Medicare-Medicaid Audit World

Will CMS Double Down on the Success of the Recovery Audit Program?

Fri, 08 Feb 2013 08:27:46 -0500

According to CMS, between October 2010 and December 2012, the RACs collected $3.8 billion in overpayments. As the nearby chart makes clear, the volume of amount collected each quarter has continued to increase, the result of the ever increasing number of issues approved for review by CMS as well as the RAC's increasing expertise in discovering alleged improper payments. There is little doubt that CMS considers the Recovery Audit Program to be a financial success or that it will continue to expand.

The Change to the Time in Which CMS Can Collect an Overpayment.

In May 2012, the HHS-OIG released a report entitled "Obstacles to Collection of Millions in Medicare Overpayments" detailing its findings on how well CMS and its contractors were doing in collecting previously identified overpayments. In response to the OIG's contention that CMS was not doing a good enough job collecting identified overpayments, CMS claimed that part of the problem was that its collection activities were hampered by the limitation in 42 U.S.C. § 1395gg which restricted recoveries of overpayments from providers to those overpayments made within the last 3 years, even though 42 C.F.R. § 405.980(b) permits a CMS contractor to reopen a paid claim for any reason within 1 year of the date of the initial determination and within four (4) years of the date of the initial determination if there is good cause. The OIG report recommended that CMS ask Congress to change the recovery period in § 1395gg to a period greater than the reopening period set forth in § 405.980. In § 638 of the recently enacted American Taxpayer Relief Act of 2012, the law passed to avoid the "fiscal cliff," Congress responded to the OIG recommendation by changing the recovery period in § 1395gg from 3 to 5 years, 1 year longer than the reopening period in § 405.980.

The current Scope of Work (SOW) for the Recovery Audit Contractors provides that:

The Recovery Auditor shall not attempt to identify any overpayment or underpayment more than 3 years past the date of the initial determination made on the claim.

Appeals of Recovery Audit Contractor Decisions are Overwhelming the Office of Medicare Hearings and Appeals

Mon, 17 Dec 2012 06:48:50 -0500

If a Medicare provider's claim for payment is denied or if a Recovery Audit Contractor (RAC) determines that a past payment was made improperly, the provider may appeal the denial. Medicare provides a 5-level appeal process that begins with a request that the Medicare Administrative Contractor (MAC) make a redetermination on the claim. If that is unsuccessful, the provider may seek reconsideration from a Qualified Independent Contractor (QIC). If the QIC agrees that the denial was proper, the provider may request a hearing before an Administrative Law Judge (ALJ) in the Office of Medicare Hearings and Appeals (OMHA).

OMHA was established by § 931of the Medicare Drug, Improvement and Modernization Act of 2003. In § 931(b)(2), Congress provided that:

The Secretary shall assure the independence of administrative law judges performing the administrative law judge functions ... from the Centers for Medicare & Medicaid Services and its contractors. In order to assure such independence, the Secretary shall place such judges in an administrative office that is organizationally and functionally separate from such Centers.

There are currently 65 OMHA ALJs in 4 regional field offices. The ALJs are organized into teams and supported by OMHA attorneys, paralegals and legal assistants. While OMHA ALJs hear appeals involving, among other things, an individual's eligibility for Medicare and coverage determinations under Parts C and D, the largest part of the ALJs workload comes from Part A and B provider appeals of pre and/or post payment denials by one of Medicare's audit contractors.

The Effect of RAC Audits on the ALJ's Caseload.

According to the latest appeal statistics from CMS, RACs issued payment denials for 903,372 claims in fiscal year 2011 and providers filed 56,620 appeals in fiscal year 2011. According to statistics maintained by OMHA, it received 132,446 appeals in fiscal year 2012. Out of the 132,446 appeals filed, 40,386 or 30.5% were filed from RAC denials by Part A hospitals. By comparison, Part A hospitals filed just 1,545 appeals in FY 2011.

