Don’t Take ZPICs’ Extrapolation Calculations at Face Value — Can Their Results Be Readily Reproduced? Don’t Fail to Address These and Other Deficiencies in the Contractor’s Actions

July 14, 2010 by  
Filed under ZPIC Audits

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(July 14, 2010): Imagine a ZPIC or PSC 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, use of formulas and application of the RAT-STAT program when selecting a statistical sample and extrapolating the alleged damages based on the sample pulled.  Over the years, we have challenged the extrapolation of damages conducted by Medicare contractors around the country, covering tens of thousands of claims.  Regardless of whether you are providing Partial Hospitalization, Evaluation and Management, Home Health, Physical Therapy, Surgical or other services, it is imperative that you work with experienced legal counsel and statistical experts to analyze the statistical sampling and extrapolation steps taken by the contractor. Should you succeed in invalidating the extrapolation, the whole games changes.  The question is – “How can you go about fighting an extrapolation calculation?”

One method is to show that the contractor’s auditor failed to identify a Statistically Valid Random Sample (SVRT).  Among the first steps is you should take is to retain experienced legal counsel to review the Medicare contractor’s actions.  Notably, there are a multitude of legal arguments which may be asserted (depending on the specific facts in your case).  Our firm has worked with several outstanding statistical experts over the years, each of which has a proven track record of analyzing the contractor’s actions and identifying any flaws made by the ZPIC or PSC when extrapolating damages.    

Notably, Section 3.10.4.2 of CMS’ Medicare Program Integrity Manual establishes that the contractor is obligated to fully document the statistical methods an auditor employs:

“The PSC or ZPIC BI [Benefit Integrity] unit or the contractor MR [Medical Review] unit shall identify the source of the random numbers used to select the individual sampling units. The PSC or ZPIC BI unit or the contractor MR unit shall also document the program and its algorithm or table that is used; this documentation becomes part of the record of the sampling and must be available for review.  (emphasis added)

The PSC or ZPIC BI units or the contractor MR units shall document all steps taken in the random selection process exactly as done to ensure that the necessary information is available for anyone attempting to replicate the sample selection.  (emphasis added)

ZPIC and PSC statisticians must be able show their work to the extent that a reviewer can attempt to “replicate” their actions and determine whether or not the steps taken were consistent with accepted principles and practices of statistical sampling.  The failure of a ZPIC or PSC statistician to fully and properly document his actions may serve as the basis for seeking to invalidate the extrapolation. The calculation of a valid statistical sample and the extrapolation of damages by ZPIC and PSC statistician is a highly complex process. After handling many extrapolated damages cases, we have found that few ZPIC or PSC statisticians fully meet their obligations to document the steps taken and / or conduct the process in a proper fashion, consistent with accepted statistical sampling procedures.  Should your practice or clinic find that it is facing an extrapolated Medicare audit, it is strongly recommended that you engage qualified, experienced counsel to represent you in the process.  Your legal counsel can then engage a qualified statistician to assess the contractor’s actions.

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.

GAO Testimony Recommends Stronger Contractor Oversight to Prevent Medicare Fraud, Abuse, and Waste

June 23, 2010 by  
Filed under Medicare Audits

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(June 23, 2010): In her June 15, 2010 testimony before Congress, GAO Health Care Director Kathleen M. King made clear that the Centers for Medicare & Medicaid Services (CMS) continue to face substantial challenges to preventing Medicare and Medicaid fraud, waste, and abuse.  Among the most significant of these challenges is lack of adequate oversight of the myriad contractors CMS relies on to process, pay, and audit the millions of daily Medicare claims.

King raised specific concerns about the national recovery audit contracting program’s failure to provide adequate post-payment review of large categories of claims.  Recall that recovery audit contractors (RACs) are private bounty hunters. 

“Because RACs are paid on a contingent fee based on the dollar value of the improper payments identified, during the demonstration RACs focused on claims from inpatient hospital stays, which are generally more costly services.” 

Therefore, GAO recommends that CMS direct othercontractors to focus on items and services known to have high levels of improper payments, such as home health and durable medical equipment.   What was it that RACs were supposed to be doing again?  Recall too that experience has shown that both ZPICs and PSCs do not necessarily strictly adhere to medical review standards established by CMS.  Instead, we have seen these contractors apply their own unwritten standards, often denying claims based on conjecture and speculation.

