Observation Deck

A Big Year for Audit Contractors

Providers will interact with a variety of Medicare audit contractors in 2016.

It is an interesting time in the world of Medicare audits and contractors responsible for payment oversight and appeals. In 2015, we saw a decline in certain activity from the Recovery Audit Contractors (RACs) while seeing an incline in other activities from the Zone Program Integrity Contractors (ZPICs) and the Supplemental Medical Review Contractor (SMRC). The Affordable Care Act has expanded CMS’s authority to revoke the billing privileges of providers or suppliers that show a pattern of “improper billing.” What does “improper billing” mean? When you look at the high error rates identified by these seemingly endless array of contractors who also have a lot of skin in the game, it’s a scary thought to ponder. So who are these contractors with whom providers will contact in 2016?

Recovery Audit Contractors

Despite a hearing in 2013 and subsequent letter in 2014 regarding concern of the RAC program by the Senate Finance Committee, CMS seems to be pushing forward with an expansion of this program, albeit slowly. A significant reduction in activity occurred in 2015 mainly due to contracting issues and disputes which still remain unresolved. In the most recent updates, CMS confirmed essentially that it was starting over with the contracting process. Effective Nov. 13, 2015, all RACs could continue audit activities through July 31. The expanded program identified a number of enhancements, but looks like we’re back to square one.

While we don’t expect a significant increase in the RAC volume, we can expect an uptick in comparison to 2015. The real volume increase can be expected when CMS finished the contracting phase and makes a final award on the expanded program with enhancements around Aug. 1. Providers should avoid complacency as the claims they are submitting now are the ones the RACs will review.


ZPICs, which identify and prevent fraud, waste and abuse, have been increasingly active again. We’ve seen an increase in the number of large extrapolated overpayments and other aggressive actions, including payment suspensions, against providers and suppliers. In some instances, these actions are undertaken for issues where, in the past, one would not have expected such actions.

The volume and intensity of these audits also coincided with another reform in the program integrity workload. In June 2015, CMS released a notice to interested parties that it would be releasing a Request for Proposal (RFP) for Unified Program Integrity Contractors. The notice stated, “ … the UPIC will combine and integrate existing CMS program integrity functions carried out by multiple contractors and contracts into a single contractor to improve its capacity to swiftly anticipate and adapt to the ever changing and dynamic nature of those involved in health care fraud, waste, and abuse across the Medicare and Medicaid program integrity continuum.”

What does this mean to providers? It means we could see these existing contractors turn up the heat in order to prevent losing lucrative government contracts. So, the more overpayments they can identify, the better the cost-savings they can tout to CMS in their bid for a UPIC contract. Why identify an actual overpayment when you can extrapolate those results and identify a much larger overpayment? Essentially, these contractors are trying to show CMS a return on their already significant investment. That means a lot of claim denials and overpayments.

In addition, we see other actions for which the ZPICs are responsible for, such as payment suspensions, being considered and implemented for issues that previously might not have warranted them. A pattern of minor or technical billing errors can result in a provider or supplier being put on prepayment review, or facing a large extrapolated overpayment, or having payments suspended. In recent ZPIC correspondence to providers, contractors are using language citing their authority to revoke billing privileges when “CMS determines that the provider or supplier has a pattern or practice of submitting claims that fail to meet Medicare requirements.”

Supplemental Medical Review Contractor (SMRC)

The SMRC is exactly how it sounds: another government contract awarded to a company — in this case, Strategic Health Solutions — to supplement the work already being performed by current contractors. Regular medical review functions are the responsibility of the administrative contractors and fall under their scope of work. Strategic Health Solutions will supplement that work by performing national reviews as directed by CMS and OIG. While the goal of the program is to reduce the improper payment rates and increase efficiencies in the medical review program, it equates to more audits and more overpayments for providers. The SMRC has a long list of completed projects across the continuum of healthcare services and current projects include various types of durable medical equipment.

DME Medicare Administrative Contractors

The big news here is the recent announcement that NHIC in Jurisdiction A and NGS in Jurisdiction B did not win the rebid of their contracts. As a result, Noridian will take over Region A and CGS will take over Region B, essentially creating two Super DMACs. For providers, my biggest concern is staffing. Both contractors have indicated that they plan to staff a majority of the contracts from their current locations in Fargo and Nashville, respectively. At Medtrade Spring recently, the Project Manager for the new Jurisdiction B contractor was asked about experienced Jurisdiction C staff moving to the new contract and he said that their goal was to have each contract staffed with about 60 percent experienced staff. That means that 40 percent of the staff will not be as experienced, which could have a big impact on everything from claims processing to medical review audits.

Qualified Independent Contractors (QIC)

There are a couple of changes in the appeal process that could benefit suppliers and reducing the overall backlog on appeals. First, in October 2015, CMS limited the scope of the DME MAC in performing redeterminations and the QIC performing reconsiderations. Previously, these contractors could conduct a new independent review and identify issues that were not previously addressed. For example, if you got denied for a missing delivery ticket, you could appeal with a copy of your delivery ticket and then get denied for medical necessity. In addition, during Redetermination, some jurisdictions would identify other claims for the same beneficiaries for recoupment, which ended up causing additional appeals. Now, contractors must look solely at the claim, code, and issues in question at the previous level. This is a big adjustment, and providers should keep a keen look out. We have seen some cases where new issues were identified and the contractor had to reopen and process the appeals by solely addressing the initial denial reason.

Lastly, the QIC announced a pilot program being initiated at the Reconsideration process where they will initiate a discussion period on pending appeals for diabetic supplies and oxygen equipment. The QIC will contact a provider when it is eligible and offer the provider the opportunity to have a discussion regarding the appeal. It’s a throwback to the old hearing officer days. In addition to this, they will also go back and look at all unfavorable decisions for that PTAN since Jan. 1, 2013 and see if there is a way to reopen the claims and issue favorable decisions during this same discussion. This is a huge change and the first solution that really could have a huge impact on the reduction of pending appeals. The QIC is excited and wants to expand the project if successful. This can only help even more.

The bottom line is that 2016 will see many audit contractors reviewing claims, and the important thing for providers to remember is that regardless of the contractor, documentation is your only defense. Be proactive and prepared.

This article originally appeared in the April 2016 issue of HME Business.

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