The increase in ALJ appeals is certainly not unexpected as a result of the nationwide expansion of the RAC program in 2010. The increased caseload has already impacted the ALJ's ability to comply with the regulatory mandate set forth at 42 C.F.R. §405.1006 that appeals to the ALJ be decided within 90 days. There is little doubt that as more and more appeals reach the ALJs, providers will experience ever increasing delays in decisions by the ALJs. While some delay may be acceptable, a restrictive CMS policy regarding the payment of reasonable and necessary Part B services provided by a hospital to a beneficiary may cause such an increase in the level of ALJ appeals as to make timely decisions by an ALJ impossible and deprive a provider of the legally required prompt resolution of its appeal.

Appeals for Payment of Part B Outpatient Services Will Further Delay ALJ Decisions

Is the Inspector General Biased Against Medicare Providers? - A Recent Report Says YES!

Tue, 20 Nov 2012 13:41:37 -0500

In 1978, Congress passed the Inspector General Act "[t]o create independent and objective units to provide leadership and coordination and recommend policies for activities designed (A) to promote economy, efficiency, and effectiveness in the administration of, and (B) to prevent and detect fraud and abuse in, such [Government] programs and operations;..." A November 14, 2012 report issued by the Health and Human Services Inspector General arguing for "improvements" in the activities of Medicare Administrative Law Judges suggests that the Inspector General is anything but "independent and objective."

The OIG's report is based upon an analysis of appeals decided by ALJs between October 2009 and September 2010 (fiscal year 2010). The OIG found that providers filed 85% of the appeals decided, that the ALJs rendered fully favorable decisions in 56% of the appeals (62% of all Part A appeals but 72% of Part A appeals filed by hospitals). The OIG calculated that about two-thirds of the ALJs rendered fully favorable decisions in between 41 and 70 percent of the appeals they considered. The question raised by these statistics is why is there such a large discrepancy between the decisions reached by the QICs in their review of the claims and the ALJs, since presumably both groups had the same information and were interpreting the same regulations. The obvious answer is that either the QICs or the ALJs are not doing their job correctly.

One might suspect that the first step in finding out which group is incompetent would be to have an independent entity review a statistically valid sample of the appeal records and offer an opinion as to whether the decision of the QIC or the ALJ was correct. Surprisingly, the OIG did not do that. Instead, the OIG appears to have assumed that the decision of the QICs was correct and then makes suggestions as to how to "improve" the decision making of the ALJs so that it will be more in line with that of the QICs. The result of such improvements, of course, will be a savings to the Government and reduced payments to providers. In case it is ultimately determined that the ALJ's decisions are in fact correct, another "improvement" suggested by the OIG is that CMS impose a fee only on providers who want to appeal to the ALJ with the hope that this will result in fewer providers filing fewer appeals.

There is no doubt that over the years, the Inspector General has identified significant inefficiency and waste in the operation of the Medicare program and put out of business many unscrupulous individuals who saw the Medicare program as nothing more than their private pot of gold. The OIG's effectiveness is due, in large part, to the belief by many that its findings and recommendations are based upon an objective analysis of the facts. When they are not, I believe it is incumbent on all those who participate in the Medicare program to do whatever is necessary to expose the OIG's bias and insist that it remain neutral and objective in promoting economy, efficiency, and effectiveness in the administration of the Medicare program.

Please contact us if we can be of any assistance with issues with ALJ appeals or in helping to resolve an issue with any of the legion of CMS auditors in the Medicare-Medicaid Audit World.

Does Medicare Always Have To Pay A Hospital For Services Provided?

Fri, 02 Nov 2012 16:22:25 -0500

Depending on a doctor's opinion as to the severity of a patient's medical condition, a hospital may either provide the patient with services after he or she is admitted to the hospital (inpatient services) or without the patient being admitted (outpatient services). Although many of the services are the same, the hospital is paid more if the patient is admitted than if the services are provided on an outpatient basis.

During the last few years, CMS' Recovery Audit Contractors (RACs) have determined that millions of dollars paid to hospitals for inpatient treatment should be refunded to CMS because although the patient needed the medical services provided, the services should have been provided on an outpatient basis. Although most people might think that the result of the hospital's mistaken classification would simply be for the hospital to repay Medicare the difference between the amount it was paid for inpatient services and the amount that it would have been paid for the services on an outpatient basis, CMS has a different view. According to CMS, because the hospital submitted a bill for what was later determined to be unnecessary inpatient services, the hospital is entitled to no payment for its services.