Finally, King’s testimony suggests that the RAC program alone does not resolve known improper payment vulnerabilities.  Where RACs have identified vulnerabilities, CMS still lacks policies and procedures to ensure that it “promptly (1) evaluates findings of RAC audits, (2) decides on the appropriate response and a time frame for taking action based on established criteria, and (3) acts to correct the vulnerabilities identified.”  GAO’s recommendations in this respect seem to fall under the category of “This isn’t happening now?” 

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.

Counsel for HHS-OIG Discusses the Impact of Health Care Reform on Enforcement with Congress

June 22, 2010 by  
Filed under Medicare Audits

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(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.

Responding to a Search Warrant of Your Practice or Clinic.

June 1, 2010 by  
Filed under HEAT Enforcement

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(June 1, 2010):  I.  Introduction:

Like most honest health care providers, you may believe that “search warrants” are only executed by the government in connection with the investigation of nefarious characters and criminals.  Unfortunately, that just isn’t the case.  The Federal government has increasingly utilized search warrants as a first-strike investigative tool.  In fact, the execution of a search warrant may very well be the first notice a health care provider has that their practice or clinic is under investigation.

Allegations of wrongdoing may arise from a wide variety of sources.  Health care providers may have been reported by disgruntled current or former employees, dissatisfied patients, or others familiar with the practice’s operations.  Notably, recent criticism aimed at RACs for their failure to identify and refer possible criminal wrongdoing to the government for further investigation may have generated a new period of significant enforcement.  It appears that Zone Protection Integrity Contractors (ZPICs) around the country have recently intensified their activities, going well beyond the typical overpayment audits normally seen.  We have seen a marked increase in the number of unannounced site visits, Medicare suspension actions and Medicare number revocation cases.  We fully anticipate the number of criminal referrals to DOJ to increase as well.

In assessing this issue, it is important to remember that prior to obtaining a search warrant, an Assistant U.S. Attorney has gone before a Federal Magistrate and has shown “probable cause” that a crime has been committed or is being committed.  Once issued, the search warrant may greatly help DOJ build its case.  Search warrants are preferable to subpoenas and other investigative tools because:

The health care provider will likely be caught completely off-guard, thereby reducing the possibility that documents may be lost, destroyed or otherwise be missing before it can be secured as part of the investigation.  In executing a search warrant, the government can preserve the documentation and electronic evidence to the greatest extent possible.

The government may use the execution of a search warrant as an opportunity to segregate possible witnesses and see if they can interview the employees and obtain statements before the practice and its employees have an opportunity to obtain counsel.

The combination of force and surprise will have an enormous psychological effect on your employees.  There will be absolutely no question about the seriousness and gravity of the government’s investigation.  This is often very intimidating, often resulting in significant damage to the practice, ranging from employee resignations to adverse publicity and media attention.

Finally, the scope of the search warrant will likely be sufficiently broad that the practice or clinic will have a difficult time determining the focus of the government’s investigation.

Once a search warrant is executed, the issue becomes how to best respond.  The purpose of this advisory is to provide an overview of the Federal search warrant process so that your interests can be protected.

II.  Responding to a Federal Search Warrant:

  A.  Before the search.

If the government were to execute a search warrant on your practice today, would you be ready?  Have your employees been briefed on how to respond if Federal agents show up at your practice or clinic?  If your answer to either of these questions is “no,” you should take immediate steps to better ensure that you are ready if this event were to occur.  Understandably, no health care provider likes to think that they would learn of an investigation in such a fashion.  Nevertheless, it occurs practically every day.  You should work with your attorney to draft procedures for responding to a search warrant that are tailored for your practice or clinic. 

B.  At the time of a search.

Please remember that these steps are not all inclusive.  Upon the execution of a Federal search warrant, you should immediately contact your attorney so that the specific facts and circumstances of your situation can be fully assessed and taken into consideration.  In responding to a search warrant, you should:

At the outset, it is important that you avoid taking any actions that could be misconstrued by the government as an obstruction to their search.  That does not mean that you cannot ask questions – merely that you should not obstruct their search.

