CMHC was also placed on prepay review. We have also conducted an analysis of IDTF licensure requirements and have found several circumstances that indicate irregularity and potential risk of fraud.” (emphasis added).
Notably, there was no discussion of how the ZPIC expects patients with rehabilitative needs or acute psychiatric treatment needs will be cared for if SafeGuard succeeds in shutting down a vast majority of the CORFs or CMHCs in South Florida. Is your ZPIC next to go down this path?
Liles Parker attorneys represent providers in ZPIC related actions. For a free consultation, please call 1 (800) 475-1906.
(August 31, 2010):
I. Introduction — Regional Health Care Fraud Summits:
Last week, department heads of the U.S. Department of Justice (DOJ) and the Department of Health and Human Services (HHS), met in Los Angeles, CA and conducted the second of a planned series of “Regional Health Care Fraud Prevention Summits.” Following-up on a similar conference held in Miami, DOJ Attorney General Eric Holder HHS Secretary Kathleen Sebelius discussed a number of ongoing concerns and remedial steps that are being taken to identify, investigate and prosecute instances of Medicare fraud. In addition to these agency heads, participants learned of current and additional planned fraud enforcement initiatives from Federal and State law enforcement officials.
II. Health Care Fraud Issues Discussed at the Summit:
As Attorney General Holder discussed, the administration’s current enforcement actions were having a significant impact on health care fraud. In fact, additional funding has been allocated to expand the HEAT program to additional cities:
“. . . Last year brought an historic step forward in this fight. In May 2009, the Departments of Justice and Health and Human Services launched the Health Care Fraud Prevention and Enforcement Action Team, or “HEAT.” Through HEAT, we’ve fostered unprecedented collaboration between our agencies and our law enforcement partners. We’ve ensured that the fight against criminal and civil health care fraud is a Cabinet-level priority. And we’ve strengthened our capacity to fight health care fraud through the enhanced use of our joint Medicare Strike Forces.”
This approach is working.
In fact, HEAT’s impact has been recognized by President Obama, whose FY2011 budget request includes an additional $60 million to expand our network of Strike Forces to additional cities. With these new resources, and our continued commitment to collaboration, I have no doubt we’ll be able to extend HEAT’s record of achievement. And this record is extraordinary.
In just the last fiscal year, we’ve won or negotiated more than $1.6 billion in judgments and settlements, returned more than $2.5 billion to the Medicare Trust Fund, opened thousands of new criminal and civil health care fraud investigations, reached an all-time high in the number of health care fraud defendants charged, and stopped numerous large-scale fraud schemes in their tracks.
We can all be encouraged, in particular, by what’s been accomplished in L.A. Criminals we’ve brought to justice here – in the last year alone – include the owners of the City of Angels Hospital, who pleaded guilty to paying illegal kickbacks to homeless shelters as part of a scheme to defraud Medicare and Medi-Cal; a physician in Torrance who defrauded insurance companies by misrepresenting cosmetic procedures as “medically necessary”; an Orange County oncologist who pleaded guilty to fraudulently billing Medicare and other health insurance companies up to $1 million for cancer medications that weren’t provided; a Santa Ana doctor who pleaded guilty to health care fraud for giving AIDS and HIV patients diluted medications; and a ring of criminals who defrauded Medi-Cal out of more than $4.5 million by using unlicensed individuals to provide in-home care to scores of disabled patients, many of them children.“ (emphasis added).
As HHS Secretary Sebelius further noted:
“In March, we gave him some help when Congress passed and the president signed the Affordable Care Act — one of the strongest health care anti-fraud bills in American history. Under the new law we’ve begun to strengthen the screenings for health care providers who want to participate in Medicaid or Medicare. And I am proud to announce that CMS is issuing a final rule strengthening enrollment standards for suppliers of durable medical equipment, prosthetics, orthotics, and supplies (DMEPOS).
This rule and others coming soon mean that only appropriately qualified suppliers will be enrolled in the program. The days when you could just hang a shingle over a desk and start submitting claims are over. No more power-driven wheelchairs for marathon runners. Under the new law, we’re also making it easier for law enforcement officials to see health care claims data from around the country in one place, combining all Medicare-paid claims into a single, searchable database. And we’re getting smarter about analyzing those claims in real time to flag potential scams. It is what credit card companies have been doing for decades: If 10 flat screen TV’s are suddenly charged to my card in one day, they know something’s not quite right. So they put a hold on payment and call me right away.