On November 1, 2012, the American Hospital Association and four individual hospitals filed a lawsuit in the United States District Court for the District of Columbia against Kathleen Sebelius, the Secretary of the Department of Health and Human Services, in an attempt to overturn this unreasonable policy and to force CMS to pay hospitals for the legitimate outpatient services provided. While the hospital's position is undoubtedly fair and reasonable, their lawsuit may not succeed.

Will CMS' Broad Power to Administer the Medicare Program Defeat the Hospitals?

There is no doubt that Congress has given CMS broad powers to enact rules and regulations governing the operation of the Medicare Program. CMS has used that authority to promulgate thousands of regulations and policies to govern, among other things, who is eligible to participate in the Medicare program, what benefits the program will provide, the amounts to be paid for services and what hospitals and other providers must do to be paid. According to 42 C.F.R. § 424.32(a)(1), in order for a hospital or provider to be paid:

A claim must be filed with the appropriate intermediary or carrier on a form prescribed by CMS in accordance with CMS instructions.

Will Recovery Audits Drive Away Medicare Providers? - Part I

Tue, 16 Oct 2012 08:21:29 -0500

Often overlooked in performance evaluations of the various contractors employed by the Medicare program to ensure program integrity, is the cost incurred by providers in responding to contractor requests for information related to billed claims and provider costs in appealing improper contractor denials. In light of the ongoing debate about whether reduced Medicare payments mandated by the Patient Protection and Affordable Care Act will drive providers from the Medicare program, an analysis of the administrative costs incurred by providers as the result of Medicare program integrity activity is in order.

With the exception of the data collected by the American Hospital Association (AHA) through its RAC Trac initiative, I am not aware of any other data tracking administrative costs incurred by providers in connection with Medicare program integrity activities. As far as I know there is no aggregate data of the costs incurred by any identified group of Medicare providers in connection with pre and post payment reviews conducted by the MACs or the costs incurred by Medicare providers in responding to document or other information requests by ZPICs or their PSC predecessors.

The RAC Trac Data

According to the American Hospital Directory, there are about 4,219 hospitals in the United States. About 2,200 of those hospitals provided data to the AHA during the first half of 2012 on the costs associated with RAC activities. About 75% of the hospitals reported that RAC activity had some impact on their operations, the single largest impact being increased administrative costs. Approximately 45% of the hospitals spent less than $3,300 per month because of RAC audits while about 8% of the hospitals spent over $33,300 per month on RAC activities. In terms of employee time, the hospitals reported that about 315 hours of employee time per month was devoted to RAC activities. In addition to internal costs, the hospitals reported that they spent about $33,000 per month on external resources required to address RAC issues. The AHA report on the RAC Trac survey data for the 1st quarter of 2012 is available here, and the 2nd quarter results are available here.

What Concerns the OIG About MACs and RACs

Mon, 08 Oct 2012 14:23:45 -0500

Last week the Department of Health and Human Services Office of Inspector General released its fiscal year 2013 Work Plan describing the issues it intends to investigate during the fiscal year beginning October 1, 2012. In the section of the Work Plan devoted to Parts A and B of Medicare, the OIG identified its concerns with the operation of the Medicare Administrative Contractors (MAC) and the Medicare Recovery Audit Contractors.

The OIG's Concerns With the Performance of the MACs

In addition to being concerned about CMS' ability to adequately monitor and assess the performance of the various MACs, the OIG is concerned with whether the MACs have consolidated all Part A and Part B edits within their jurisdiction, have developed and tested final edits, implemented and used initial, local system, and medical review edits and evaluated edit effectiveness. On a related subject, the OIG is also concerned about Part B claims that were suspended for manual prepayment review on the basis of system edits but on which the reviews were not conducted. According to the OIG, because manual review is more timely and costly to the contractor, some suspended claims might not be reviewed but paid inappropriately. In sum, the OIG believes that the MACs may be paying too many improper claims.