 Try and ensure that patient care activities are not jeopardized. Typically, law enforcement will be sensitive to these issues and will try to avoid direct patient care areas.  Nevertheless, you may need to bring this issue to their attention.  You may find that legal counsel can often work with law enforcement to resolve an unreasonable intrusion in this regard.

 Ask for a copy of the search warrant and give it to your lawyer.  Your lawyer will try and prevent them from seizing any documents or items that appear to be outside of the scope of their warrant.  Importantly, search warrants are supposed to provide a specific description of the information or items to be search.  If a search warrant is ambiguous overly broad, your counsel may choose to seek to quash to the search.

 Regarding the search warrant itself, your lawyer will try and note the issuance date of the warrant and the date it was executed. Additionally, counsel will ask to check the identification of the leading agent handling the search, along with the identification of any other participating agencies (e.g. IRS, HHS-OIG).

 While your lawyer may request to see the affidavit upon which the search warrant is based, you should not be surprised if it was sealed by the Court and cannot be obtained. If counsel has not yet arrived, call your lawyer to discuss whether there may be any grounds to object to the search.  Should you object, inform the lead agent of your objection. Should the search continue, record the date and time of their arrival and departure.

 If they will allow it, try and accompany agents on the search.  Try to note which areas were searched and which documents or items were seized.  

 You may have documents that qualify as attorney-client privileged materials.  Should agents try to take documents that may be considered privileged, you should immediately object and notify the agents that the documents they are seizing are privileged. 

 Try and obtain a receipt from the agents for any items or documents that are seized. When possible, get copies of original documents before they are removed.

  C.  Handling employee issues.

The execution of a search warrant is an extremely stressful situation and can create confusion and stress on a practice’s employees. You should quickly move to restore order and re-assure employees that the situation is under control.

While a search warrant can be used to seize documents or other items, it cannot be used to force employees to participate in an interrogation.  Due to the many sensitivities in this area, it is strongly recommended that you have counsel advise employees of the situation.  While the government cannot force employees to answer questions, you must take care when you are briefing employees on the situation. While you must not tell employees that they are not allowed to talk with an agent, it is appropriate to tell employees that they have no obligation to answer any questions.  While individuals have a Fifth Amendment privilege against self-incrimination, your practice or clinic does not enjoy such a privilege.

When possible, send employees home for the day or have them work in another part of the facility.  Finally, you should notify employees that any questions regarding the location of certain records should be directed to a specific management official so that any inquiries can be properly and consistently handled.

  D.  After the search.

Document retention issues should be carefully handled. It is our view that all document destruction should immediately stop, even if the activity would be consistent with pre-search document retention policies used by the practice or clinic.  Once an investigation is initiated, you should diligently work to avoid even an appearance that obstruction of justice may be occurring. 

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.

Part II: A Look at the ZPIC System – The Appointment of Health Integrity to Handle Zone 4

April 1, 2010 by  
Filed under ZPIC Audits

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(April 1, 2010): Last week, we posted an initial article examining the ZPIC audit process and the various companies chosen by CMS to administer the program in one or more of the seven “Zones” around the country (based on Medicare Administrative Contractor (MAC) jurisdictions).  As Kim Brandt, CMS’ Program Integrity Group Director has noted, five of the seven zones are considered “hot spots.”  These include: California, Florida, Illinois, New York and Texas.  These five “hot spots” align with Program Integrity field offices.

In September 2008, Health Integrity was awarded the first Zone Program Integrity contract for Zone 4, covering Texas, Colorado, Oklahoma and New Mexico.

On February 1, 2009, Health Integrity began performing program integrity functions for Medicare Part A, Part B, Durable Medical Equipment (DME), Home Health and Hospice services.  Health Integrity was also designated as responsible for handling the Medicare – Medicaid Data Match Projects.  Overall, these responsibilities cover the following six tasks:

  • Performing Data Analysis and Data Mining.
  • Conducting Medical Reviews in Support of Benefit Integrity.
  • Supporting Law Enforcement and Answering Complaints.
  • Investigating Fraud and Abuse.
  • Recommending Recovery of Federal Funds through Administrative Action.
  • Referring Cases to Law Enforcement.

