How to Protect your Business from Medicare Claims Audits

While competitive bidding might be the HME industry’s over arching concern, 2011 will most likely go down as “the Year of the Medicare Claims Audit.” CMS ramped up its “program integrity” budget and built up a vast reservoir of auditing resources, and now nothing standing between providers and an onslaught of pre- and post-payment review.

Approximately $3 billion was recovered last year due to fraud, so in the fiscal year of 2010, $311 million was invested for program integrity, which was a 50 percent increase from 2009’s outlay. Now, here in 2011, providers are feeling the effect in a major way. Claims dating back to October 2007 are being subject to recoupment, and providers facing pre-payment audit, could have 100 percent of their incoming claims reviewed before payment. The government estimates it will recover $10.4 billion this year. That math is hard to ignore for a government agency that has been bent on cutting costs any and every way possible, regardless of how it impacts homecare.

And it certainly is having a negative impact. CMS’s sudden and large expansion of its claims auditing represents a financial stranglehold for many providers, particularly small ones that cannot survive having so much funding held in limbo. With budgets already in disarray from so many other funding cuts, the audits represents the final nail in the coffin for some. And for those that can survive, the audits cover so many areas of claims that it is still difficult to determine and effective strategy for dealing with them.

Perhaps the best place to start dealing with audits is to understand the different types of audits. The three biggest audit problems facing the industry are RAC and CERT audits, which review past claims, and ZPIC audits, which review future claims. Let’s quickly examine each:

Recovery Audit Contractors (RAC) — These post-payment audits detect overpayments and underpayments. RAC audits randomly select claims and reviews result from data analysis; they can’t audit claims simply because they represent a high dollar amount. These audits can go back three years from the date the claim was made, stopping at Oct. 1, 2007. They combine what is called “automated” reviews conducted by software systems, and “complex” reviews, which are conducted by auditing staff. Current focus areas for the RACs are pharmacy supply and dispensing fees billed by a DME supplier; wheelchair bundling; and urological bundling.

Comprehensive Error Rate Testing (CERT) — These are post-payment audits conducted by the CERT contractor AdvanceMed, which randomly selected a sample of approximately 120,000 submitted claims, and request medical records from providers who submitted the claims. The claims and medical records are reviewed for compliance with Medicare coverage, coding and billing rules. Key areas of focus for the CERT audits are diabetic test strips, power mobility and oxygen.

Zone Program Integrity Contractors (ZPIC) — This is part of CMS’s Benefit Integrity Audits, and are pre-payment audits that identify and prevent fraud, waste, and abuse of incoming claims. These are aggressive audits that even result in the ZPIC auditors referring some cases to law enforcement agencies. The ZPICs also maintain a list of providers that require future monitoring based on past history. There are seven ZPIC zones covering all geographies served by Medicare, but so far two have been awarded to contractors: Zone 4, which covers Colorado, New Mexico, Oklahoma and Texas was awarded to Health Integrity; and Zone 7, which covers Florida, Puerto Rico and Virgin Islands, was awarded to SafeGuard Services.

Now that we know a bit about the audits, what are some ways providers can prepare for them?

Implement hard-and-fast documentation requirements. First and foremost, you must require the complete and correct medical documentation from all referral partners, and not process their claims without them. That can be a tough bullet to bite for providers, but it is absolutely necessary, especially when it comes to pre-payment audits. One slip up and the entire business could go on 100 percent pre-pay audit, which would be far worse than antagonizing a single referral partner.

Educate your referral partners. The key to avoiding soured referral partner relationships lies in educating your physicians. Create an in-service and other educational materials and proactively reach out to your partners to explain to them the Medicare requirements, as well as CMS’s ramped-up audit programs and make clear that it is in their patient’s best interest for them to provide the correct and complete documentation. And add that if the auditors ever start reviewing your partners’ claims, having that documentation on-hand will benefit them, as well.

Conduct internal audits. One sure fire way to ensure you collect all the correct paperwork and have squeaky clean claims is to ensure all elements are living up to the documentation requirements. Conducting regular audits of your own claims processing to detect and prevent problem areas is a great way to protect yourself from an audit.

Use document imaging. Document imaging and retrieval systems are critical assets for HME providers because they allow them to easily store and access any and all documentation related to a claim or a patient. While it might not necessarily prevent an audit, what it will do is cut down the time required to respond to and address an audit when it comes up.

Points to Remember:

  • CMS’s ramping up of pre- and post-payment audits poses a large, immediate to threat to HMEs.
  • Providers face multiple types of audits run by various contractors.
  • The best way to deal with audits is to implement writte-in-stone documentation requirements.
  • Educate your referral partners on why this requirement is necessary for not just your protection, but theirs.
  • Conduct internal audits to sharpen your documentation edge.
  • Use document imaging systems to help you rapidly respond to audit requires and minimize the payment delays.

Learn More:

  • HME Business hosted a detailed webinar in June 2011 from Kelly Riley, CRT, RCP, the director of the National Respiratory Network, on protecting respiratory claims from audits, which can be watched on demand for a limited time.

This article originally appeared in the July 2011 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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