The OIG's Concern With the Performance of the RACs

As opposed to its concern with the MACs' performance in specific areas, the OIG Work Plan does not identify any specific concern with the performance of the RACs. Rather, the Work Plan states that the OIG intends to "review the extent that Recovery Audit Contractors (RAC) identified improper payments, identified vulnerabilities, and made potential fraud referrals in 2010 and 2011." The OIG will also review CMS' actions in resolving RAC-identified vulnerabilities, addressing potential fraud referrals, and in evaluating RAC performance in 2010 and 2011. Apparently the OIG does not believe that the problems with the RAC program identified by the American Hospital Association, the American Medical Association and other professional organizations as well as some members of Congress warrant investigation.

The Concerns of Others With the Performance of the RACs

Since its inception, the structure of the RAC program has been the subject of considerable unfavorable comment by Medicare providers. In an April 3, 2012 letter, the leaders of 35 professional organizations representing doctors expressed their opposition to CMS' plan to have RACs conduct prepayment reviews because "[t]he program's contingency fee structure inappropriately incentivizes the Recovery Auditors to conduct "fishing expeditions" that are exceedingly burdensome for physician practices" and because "[t]hey [Recovery Auditors] are incapable of efficiently or accurately conducting prepayment review."

Evaluation and Management Codes - The Newest Audit Target

Mon, 01 Oct 2012 13:19:21 -0500

Over the past couple of weeks there has been considerable press attention to the fact that over the last 10 years bills submitted by doctors to CMS for evaluation and management services have increasingly used E/M Codes 99214 and 99215 in place of lower cost 99211 and 99212 codes, coupled with the possibility that the increased use by hospitals and doctors of Electronic Health Record (EHR) software as the result of the CMS EHR incentive program, has resulted in increased fraudulent billing by providers. Although press reports conflate the two issues, they do not appear to be related.

Reports on Evaluation and Management Billing

In May 2012, the HHS OIG released a report entitled "Coding Trends of Medicare Evaluation and Management Services" in which it analyzed Evaluation and Management coding for (1) established patient office visits, (2) subsequent inpatient hospital care, and (3) emergency department visits. It found that the use of codes 99214 and 99215 increased 17% between 2001 and 2010, the use of codes 99232 and 99233 increased 6 and 9 percent, respectively between 2001 and 2010, and the use of code 99285 rose 21 percent, increasing from 27 to 48 percent of billings during the same period.

On September 15, 2012, the Center for Public Integrity released a study entitled "How doctors and hospitals have collected billions in questionable Medicare fees." This article purports to report on the Center's analysis of data obtained from CMS on Evaluation and Management billing as well as how the widespread adoption of EHR may be contributing to fraudulent upcoding by hospitals and doctors.

On September 21, 2012, the New York Times published an article entitled "Medicare Bills Rise as Records Turn Electronic" referencing both the May OIG report and the Center for Public Integrity article. The Times' article, which purported to analyze CMS data from the American Hospital Directory, pointed out the same trends as the earlier reports, but attributed the difference to hospitals converting from paper records to EHRs. The Times article apparently prompted a strong letter from the Secretary of Health and Human Services and the Attorney General to the CEO's of five hospital trade associations. In their letter of September 24, 2012, the Secretary and Attorney General warned against the use EHR software to commit healthcare fraud and threatened prosecution for fraudulent billing. The American Hospital Association responded the same day as did the Association of Academic Health Centers.

Are All Providers Equal in the Eyes of the ZPICs?

Fri, 21 Sep 2012 14:25:11 -0500

Zone Program Integrity Contractors (ZPICs) are charged with detecting fraud, waste and abuse in Medicare Parts A, B, C, D, Durable Medical Equipment, Prosthetics, and Orthotics Suppliers (DMEPOS), Home Health and Hospice agencies (HH+H), and Medi-Medi (a partnership between Medicaid and Medicare designed to enhance collaboration between the two programs to reduce fraud, waste and abuse). In conducting their work, ZPICs are not limited by time as to the claims they may review or the number of documents they may request "to identify cases of suspected fraud, develop them thoroughly and in a timely manner, and take immediate action to ensure that Medicare Trust Fund monies are not inappropriately paid out and that any mistaken payments are recouped." In carrying out their responsibilities, ZPICs do not conduct random audits. Instead ZPICs rely on data analysis to detect high frequency of certain services as compared with local and national patterns, trends of billing, or other information that may suggest the provider is an outlier. ZPIC audits may also be triggered by employee or beneficiary complaints to the Office of Inspector General hotline, fraud alerts, or information received from a MAC or other contractor and law enforcement agencies.