According to Health Integrity, through these efforts, it will “develop innovative data analysis methodologies for detecting and preventing abusive use of services early, develop high quality fraud case referrals for law enforcement, and identify appropriate corrective actions.”

Health Integrity will manage this workload from offices located in Dallas, Texas; San Antonio, Texas; Houston, Texas; Brownsville, Texas; Denver, Colorado; Oklahoma City, Oklahoma; and Albuquerque, New Mexico.  Health Integrity staff include data analysts, nurse reviewers, and fraud investigators.

As you will recall, like RACs, ZPICs are tasked by CMS to “find and prevent waste, fraud and abuse in Medicare.” Consistent with this mandate, ZPICs look at health care provider billing trends and patterns, focusing on those whose billings for Medicare services are higher than their peers. While most cases appear to have been generated as a result of “data mining,” several of our clients are convinced that the audit has been triggered by complaints, likely filed by a former disgruntled employee.

ZPICS are required to use a number of techniques, both proactive and reactive, to address fraud.  These techniques include the ZPIC IT Systems that combine claims data (fiscal intermediary, regional home health intermediary, carrier, and durable medical equipment regional carrier data) and other data to create a platform for conducting complex data analysis. By combining data from various sources, the ZPIC will be expected to present an entire picture of a beneficiary’s claim history regardless of where the claim was processed. The primary source of this data will be the CMS National Claims History (NCH).  Note that RACs are expected to report cases of suspected fraud. However, a RAC denial resulting in a provider repayment will not necessarily prevent a ZPIC and / or HHS-OIG from investigating and prosecuting, if appropriate, allegations of fraud or abuse arising from the overpayment.

Over the last year, we have worked on several cases involving Health Integrity.  Generally, we have been quite pleased with their willingness to consider arguments initially presented the provider.  Moreover, it has been our experience that Health Integrity takes the new 15-day “rebuttal” stage seriously.  Rather than merely “rubber-stamp” their initial findings, the contractor carefully reviewed the “rebuttal” information we submitted, ultimately deciding to significantly reduce the amount of the alleged overpayment.

Unfortunately, our initial concerns regarding the contractors use of statistical extrapolations in estimating damages remain.  As discussed in previous articles, we strongly recommend that you engage the services of experienced counsel if your practice or clinic is subjected to extrapolated damages.

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.

 

Part I: A Look at the Opposition – For AdvanceMed, It’s Not Personal, It’s Just Business — Big Business . . .

March 26, 2010 by  
Filed under ZPIC Audits

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(March 26, 2010):

OverviewOver the next few days, we will be publishing a brief overview of specific Zone Program Integrity Contractors (ZPICs) – the companies who have been hired by CMS to conduct the medical reviews of Part A and Part B health care providers around the country.  As we have previously discussed, over the last year, ZPICs have been taking over where Program Safeguard Contractors (PSCs) left off.  While our firm is still handling a number of cases that were initiated by PSCs, all of our recent cases have involved ZPICs.

As PSCs and ZPICs have been so quick to point out, they are not paid a percentage of the Medicare overpayments identified like their fellow medical reviewers – Recovery Audit Contractors (RACs).  Nevertheless, as you will soon see, they are handsomely paid for their efforts, albeit in a different fashion than are RACs.

It is essential to keep in mind that both RACs and ZPICs are designed to “find and prevent waste, fraud and abuse in Medicare.” Further, like their RAC cousins, ZPICs look at billing trends and patterns, focusing on providers whose billings for Medicare services are higher than the majority of providers in the community (e.g. their peers).

AdvanceMed:

AdvanceMed Corporation was awarded a $107,957,737.00 five-year contract to handle the ZPIC duties for Zone 5.   Zone 5 covers the states of Alabama, Arkansas, Georgia, Louisiana, Mississippi, North Carolina, South Carolina, Tennessee, Virginia, and West Virginia.  Yes, you read this correctly, AdvanceMed is being paid over $100 million.