We should be able to take the same approach when one provider submits ten times as many claims for oxygen equipment as a similar operation just down the road. It’s about spotting fraud early before it escalates and the cost grows. As we step up our efforts to stamp out fraud, we’re holding ourselves accountable. The President has made a commitment to cut improper Medicare payments in half by 2012.”
While DOJ Attorney General Holder’s and HHS Secretary Sebelius’ presentations provided an overview of law enforcement’s current and future efforts, the comments of DOJ Assistant Attorney General for the Criminal Division, Lanny A. Breuer, were especially enlightening in terms of how providers are being identified and targeted for investigation. As Mr. Breuer discussed:
“In 2007, the Criminal Division of the Justice Department refocused our approach to investigating and prosecuting health care fraud cases. Our investigative approach is now data driven: put simply, our analysts and agents review Medicare billing data from across the country; identify patterns of unusual billing conduct; and then deploy our “Strike Force” teams of investigators and prosecutors to those hotspots to investigate, make arrests, and prosecute. And as criminals become more creative and sophisticated, we intend to use our most aggressive investigative techniques to be right at their heels. Whenever possible, we actively use undercover operations, court-authorized wiretaps and room bugs, and confidential informants to stop these schemes in their tracks.” (emphasis added).
As Mr. Breuer’s comments further confirm, health care providers are being identified based on their billing patterns. Through the use of data-mining, providers who coding and billing practices identify them as “outliers,” are finding themselves subjected to administrative, civil and even criminal investigation.
As counsel for a wide variety of health care providers around the country, we are especially concerned that honest, hard-working health care providers are finding themselves and their practices / clinics under investigation merely because: (1) their productivity is higher than that of their peers, or (2) their focus is specialized and often treats a higher percentage of seriously sick patients which ultimately requires a more detailed or comprehensive examination than one might normally find. Ultimately, through our representation of health care providers who have been targeted through data-mining, we believe that it is fundamentally unfair to investigate a provider merely on the basis of statistical data which can be manipulated in a thousand different ways in order to justify going after a specific provider or a type of practice.
On the administrative side, when data-mining is used as a targeting tool, providers are being audited and pursued by ZPICs, PSCs and RACs – each of is incentivized (either because they receive a percentage of any overpayment OR they are under contract with CMS to find overpayments and wrongful billings) to find fault with the provider.
IV. Continuing Health Care Fraud Concerns:
Under the current system, providers targeted through data-mining are likely to be saddled with extrapolated damages which can easily run into the millions of dollars, regardless of the fact that a large percentage of these providers are eventually exonerated (either fully or partially) when the case is heard by an Administrative Law Judge.
Health care providers subjected to an administrative audit (by a ZPIC, PSC or RAC), civil investigation (such as a review by the DOJ for possible False Claims Act liability), or criminal investigation (by DOJ or a State Medicaid Fraud Control Unit) should immediately contact your counsel. Extreme care should be taken when making statements to Federal or State investigators. Should the provider make a statement that is false or misleading, such comments could be used as the basis for bringing a separate cause of action. Your legal counsel may choose to handle all contacts with the government.
Robert W. Liles serves as Managing Partner at Liles Parker. Should you need assistance in connection with Medicare matters and cases. Should you have questions regarding these issues, give us a call for a free consultation. Call us at: 1 (800) 475-1906.
(July 20, 2010): In recent years, we have seen agents for the Centers for Medicare & Medicaid Services (CMS) increasingly rely on statistical extrapolation in ZPIC audit cases. In early cases, we successfully invalidated countless extrapolations by identifying relatively basic reasons for why the calculations were inconsistent with accepted statistical principles and practices. Now, however, providers should expect for ZPIC audits to ultimately result in a team of staff from the ZPIC (such as a statistician, an attorney and a clinician) attending and participating in the Administrative Law Judge (ALJ) hearing in an effort to have their extrapolation calculations approved by the Court.