The World of Medicare Contractors

As the number of stand-alone health care providers continues to decrease, the number of corporate relationships between companies hired by CMS to ensure the integrity of the Medicare program and Medicare providers continues to increase. The result of this consolidation is the growing possibility that these relationships will not be detected or adequately addressed by CMS, with the result that complaints of wrongdoing against some providers will not be investigated as vigorously as complaints against other providers.

Palomar Medical Center v. Sebelius - Update

Tue, 11 Sep 2012 16:44:11 -0500

In a July 21, 2012 post I discussed the case of Palomar Medical Center v. Sebelius which raised the question of whether the "good cause" requirement set forth in 42 CFR § 405.986(a) governing a RACs reopening of a claim paid more than one year earlier could be challenged by a provider during the administrative appeal process or in federal court. The answer, at least in the Ninth Circuit, is no.

In a unanimous decision filed on September 11, 2012, the Ninth Circuit held that CMS correctly interpreted its regulations that preclude an appeal of a RAC's decision to reopen a paid claim, that the regulations were reasonable and that because the decision to reopen cannot be appealed, federal courts do not have jurisdiction to review a RAC's decision to reopen a paid claim. In sum, the Court rejected every argument advanced by Palomar.

In my July 24th post I discussed the decision in St. Francis Hospital v. Sebelius in which a District Court in the Eastern District of New York came to a contrary result. According to the Ninth Circuit, the different result in St. Francis Hospital is based on the Constitutional due process argument advanced by St. Francis but abandoned by Palomar at an earlier stage of the litigation.

Is the "GOOD CAUSE" Fight Over?

As I suggested in my earlier post, I think the argument that the regulations permit a provider to litigate the question of good cause is extremely weak and expect that other Courts that consider the issue will come to the same conclusion as the Ninth Circuit. At this point, I believe that any hope of raising this issue is dependent upon a finding that by denying a provider the right to litigate the good cause requirement, the regulations deny the provider due process, a question not considered or decided by the Ninth Circuit.

Does SECRETARY = MAC - Who Authorizes Statistical Sampling?

Wed, 05 Sep 2012 10:24:55 -0500

In 1991, in the case of Chaves County Home Health Service Inc. v. Sullivan, the Court of Appeals for the District of Columbia Circuit approved the use of statistical sampling and extrapolation by Medicare contractors, currently known as MACs or ZPICs, in conducting post payment reviews. Specifically, the Court held that the Secretary of HHS was authorized to employ statistical sampling and extrapolation as set forth in Health Care Financing Administration (HCFA, now known as CMS) Ruling 86-1 since the Medicare Act did not prohibit statistical sampling and such a procedure was consistent with the Secretary's duty to prevent overpayments. On January 8, 2001, in Transmittal B-01-01, CMS updated the procedures a contractor was to follow in employing statistical sampling and extrapolation during a post payment review. As in Ruling 86-1, the new procedures imposed no limitation on when the contractor could determine the amount of an overpayment in a universe of claims by extrapolation from an analysis of a sample of the claims in that universe.

In § 935 of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003, Congress added a new subsection (f)(3) to 42 U.S.C/ § 1395ddd. This subsection states:

Limitation on use of extrapolation A medicare contractor may not use extrapolation to determine overpayment amounts to be recovered by recoupment, offset, or otherwise unless the Secretary determines that-- (A) there is a sustained or high level of payment error; or (B) documented educational intervention has failed to correct the payment error. There shall be no administrative or judicial review under section 1395ff of this title, section 1395oo of this title, or otherwise, of determinations by the Secretary of sustained or high levels of payment errors under this paragraph.