As the ZPIC for Zone 5, AdvanceMed assumed the Benefit Integrity functions for Medicare Parts A, B, Durable Medical Equipment, and Home Health and Hospice, as well as establishing a Medicare / Medicaid (Medi-Medi) data matching program for each state within the Zone.

The AdvanceMed Zone 5 ZPIC contract performs the following functions for CMS as a ZPIC:

  • Medicare fraud investigation and prevention, including referrals to law enforcement;
  • Medicare data analysis (discovery, detection, investigation, and overpayment projection);
  • Medical Review to support fraud case development, including coverage and coding determinations;
  • Reviewing audit, settlement, and reimbursement of cost reports, and conducting specified audits;
  • IT Systems for case and decision tracking and data warehousing;
  • Interface with the Medicare contractors, the medical community (outreach & education), and law enforcement; and
  • Medicare/Medicaid data matching program safeguards work for each state in Zone 5.

AdvanceMed’s Extrapolations of Alleged Damages:

Over the years, we have gone up against AdvanceMed numerous times, challenging their interpretation of LMRPs / LCDs and assessing the methods they utilized to engage in a statistical extrapolation of the alleged damages in our client’s cases.  To give the company its due – their statistical experts are smart, aggressive and do not hesitate to respond when their methods have been challenged.  We like that – it keeps us sharp.

With the help of some of the best statisticians in the country (including, but not limited to the late Will Yancey, Ph.D.), in  a number of cases, we have been able to show that their extrapolation of damages (and that of other PSCs and ZPICs) has not complied with applicable requirements, and is therefore invalid.  To be fair, every extrapolation is different, both in terms of facts, the methodology employed, and in the associated calculations conducted.  As attorneys, we work with our experts to break down and assess AdvanceMed’s (and other ZPICs) calculations.  Perhaps they handled it appropriately – or maybe they didn’t.  There really isn’t any way to know if it was handled properly without a complete copy of their file (including associated work papers and calculations) so that we can fully assess their actions.

Over the last year, we have seen a marked increase in Medicare contractor (e.g. PSC and ZPIC) participation (as “participants” not as “parties”)  in ALJ hearings.  Their experts have consistently been professional, concise and ready to answer any questions posed by the ALJ.  Our recommendation – both counsel and their defense expert better be prepared.  It’s never to early to start thinking about how to best contest the extrapolation that has been conducted.  As a final point, we are aware of a number of instances where a  provider (or their representative) has chosen to ignore the extrapolation as a contestable issue.  In other words, they just accept the extrapolation as a foregone conclusion and focus solely on the claims.  We respectfully disagree with that approach.  If we identify deficiencies with the extrapolation, we aggressively challenge its application.

AdvanceMed’s Medical Reviews:

Once a provider has been identified as an outlier (or identified as a possible problem through a variety of other mechanisms), a medical review of their claims is often conducted by a ZPIC, such as AdvanceMed.

A number of year ago, Kevin Gerold, CMS’ former Acting Deputy Director for Program Integrity was quoted as saying that the agency had revamped its approach to claims processing in an effort to better “grasp the experience of the patient encounter.” Mr. Gerold was further quoted as saying that CMS was going to “let medical reviewers assess a claim’s legitimacy based on the big picture of the patient encounter, not on a nit-picking slavery to perfect documentation.” Unfortunately, in our humble opinion, AdvanceMed’s medical reviews have conducted have been extremely technical — resulting in the denial of many claims based on minor omissions, technical deficiencies and / or the contractors’ own peculiar spin regarding the application of an LCD.

In responding to AdvanceMed’s reasons for denial, it is essential that you obtain each and every reference relied upon by the contractor when denying the claims at issue.  We have identified multiple instances where a contractor (not necessarily AdvanceMed) attempted to apply an LCD retroactively.  Moreover, it is important to examine the underlying statutory authority to determine whether the contractor’s interpretation of a coverage provision is consistent with the underlying law or regulation.  Finally, it isn’t enough to merely “poke holes” in AdvanceMed’s reasons for denial – we like to go one step further – show that the particular claims at issue do, in fact, qualify for coverage and payment.

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.

Hold on Tight – 2010 Could be Rough for Providers. . .

February 27, 2010 by  
Filed under HEAT Enforcement

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(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.

