Oxygen Audit Outlook: TPE Audits

Audit expert Wayne van Halem explains why respiratory providers need to pay close attention to Medicare's new TPE audits.

In addition to implementing the right respiratory business models in 2018, oxygen providers also need to keep a close eye on the challenges they will face on a regulatory front. Two of those issues remain static: the 36-month rental cap and competitive bidding. Those issues won’t likely see much change over the next year, except in the case of possible bidding relief for rural providers.

But the big regulatory change oxygen providers can expect to see as 2018 unfolds is with audits. And there is a key audit program that respiratory providers must monitor.

“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.”

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, 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.”

This article originally appeared in the November 2017 issue of HME Business.

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