Problem Solvers

Oxygen Audits in the New Year

What can respiratory providers expect from a new audit program during 2018, as well as respiratory audits carrying over from last year?

Audits represent a constant frustration to oxygen providers, but this year might see some improvements on that front. Oxygen providers can expect a big change in 2018 with audits with a recently introduced audit program that they must monitor: TPE audits. The program offers both challenges and opportunities.

“The biggest thing is the new TPE audit strategy that CMS is implementing,” says Wayne van Halem, president and founder of audit consulting firm The van Halem Group, which is a division of the VGM Group Inc. “CMS announced it in August, and we are just now seeing clients getting the audit notices now.”

The TPE Program

TPE stands for Targeted Probe and Educate and it stems from an earlier Probe and Education program that went in effect in 2014, according to van Halem. It has been expanded to all suppliers, and it aims to identify providers who are billing for certain codes and have a higher error rates. Rather just doing widespread prepayment reviews of oxygen claims, TPE auditors will view targeted prepayment reviews.

“What will happen is, the provider is going to get a letter that says, ‘You have been chosen for a Targeted Produce and Educate audit,’ or something along those lines,” van Halem explains. “Then, over the period of the next couple of weeks or months, depending on how much the provider is billing, it will receive prepayment notices on anywhere between 20 and 40 claims, so it’ll just look like the normal prepaid notices that they’re getting.

“Except now these are a part of this new audit program,” he continues. “[Auditors] will audit on those 20 to 40 claims. And the contractor calculates, at the end, an error rate. If the error rate is under a certain amount, then they will simplify notify the provider, and the provider is essentially free to go about its business, and will very likely receive much fewer audits than they had in the past over the period of the next six, to 12 months.

But if the provider’s error rate is over a certain amount, then they have to go through a second round. The second round starts with an education session with the auditor, identifying the issues that they identified, and the auditor supplying some education on, from that. And then, the provider goes through another round of 20 to 40 audits.

“Again, they do the same thing: calculate an error rate, and under a certain amount, provider gets off, and if it’s over a certain amount, provider stays on,” van Halem explains. “And that goes through a third round. If, after the third round, the error rate is still not where they anticipate it being, then that provider gets referred to CMS.

From that point onward, the outcome varies, van Halem says. CMS’s responses could include extrapolated overpayment, or referral to a RAC, or a ZPIC, for additional auditing, which is much more intensive. And there’s a hidden consequence that van Halem warns about: CMS has the authority, granted via the Affordable Care Act, to revoke billing privileges of a provider or supplier who shows a pattern or practice of improperly billing claims.

Fortunately, while oxygen providers must learn to work within this new program, other audits aren’t as large a concern for them, so they can focus their attention on the TPE program.

“Based upon the process, TPE audits can either be really good for a provider, or really bad,” he says. “So if [providers] go through it, and they can get the error rate under a certain amount, they’ll very likely sort of receive a reprieve from audits, for a certain period of time, which would be great. But if they can’t get that error rate down, they could subject to extrapolated overpayments, an expanded audit, or even a revocation.”

Ongoing Audit Challenges

Of course, the new TPE program is one element of a spectrum of audits facing respiratory providers. There are also lingering audit challenges that will continue from 2017 — and last year saw a number of contractors focus on oxygen providers.

“The DME MACs were auditing oxygen, CPAP, and BiPAPs claims as part of their widespread prepayment review efforts,” van Halem says. “The Supplemental Medical Review Contractor, or SMRC, is just finalizing a project that included an audit of 106,000 respiratory claims including oxygen, PAP, nebulizers and inhalation medications. The national Recovery Audit Contractor also identified an automated review related to nebulizers billed without an appropriate diagnosis code as well as complex reviews of High Frequency Chest Wall Oscillation devices.”

“Some of these contractors focused efforts could be related to issues identified in the 2017 Office of Inspector General (OIG) Workplan,” he adds. “Specifically, the OIG noted a focus on nebulizer machines and the related drugs indicating that for calendar year 2014, Medicare paid approximately $632.8 million for inhalation drugs. With an improper payment rate of 42 percent, inhalation drugs were sixth on a list of the top 20 DMEPOS services with the highest improper payments in the 2014 CERT report.”

And that wasn’t the OIG found.

“They also identified PAP supplies as well based on volume, indicating that Medicare payments for CPAP and BiPAP supplies in 2014 and 2015 was approximately $953 million,” van Halem explains. “And prior OIG work found that suppliers auto-shipped supplies when refills were not requested by the beneficiary and also that the physician orders were incomplete in regards to the types of supplies needed and frequency of use.”

Bearing all this in mind, respiratory providers should be taking a number of steps to ensure their claims documentation is solid, and most of those activities are focused on how they deal with their referral partners. Providers must assume they will be the focal point of oversight.

“It all comes down to communication and education with the referral sources,” van Halem says. “Unfortunately, CMS puts that burden onto the supplier and most physicians don’t know the documentation requirements. There should be some sort of internal QA or prior approval process.

“These days, it is not enough to just request documentation — you should also review it and determine whether the patient qualifies,” he continues. “Many suppliers are now being forced to turn away patients and transfer liability to them because they can’t get the documentation that they need to substantiate reimbursement.”

This article originally appeared in the January 2018 issue of HME Business.

About the Author

David Kopf is the Publisher and Executive Editor of HME Business and DME Pharmacy magazines. Follow him on LinkedIn at and on Twitter at @postacutenews.

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