Regardless of whether you are providing Home Health, Hospice or Durable Medical Equipment services, if your organization is facing an extrapolated ZPC audit, it is strongly recommended that you engage qualified, experienced legal counsel to represent your interests as early in the appeals process as possible. Your legal counsel can then engage an experienced expert statistician to assess the contractor’s actions and assist with the attorney’s efforts to have the extrapolation thrown out by either the Qualified Independent Contractor (QIC) or the ALJ hearing your case. Before you engage counsel, you should consider asking the following questions:
Has the attorney ever handled large, complex contractor audits before? Some firms will happily take your case, despite the fact that they have little or no experience in this area of health law. Don’t pay for your attorneys to learn how to handle a case. While every case is different, an experienced firm will have developed a number of arguments and defenses that may be readily used in your case without having to conduct costly, extensive legal research.
Can the firm provide client references who are willing to speak with you about the quality of work performed on their Medicare statistical extrapolation case?
Who will be working on your case? Will it be an inexperienced Associate attorney or one of the partners who has actually fought and won a multitude of Medicare overpayment claims and cases where the damages have been extrapolated by the contractors?
What are the credentials of the attorneys and paralegals who will be working on your case? Have they ever worked on the side of the government? One of our attorneys served as an Assistant U.S. Attorney for many years, ultimately being selected to serve as the First National Health Care Fraud Coordinator for the Department of Justice, Executive Office for U. S. Attorneys. In addition to a law degree, he also holds a Master’s in Health Care Administration. To fully appreciate the challenges faced by health care providers, you need an attorney who understands both the legal constraints and the practical business risks faced by health care providers.
In several of the ZPIC audit appeals cases we have handled, the alleged error rate has exceeded 90%. With the resulting alleged damages often in the millions of dollars, few health care providers are in a position to merely pay such an assessment. Instead, they need experienced legal counsel to defend their interests and set out the reasons why these claims should qualify for coverage and payment. When handling these cases, it is essential that you challenge both the denial of claims and the extrapolation itself (as appropriate).
Robert W. Liles serves as Managing Partner at Liles Parker. Robert and our other attorneys have extensive experience defending health care providers in cases where ZPICs have sought to impose extrapolated damages. Should you have any questions regarding these issues, don’t hesitate to contact Robert for a complementary consultation. He can be reached at: 1 (800) 475-1906.
(July 12, 2010): A ZPIC’s use of extrapolation can be a surefire way of destroying a provider’s practice. We’ve known it for years and yet the government’s passion for statistical sampling only seems to be growing. This makes it essential for providers to involve experienced counsel as soon as possible after the audit has been conducted.
“Extrapolation” is the process of using statistical sampling in a review to calculate and project (extrapolate) alleged overpayments made in connection with Medicare claims. Basically, ZPICs seek out errors in an alleged “statistically relevant sample” of the provider’s Medicare claims and then calculate and apply the “error rate” to the entire universe of claims covering a given period of time. This long-standing practice allows ZPICs to grossly inflate the monetary demands on their audit targets while avoiding actually reviewing each of the Medicare claims in the universe for which they are seeking recoupment or offset.
The practice dates back twenty years to a decision by the Secretary of Health and Human Services (HHS) to authorize the use of statistical sampling in lieu of engaging in onerous claim-by-claim reviews. In Chaves County Home Health Services v. Sullivan, 931 F.2d 914 (D.C. Cir. 1991), the district court upheld extrapolation as being within the Secretary’s discretion.
In 2003, after years of protest, physicians groups and others succeeded in convincing Congress to place some limitations on the use of extrapolation. Under Section 935 of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA), before an auditor can employ extrapolation, there must be either a determination of a sustained or high level of payment error, or documentation that educational intervention has failed to correct the payment error. While this opens the door to challenging an extrapolation, we also work with a statistical expert to identify other errors made by the ZPIC when conducting an extrapolation.
Over the years, Liles Parker has worked with a number of the best statisticians in the country, challenging the extrapolation and having it invalidated at either the Qualified Independent Contractor (QIC) level or at hearing before an Administrative Law Judge (ALJ). If your practice or clinic is audited by a ZPIC, we strongly recommend that you engage experienced legal counsel to represent your interests during this complex process. The legal arguments utilized are driven by the facts in each case. As a result, you should retain counsel with extensive real-world knowledge of how to best challenge the use of statistical sampling by ZPICs and PSCs.
Should you have any questions regarding these issues, don’t hesitate to contact us. For a complementary consultation, you may call Robert W. Liles or one of our other attorneys at 1 (800) 475-1906.