The meaning of this section became the central issue in the case of Gentiva Healthcare Corp. v. Sebelius.

How to Receive the Most Interest Possible From CMS

Mon, 27 Aug 2012 14:16:14 -0500

One of the best "investments" available today is the current 10.5% rate of interest paid by CMS on money improperly held by its contractors. The rules on when CMS will pay interest and how appeals affect interest paid on amounts recouped are set forth in 42 C.F.R. § 405.378 and 42 C.F.R § 450.379.

Medicare pays and charges interest from the date of a "final determination," which is defined in §405.378(c) and generally is the date of the written advice of payment or demand for repayment. Interest starts to accrue 30 days after the notice date and is calculated in 30 day increments thereafter. This means if CMS pays or is repaid the full amount due within 30 days, there will be no interest. If CMS pays or is repaid on the 45th day, the interest due is that calculated as of the 30th day, not the 45th day.

The interest rate applied to the amount due is the higher of the rate fixed by the Secretary of the Treasury after taking into consideration private consumer rates of interest prevailing on the date of final determination or the current value of funds rate. This means that if, for example, the ALJ overturns a repayment demand that has been previously recouped or repaid, the interest rate applied to the amount repaid by CMS is the interest rate in effect on the date of the ALJ's decision, not the rate in effect on the date of the initial repayment demand. A list of the interest rates paid by CMS since February 2001 is here so you can verify that the MAC is using the correct rate in calculating the interest due.

Section 405.378(g) provides that in the event of partial payments made over time, the amount paid is first applied to the outstanding interest and then to the principal, the same method used by credit card companies when the bill is not paid in full.

How do Requests for Redetermination by a MAC and Reconsideration by a QIC Affect the Interest Paid?

Pursuant to 42 C.F.R. § 405.942(a), a provider may seek a redetermination of an initial repayment demand "[w]ithin 120 calendar days from the date a party receives the notice of the initial determination." However, if the amount claimed to be due has not been promptly repaid in full, § 405.379(d) permits a Medicare contractor to begin recouping the amount due from other amounts CMS owes the provider 41 days after the date of the initial repayment demand. Recoupment can be prevented or stopped, however, by a provider request for redetermination. If the provider is unsuccessful, 42 C.F.R. § 405.962(a) provides that a request for reconsideration to a QIC may "[b]e filed within 180 calendar days from the date the party receives the notice of the redetermination." If the request for reconsideration is filed within 60 days of the adverse redetermination notice, recoupment continues to be stayed pursuant to §455.379(e)(ii). If no request for reconsideration is filed within 60 days, recoupment may be resumed, but will be stopped again by filing a reconsideration request at any time during the 180 day period. Recoupment will resume if the decision of the QIC is unfavorable.

If the provider is successful at either the 1st or 2nd level appeal, it is entitled to interest on any money held by the Medicare contractor for more than 30 days, whether received by payment from the provider or by way of recoupment. However, §405.378(j) imposes an interest penalty on providers who do not immediately pay the amount demanded in full and are not successful until appealing to an ALJ or the Medicare Appeals Council.

Who are the Medicare Auditors?

Wed, 22 Aug 2012 10:05:26 -0500

CMS has entered into contracts with numerous auditing companies to review provider billing for various purposes. As time goes by, it is more and more likely that billings submitted by almost every Medicare provider will be subject to review by one or more of these audit contractors. Set forth below is a brief description of the auditing functions of the various CMS auditors.
Medicare Administrative Contractors

According to Chapter 3 of the Medicare Program Integrity Manual (PIM), in addition to their claims processing functions, Medicare Administrative Contractors (MACs) have the authority to review any claim prior to payment. MACs have the discretion to select target areas because of:

High volume of services;

High cost;

Dramatic change in frequency of use and/or

High risk problem-prone areas

What this means is that a MAC, unlike a RAC, does not have to obtain CMS' approval of what procedures it will subject to prepayment review. Also, there is currently no limitation, other than the MACs discretion, as to how many Additional Document Requests (ADR) a MAC may make.