 

Are ZPICs Tougher than RACs when Conducting a Medicare audit?

February 27, 2010 by  
Filed under ZPIC Audits

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(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.

Watch out Texas Providers — There’s a New Sheriff in Town — the Number of ZPIC Audits Being Conducted in Texas is Increasing!

February 20, 2010 by  
Filed under ZPIC Audits

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(February 20, 2010): Health care providers around the country are finding themselves the target of various audits from jurisdictionally overlapping Medicare contractors.  Notably, any of these audits have the potential to destroy a provider’s practice or clinic.

States where PSCs (Program Safeguard Contractors) have transitioned to ZPICs (Zone Program Integrity Contractors) are under extreme pressure. One of those states is Texas. Providers in the Lone Star state are being inundated with requests for documentation from Health Integrity, the ZPIC for Zone 4, which covers Texas, Colorado, New Mexico and Oklahoma.

Unlike Recovery Audit Contractors (RACS), whose primarily focus is to identify overpayments, or Medicare Comprehensive Error Rate Testing (CERT) audits, reviews aimed at measuring improper payments, ZPIC audits are subjecting providers to both pre–payment and post-payment Medicare audits.  Perhaps most importantly, ZPICs are expected to report suspected fraud to law enforcement.

ZPIC audits in Texas cover claims for everything from psychology E/M services to DME items. The Zone 4 contractor has said the audits are based on what it calls “atypical billing practices.”

Some providers have found the audit response process so burdensome that they have been forced to suspend operations in order to fulfill the requests for documentation.

Generally, health care providers have 30 days from the date on the letter of notification to get the ZPIC the information it has requested. If documentation is insufficient or is not received, the ZPIC will deny the claims and issue and issue an overpayment letter demanding the repayment of funds.  Additionally, in most cases,  ZPIC have been seeking extrapolated damages, applying the error rate identified to the universe of claims at issue during the time period audited.

While RACs and CERT auditors only conduct post-payment audits, PSCs and ZPICs are increasingly placing providers on pre-payment review, effectively delaying a provider’s cash flow up to six months (and in some cases even longer).  Although RACs have only been conducting  “automated” reviews to date, providers should expect the number of “complex” reviews to increase in 2010.

ZPICs, CERT reviews, PSCs, and RAC auditors are aggressively reviewing Medicare claims around the country. Should any of these contractors identify possible fraud, they will not hesitate to report’s the provider’s conduct to law enforcement.

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.

Overview of the Zone Program Integrity Contractor (ZPIC) Program

January 26, 2010 by  
Filed under ZPIC Audits

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(January 26, 2010):  Pursuant to the Medicare Prescription Drug, Improvement and Modernization Act of 2003 (MMA), CMS was required to use competitive measures 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). Intended to consolidate existing program integrity efforts, over the last year ZPICs have been taking over PSC audit and enforcement activities around the country.
Statements of Work in ZPIC contracts are similar to those covering PSCs.  In fact, Chapter 4 of CMS’s “Medicare Program Integrity Manual” reflects that the processes and procedures used by ZPICs when handling program integrity functions are essentially the same as those used by PSCs around the country.  Seven ZPIC zones have been identified.  The zones include the following states and / or territories:
  • Zone 1 – CA, NV, American Samoa, Guam, HI and the Mariana Islands.
  • Zone 2 – 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 – CO, NM, OK, TX.
  • Zone 5 – 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 – FL, PR and VI.
Upon receiving a request for records by a ZPIC:
  • Take care before conducting an internal review of the claims requested.  While an internal analysis can be invaluable, you want to avoid creating a non-privileged paper trail of identified problems.  Remember, both ZPICs and RACs may make a referral to law enforcement if their assessment indicates that problems may be more than a mere overpayment.
  • Review past claims audits and evaluations to determine whether these claims have been previously evaluated.
  • Note the claims denied and calculate when appeals must be filed.  Review the reasons given for each denial.
  • Has the contractor correctly cited Medicare policy?  Do not automatically assume the contractor’s arguments are meritorious.
  • Appeals must be filed in a timely fashion.  Moreover, all supporting documentation and arguments must be submitted to the QIC

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.

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