(June 22, 2010): In his testimony last week before the Health and Oversight Subcommittees of the House Committee on Ways and Means, Lewis Morris, Chief Counsel to the Inspector General (OIG) of Health and Human Services (HHS), emphasized the increasing speed and intensity of HHS-OIG’s multi-pronged health care fraud enforcement efforts. Morris’ testimony reinforces the need for Medicare providers and suppliers to aggressively prepare for a knock on the door from HHS-OIG or one of its many enforcement partners.
Morris highlighted numerous new enforcement tools available under the Patient Protection and Affordable Care Act (PPACA), paying particular attention to innovations in data access and use. These measures include consolidating and sharing data across agencies, as well as deploying new technology that allows “investigators to complete in a matter of days analysis that used to take months with traditional investigative tools.”
He further praised the enhanced accountability measures contained in PPACA, such as HHS-OIG’s ability to impose civil monetary penalties for “failing to grant [upon reasonable request] timely access to HHS-OIG for investigations, audits, or evaluations.” Notably, PPACA Section 6408 provides for a penalty of $15,000 for each day for failure to grant access.
Morris’ testimony also reminded the health care community that:
- PPACA allows the HHS Secretary to suspend payments to providers or suppliers based on credible evidence of fraud. At the same time, it expands the types of conduct constituting Federal health care fraud offenses under Title 18.
- HHS-OIG has improved access to information from entities directly or indirectly involved in providing medical items or services payable by any Federal program.
Perhaps most significantly:
- Medicare and Medicaid program integrity contractors (i.e., ZPICs and PSCs) are required to provide performance statistics, “including the number and amount of overpayments recovered, number of fraud referrals, and the return on investment of such activities.” (emphasis added).
While not surprising, it is nonetheless disconcerting that ZPICs and PSCs are essentially being “graded” based on the “amount of overpayments recovered,” along with the number of enforcement actions handled and referred to law enforcement. Based on these performance measures, is there any real difference between ZPICs and RACs? While RACs may be compensated directly based on the amount of overpayments collected (and ZPICs are not), it is crystal clear that the government’s expectations of ZPICs are quite similar. Now, more than ever before, it is essential that providers implement effective compliance measures to cover their practices and clinics.
Should you have any questions regarding these issues, don’t hesitate to contact us. For a complementary consultation, you may call Robert W. Liles or one of our other attorneys at 1 (800) 475-1906.
(February 27, 2010): The number of auditors, reviewers, investigators and prosecutors going after health care providers is increasing and signals an alarming, unprecedented effort by the government to uncover and recover alleged Medicare overpayments to health care providers.
Health care providers now face not only simple repayment demands, but also civil False Claims Act cases and criminal Medicare / Medicaid fraud claims identified by various new government contractors. Regrettably, we have seen unintentional mistakes, incomplete documentation and technical errors cited as the basis for seeking the repayment of millions of dollars, representing Medicare services rendered long ago, in some cases as many seven years before the demand letter was sent. Perhaps most troubling is the fact that no one, including the ZPIC and / or PSC conducting the medical review, doubts that the medical services were rendered and in most cases, the Medicare beneficiary benefited from the care and treatment provided. Today, every health care provider must beware of:
- “RACs” — Recovery Audit Contractors.
- “ZPICs” — Zone Program Integrity Contractors.
- “MICs” — Medicaid Integrity Contractors.
- “MCFU” — Medicaid Fraud Control Unit.
- “HHS-OIG” — Department of Health and Human Services, Office of Inspector General.
- “DOJ” — U.S. Department of Justice, and
- “HEAT” — Healthcare Fraud Prevention & Enforcement Task Force (in a number of U.S. Attorney’s Offices around the country).
RACs and the havoc they are expected to wreak is old news, quite frankly. The newest players in town, ZPICs, MICs and HEAT Teams should be at the top of your current list of concerns. As you will recall, CMS consolidated functions of all Program Safeguard Contractors (PSCs) and Medicare Prescription Drug Integrity Control (MEDIC) contracts into ZPIC contracts. ZPICs are designed to combine claims data (FIs, Regional Home Health Intermediary, Carrier, DMERC) and other data to create a platform for documenting complex data analysis. While RACs (until recently) have focused solely on recovering money, ZIPCs also look for fraud.
MICs are just now revving up around the country. Unburdened by many of the restrictions placed on RACs, providers with a heavy Medicaid beneficiary base should diligently review their Medicaid coding and billing efforts to better ensure compliance with applicable statutory and regulatory requirements.
HEAT Teams are made up of top level law enforcement and professional staff from DOJ and HHS. HEAT was implemented to prevent fraud and enforce current anti-fraud laws and prevent waste that focuses on improving data and information sharing between the Center for Medicare & Medicaid Services and law enforcement agencies. HEAT is working to strengthen program integrity activities to monitor and ensure compliance and enforcement. HEAT’s tools to identify fraud include hotlines and web sites for healthcare workers and ordinary citizens. Furthermore, HEAT officials are helping state Medicaid officials conduct better audits and provide better monitoring to detect fraudulent activities.
Should you have any questions regarding these issues, don’t hesitate to contact us. For a complementary consultation, you may call Robert W. Liles or one of our other attorneys at 1 (800) 475-1906.
(February 27, 2010): The Recovery Audit Contractor (RAC) program is an integral part of the Center for Medicare and Medicaid Services’ (CMS’) “benefit integrity” efforts which seek to identify and recoup alleged overpayments paid to Medicare providers. While the RAC program is still being expanded in many of the country (to cover not only hospitals but also other providers and types of Medicare claims), health care providers should be aware that the Zone Program Integrity Contractors (ZPICs) are already active in many areas and are actively auditing physicians, home health agencies, hospices, DME companies, therapy clinics, chiropractors and other small to mid-sized health care providers. Despite the “hype” surrounding RACs, at this time, ZPICs represent a significantly greater risk to non-hospital providers than do RACs. The purpose of this article to examine a number of the differences between these Medicare contractor programs.
What are the chances of your practice being reported by a ZPIC or RAC to HHS-OIG or DOJ for possible fraud violations?
While both contractor programs are designed to “find and prevent waste, fraud and abuse in Medicare,” the fact is that to date, ZPICs have been much more likely than RACs to report possible incidents of “fraud” that are identified while conducting a medical review. Frankly, it makes sense. RACs make money by identifying alleged overpayments – not by making a fraud referral to law enforcement. Notably, as a result of recent criticism by HHS-OIG, CMS will be requiring RACs to be much more diligent in the future about making referrals to law enforcement when it appears that a health care provider’s conduct represents fraud rather than merely an overpayment. CMS has provided training to RACs on how to identify fraud in the near future. Importantly, a RAC denial of claims which results in a provider repayment will not necessarily prevent HHS-OIG from investigating and making a referral to DOJ for possible prosecution, as appropriate, if there are allegations of fraud or abuse arising out of the alleged overpayment.
Notably, recent letters by ZPICs in South Texas and in other parts of the country have been seeking copies of business related records (copies of contracts, agreements with Medical Directors, lease agreements and more), along with its request for claims-related medical documentation. Importantly, the contractor is assessing the provider’s business relationships to help verify that referral and other business relationships do not violate the Federal Anti-Kickback Statute. To reduce the possiblity of civil or criminal liability, it is essential that Medicare providers take affirmative steps to better ensure that their practices are compliant with applicable statutory and regulatory requirements. 2011 will be the “Year of Compliance.” All providers, regardless of size, should take steps to implement an effective Compliance Program. Should you not have an compliance program in place, give us a call — we can help.
What is different about ZPICs and their predecessors, Program Safeguard Contractors (PSCs)?
Both ZPICs and Program Safeguard Contractors (PSCs) readily point out that they are not “bounty hunters.” ZPICs are not paid contingency fees like RACs and are paid directly by CMS on a contractual basis. Nevertheless, common sense tells us that if ZPICs aren’t successful at identifying alleged overpayments, the chances of a particular contractor getting their contract with CMS renewed are pretty slim. Experience has shown that both ZPICs and PSCs don’t always appear to strictly adhere to medical review standards established by Medicare Administrative Contractors (MACs) and approved by CMS. In our opinion, there appear to have been cases where these contractors applied their own unwritten standards, often denying claims based on conjecture and speculation rather than a strict application of the applicable LCD or LMRP.
In any event, over the last year, both ZPICs and PSCs have been increasingly placing health care providers on pre-payment review, conducting post-payment audits, recommending suspensions of payment. Additionally, in many cases they have been extrapolating the alleged damages based on a sample of claims reviewed. Finally, as discussed above, identified instances of potential fraud are being referred by ZPICs and PSCs to HHS-OIG for possible investigation, referral for prosecution and / or administrative sanction.
What sources of coding / billing data are used by ZPICs?
ZPICS are required to use a variety of techniques, both proactive and reactive, to address any potentially fraudulent practices. Proactive techniques will include the ZPIC IT Systems that will combine claims data (fiscal intermediary, regional home health intermediary, carrier, and durable medical equipment regional carrier data) and other source of information to create a platform for conducting complex data analyses. By combining data from various sources, ZPICs have been able to assemble a fairly comprehensive picture of a beneficiary’s claim history regardless of where the claim was processed. The primary source of this data is reportedly CMS’ National Claims History (NCH) database.
How do ZPICs conduct medical reviews?
ZPICs conduct medical reviews of charts to determine, among other things, whether the service submitted was actually provided, and whether the service was medically reasonably and necessary. Based upon their findings, ZPICs may approve, downcode or deny a claim. To date, we have never seen a ZPIC conclude that a claim should have been coded at a higher level, only a lower level. Regrettably, ZPICs are not required to have a physician review a claim in order to deny coverage. In most of the cases on which we have worked, the contractor’s medical reviewer has been a Registered Nurse. While some Federal courts have found that a treating physician’s opinion should be given paramount weight, others have ruled that the opinion of a treating physician should not be given any special consideration. Generally, ZPICs have completely disregarded the “Treating Physician Rule,” despite the fact that a patient’s treating physician was the only provider to have actually seen and assessed the patient at issue.
How should you respond to a ZPIC audit?
In responding to a ZPIC audit, it is important to remember that although they may not technically be “bounty hunters,” in our opinion, they are in the business of finding fault. Moreover, they are quite adept at identifying “technical” errors, many of which they will readily cite when denying your Medicare claims. Unfortunately, it is not at all uncommon for a ZPIC to find that 75% — 100 % of the sample of claims reviewed did not qualify for coverage and payment by Medicare. After extrapolating the damages to the universe of claims at issue, health care providers often find that they are facing alleged overpayments of between $150,000 and several million dollars. In many cases, the assessment is far in excess of the provider’s ability to pay. As such, the administrative appeal becomes a “bet the farm” matter for the health care provider. If the assessment remains, the provider will have no choice but to declare bankruptcy.
It is also important to remember that ZPIC enforcement actions are not limited to merely overpayment assessments. In recent months, ZPICs have been increasingly conducting unexpected site visits of health care provider’s offices and facilities, often requesting immediate access to a limited number of claims and the medical records supporing the services billed to Medicare. Typically, they then require that a provider send supporting documention covering a wider list of claims within 30 days of their visit. In other cases, should a ZPIC identify serious problems when reviewing the medical records requested, they may recommend to CMS that the provider’s Medicare billing privileges be suspended. From a practical standapoint, few providers are diversified (in terms of payor mix) to the point that they can easily do without Medicare reimbursement. The practical effect of a Medicare suspension is therefore that provider cannot continue in business throughout the 180-day initial period of suspension typically imposed by CMS. Finally, in a limited number of cases, after a ZPIC or PSC has visited an office, the provider will subsequently learn that the contractor has recommended that the provider’s Medicare number be revoked. In a fairly recent case we are aware of (not involving a client of the Firm), the contractor claimed that the provider failed to cooperate, a clear violation of the provider’s “Conditions of Participation” with Medicare. As a result, the contractor recommended (and CMS approved) the revocation of the provider’s Medicare number. Short of exclusion from participation in the Medicare program, this is arguably the most serious and far-reaching administrative action that can be taken against a Medicare provider.
In light of the seriousness of the situation, regardless of whether you are contacted by a RAC, a ZPIC or a PSC, you must take great care when responding to the contractor’s request for business records, claims information or medical records. Administrative enforcement actions can be extraordinarily serious. Therefore, is essential that you engage an experienced attorney and law firm to represent your interest.
Liles Parker attorneys have extensive experience representing health care providers around the country in connection with ZPIC audits and reviews by other Medicare providers. Should you have any questions regarding these issues, don’t hesitate to contact us. For a complementary consultation, you may call Robert W. Liles or one of our other attorneys at 1 (800) 475-1906.