If the MAC feels that a certain procedure is being miscoded or that there is no medical necessity for a procedure, it will conduct a prepayment review of each claim submitted for extended periods of time. This means the provider will be subject to ongoing requests for records and suffer a substantial negative impact to its current cash flow.

Recovery Audit Contractors

A demonstration Recovery Audit program was authorized by § 306 of the Medicare Prescription Drug, Improvement and Modernization Act of 2003 and conducted from March 2005 to March 2008, in six states, to determine if Recovery Auditors could effectively be used to identify improper payments for claims paid under Medicare Part A and Part B. The Tax Relief and Health Care Act of 2006 made the program permanent and expanded it to cover the entire country. To implement the program, CMS divided the country into four regional areas.

The RACs are responsible for identifying improper payments for:

Items or services that do not meet Medicare's coverage and medical necessity criteria.

Items that are incorrectly coded and

Services where the supporting documentation submitted does not support the ordered service.

Automated reviews conducted by the RACs typically focus on DME, physician and outpatient claims and do not require the production of additional records by the provider. Complex reviews, which do involve the production of additional medical records by the provider, involve coding issues, Diagnosis Related Group (DRG) validations and medical necessity reviews. CMS must approve the issue a RAC wants to review and has imposed limits on the number of medical records a RAC may request. Each RAC has established a website that lists, among other things, the claims that have been approved for audit.

CMS recently announced that a three year RAC pre-payment review demonstration project will begin on August 27, 2012. CMS conducted an Open Door Forum on August 9, 2012 to discuss the operation of this new program. The transcript of the Open Door Forum can be found here

What's Wrong with the RAC's Contingent Fees? - Part 2

Fri, 17 Aug 2012 07:22:34 -0500

In Part 1 of this post, I provided a brief history of the evolution of the Medicare and Medicaid RAC programs and highlighted provider concerns with the contingent fee part of the program. In this post, I will discuss why I believe that the contingent fee process developed by CMS does not comply with the Fifth Amendment to the United States Constitution and why, if this argument is presented in a proper case, there is a significant possibility that a Federal Court will issue an injunction stopping the program and order the return of the money paid to CMS in response to RAC demands.

The Fifth Amendment to the United States Constitution

Among other protections afforded by the Fifth Amendment to the United States Constitution is the guarantee that the Federal Government may not deprive any person of life, liberty, or property, without due process of law. A basic tenet of due process is conceptualized in the Latin phrase "nemo iudex in causa sua" which translates to "no one should be a judge in his own cause."

The United States Supreme Court has considered on a number of occasions the circumstances under which the receipt of money by a judge or other decision maker violates due process. It has held that a litigant's right to due process is violated when the mayor of a town receives a portion of the fines he imposes while acting as a judge. It has also held that a litigant's right to due process is violated where fines imposed by a mayor while acting as a judge represent a significant portion of his town's revenue, even though the mayor did not directly receive any part of the fine. In a recent decision, the Court held that due process required a justice of the West Virginia Supreme Court to not participate in an appeal involving a company in which the company and its CEO had contributed significant amounts of money to the justice's campaign for election to the court. This quotation from the Supreme Court's opinion in Tumey v. Ohio succinctly sums up why money perverts due process:

Every procedure which would offer a possible temptation to the average man as a judge to forget the burden of proof required to convict the defendant, or which might lead him not to hold the balance nice, clear, and true between the State and the accused denies the latter due process of law.
Why the Contingent Fee Arrangement between CMS and the RACs Violates Due Process
The structure of the program created by CMS gives to the RACs the sole and unreviewable authority to create, from a previously paid claim, a provider overpayment and the right to demand payment from the provider. It is through these actions, taken solely by the RACs, that the RACs create their income. If they want to make more money, they create more overpayments; if they want to make less, they find fewer overpayments. In my opinion, this direct link between the RAC's income and its decision as to whether a specific claim was improperly billed might lead them not to hold "the balance nice, clear, and true between the State [CMS] and the accused [provider]" as the Tumey Court noted and why the RAC program denies the latter due process of law.

What's Wrong with the RAC's Contingent Fees? - Part 1

Tue, 14 Aug 2012 12:05:00 -0500

To date, most of the discussion about the RACs has revolved around the merits of an individual claim and the repayment demand appeal process, including whether the RACs have to establish good cause at an ALJ hearing to justify the reopening of a claim more than 1 year old.

Part 1 of this post provides a brief history of the evolution of the Medicare and Medicaid RAC programs and highlights provider concerns with the contingent fee part of the program. In Part 2, I will discuss why I believe that the contingent fee process developed by CMS does not comply with the Fifth Amendment to the United States Constitution and why, if this argument is presented in a proper case, there is a significant possibility that a Federal Court will issue an injunction stopping the program and order the return of the money paid to CMS in response to RAC demands.

A brief history of RAC contingent fees.

In § 306(a) of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003, Congress directed CMS to conduct a project to demonstrate the use of recovery audit contractors in identifying underpayments and overpayments under Parts A and B of Medicare and to recoup overpayments. Congress further provided that payment may be made to the RACs on a contingent basis from amounts they recovered. In § 302 of the Tax Relief and Healthcare Act of 2006, 42 U.S.C. § 1395ddd(h), Congress made the recovery audit program permanent and directed it be expanded to all fifty (50) states by January 1, 2010. Congress also directed that the RACs be paid on a contingent basis out of funds recovered by the RACs from overpayments, and in such amounts as the Secretary specified for the identification of underpayments.

Are the Costs Incurred in Appealing a Repayment Demand Recoverable? - Part 2

Thu, 09 Aug 2012 09:41:03 -0500

Part 1 of this post provided information on the number of appeals being filed by providers from RAC repayment demands and, for those appeals already decided, the extraordinary success providers have had in getting RAC decisions overturned. In some cases, the Equal Access to Justice Act (EAJA) opens the door to the recovery of the fees and costs incurred by the provider in prosecuting the appeal if the provider prevailed in an "adversary adjudication" before an ALJ, and if the position of CMS was not "substantially justified."

What is an "adversary adjudication?" - Handron v. Secretary Department of Health and Human Services

In 2003, Dr. Handron, a psychologist, received a demand to repay $604,038 from a Medicare contractor because his documentation did not support the services billed. The amount to be repaid was extrapolated from a nurse's review of 2,500 of Dr. Handron's claims. Dr. Handron retained counsel and after losing his initial appeal, appealed to an ALJ. The ALJ determined that of the 2,500 claims reviewed by the nurse, Dr. Handron had been overpaid only $5,434.48 and that because the statistical sampling procedure used by the contractor was unreliable, the extrapolation was invalid. Although the ALJ requested that a representative of the contractor or CMS appear as a non-party participant at the hearing, none did so. However, again at the ALJ's request, CMS did provide the ALJ with documents related to the sampling procedure and extrapolation used by the contractor.

After prevailing on the vast majority of the claims in his appeal, Dr. Handron filed an application for fees and expenses under the EAJA. The ALJ, the Medicare Appeals Council and the District Court all denied Dr. Handron's claim based upon a HHS regulation found at 45 CFR § 13.3 that defines an "adversary adjudication" as one in which CMS is represented by counsel at the ALJ hearing. The Third Circuit disregarded the regulation and held that:

[C]ongress chose language that left open the possibility that the government's position could be represented in some other manner and by someone other than a lawyer. This indicates Congress's recognition that the position of the United States can be represented in many ways and its desire to grant judges some discretion in determining whether particular action "represents" the government's position. It does not suggest that the government's position can only be represented at a hearing if a government representative physically stands before the decision-maker... Accordingly, we have little doubt that some forms of written advocacy submitted to an ALJ can constitute a representation of the government's position, so as to make an agency proceeding an "adversary adjudication" for purposes of the EAJA.

Although Dr. Handron won the attorney battle, he lost the war when the Court held that something more than the provision by CMS of the claim files and documents explaining the statistical sampling methodology was required to make his ALJ proceeding an "adversary adjudication." The Court held that for an ALJ proceeding to be an adversary adjudication, the Government must engage in: