When people in the home medical equipment industry talk about Medicare claims audits, they are really talking about two things: The first thing is the audit program itself, a massive, far-reaching agenda that the Centers for Medicare & Medicaid services ramped up in earnest back in 2009. And since that time, the program has grown almost exponentially into a massive challenge that has outpaced competitive bidding as the primary threat to the industry. The second thing is the fight to stop this out-of-control regulatory juggernaut from drowning the industry in a sea of audit documentation requests, recoupments and appeals.
As a result, providers find themselves living in a sort of dual reality when it comes to audits. On one hand, there is the regulatory reality, where providers must deal with the everyday reality of audits — they must reduce their exposure to audits as much as possible; ensure that referral sources are providing the right documentation; be able to respond promptly to auditor requests; and be in a position to appeal unfair recoupments. On the other hand, there is the legislative reality, where they must keep abreast of industry initiatives to reform CMS’s audit program and work to support those efforts with grassroots lobbying and industry advocacy.
In effect, providers are walking a tightrope between these two words where they deal with the day-to-day, while working on the long game of fixing a very broken program. And, somehow amidst all of this, providers must run their businesses and serve their patients and referral partners.
Rapidly Spiraling Out of Control
In order to understand how out-of-whack CMS’s audit program has become, let’s quickly review some history. Back around 2009 to 2010, CMS ramped up its “program integrity” budget by a considerable degree and unleashed a flood of RAC, CERT and ZPIC audits on providers.
That move initially took the industry by surprise, but once providers shook off the initial shock, they realized that audits weren’t going away, and that they would have to learn how to cope with audits. They learned key lessons such as how to educate their referral partners and work with them to ensure that claims have unimpeachable documentation, and how to promptly respond to auditor questions and requests. Fast learners that they are, HME businesses quickly put in place the tools and processes to help them survive under audits.
Providers also learned one more key lesson: that audit contractors were making poor and often arbitrary and incorrect recoupments. So, providers began appealing Medicare audits when it became clear that auditing contractors were trying to recoup claims based on technicalities and seemingly spurious grounds. In some cases, depending on the type of audit, providers were seeing as good as a 60 percent overturn rate when those appeals were elevated to the administrative law judge (ALJ) level.
However, as providers grew increasingly effective at responding to and appealing audits, CMS increased the scope of its program. Over the past three years, the agency’s radically revved up audits have resulted in appeals growing by 184 percent. Where CMS’s Office of Medicare Hearings and Appeals (OMHA) once received 1,250 appeals a week in January 2012, it received more than 15,000 appeals a week by November 2013. This resulted in a backlog of 357,000 audit appeals by mid 2014. As a result Nancy Griswold, OMHA’s chief judge delayed assigning an Administrative Law Judge to any new audit appeals for more than two years.
And what is OMHA’s backlog of assigning ALJs to audit appeals as this story goes to press? It is pushing the 1 million-appeal mark. That’s one million appeals that must be reviewed by a pool of roughly 75 judges.
This means a huge problem for the industry. Besides exceeding the statutory 90 days, the ALJ delay is more than just a delay; a recouped reimbursement does not just sit in limbo during the delay. Auditors and CMS continue to purse the provider for overpayments, or principle and interest via CMS’s Extended Repayment Schedule. And delinquency can involve the U.S. treasury.
The American Association for Homecare has been coordinating with OMHA to see if the office can determine ways to alleviate the backlog. OMHA issued a Request for Information (RFI) in 2014 looking for insights into how it can reduce the pace of mounting ALJ appeals (such as reducing the pace of technical denials that real the ALJ level), but so far there hasn’t been much movement from OMHA in that regard.
“There have been essentially no changes in the backlog at the ALJ level,” says Kim Brummett, vice president of regulatory affairs for the American Association for Homecare. “Since the RFI issued by OMHA and industry response, we have seen little activity. AAHomecare is in constant contact with OMHA to see what has developed post RFI response and have received little information. In addition, AAHomecare has had conversations with the Office of Enrollment and Appeals at CMS to continue discussions on ways we can alleviate the growing backlog at the ALJ level.”
Brummett and AAHomecare’s Regulatory Council have worked with CMS to pinpoint problems that could help reduce the volume of appeals at the ALJ level, but it requires reducing more problems up-front in the process. For example, reintroducing clinical inference in evaluating audits back into the process would be a key element in reducing that pace of appeals.
“There are no planned regulatory changes that we can see on the horizon specific to audits,” Brummett says. “We do need to monitor the RAC protest and award of the contract specific to DMEPOS and home health. In addition, AAH met recently with CMS officials responsible for RAC oversight and had some positive conversations on the operational components of the RAC and industry recommendations for improvement.”
Reforming the Program
This means the industry must continue reform efforts on the legislative front. “It is crazy at this point,” says Tom Ryan, president and CEO of AAHomecare. “… With really no relief in sight. It’s nice that you can now track your claim [see “News, Trends & Analysis,” page 12 for more information], but we’re still not where we need to be; we’re still not able to have a settlement; and it’s still a crisis. That resonates with providers; it’s a pocketbook issue, and all the more reason why we need a fairer audit process up front. We need to get things like clinical inference back in the process.”
So, what is the industry’s current game plan for reforming the audit program? Well, let’s first examine the industry’s recent efforts. During the last Congress, the industry worked to try to reform the audit program. Rep. Renee Ellmers (R-N.C.) and John Barrow (D-Ga.) introduced H.R. 5083, known as the Audit Improvement and Reform Act (aka, the AIR Act), into the House in order to address key problems with Medicare’s unchecked audit system.
Key provisions of legislation included:
- Providers would receive a score on their error rates. Suppliers with low errors rates would receive fewer audits.
- Providers with error rates of 15 percent or lower would only be subject to one random audit for the year they have a low error rate.
- Clinical inference and clinical judgment when evaluating audits would be restored in the audit process.
- Look-back periods would be limited to three years rather than five years for MACs and four years for RACs.
- MACs and RACs would provide quarterly training on avoiding frequent payment errors, including notice of all new audit procedures and education to avoid clerical errors. Funding for these programs would be derived from 25 percent of recoupments.
- It would require the reporting of error rates on audited claims after adjustment for those audited claims that have been overturned on appeal.
The bill did relatively well, picking up 45 co-sponsors, but lapsed with the 113th Congress, and Rep. Barrow was not reelected. This meant providers had to contend with a continued audit program and ALJ delay as work was done to launch something new into the 114th Congress.
AAHomecare continued to work with Rep. Ellmers and to identify a Democratic champion that could join the Congresswoman to introduce new legislation, in order to drive continued bi-partisan support for audit reform, according to Jay Witter, senior vice president of public policy for AAHomecare. That work is producing some very encouraging news.
“We recently have gotten agreement for a Democratic lead, which we are excited about,” Witter says. “Also, I’ve been in contact with Rep. Ellmers’ office on an almost daily basis, and there’s the ongoing SGR bill that might have some elements that are similar to Rep. Ellmers’ bill from last year.
“So I know Rep. Ellmers’ staff is working with Ways and Means to ensure there is no duplication, and that’s where we are,” he continues. “We’re hoping to have the legislation introduced by the end of [March]. … If they can get it in the SGR, that would be a victory, and they’re just working out some final details. But, Rep. Ellmers is very anxious to get the legislation introduced; I can attest to that.”
“We’re lined up with a Democratic co-sponsor, so it’s just a matter of getting the language cleared,” Ryan says. “So it’s going to happen, and this is not a ‘message bill;’ this is a bill that is meant to be passed into law, and every effort is going to go into that.
“And that’s when we’re really going to need the call to arms for the grass roots effort to get co-sponsors lined up,” he adds. “We need to have providers engaged.”
Key Audit Appeal Developments
The facts that the industry has audit reform language in SGR legislation, and that Rep. Ellmers and an as-yet-unnamed Democratic Congressional peer will introduce new legislation should be enough to give any audit-weary provider hope, but HME business owners and operators still must content with the rough reality of the here and now. That means staying on top of key audit trends. One of the first key things to keep in mind is that the ALJ appeal delay continues to veer into almost surreal territory.
“An interesting trend I’ve seen in that area … is that there are a few judges in particular that are dismissing a lot of cases for not adhering to some minute detail in federal regulation somewhere,” says Wayne van Halem President and Founder of the van Halem Group, now a division of the VGM Group Inc. “For example, we saw one where it was missing a fax number on a document, or you’re supposed to copy the patients on request, and if you don’t prove that you copied them — even if you have a copy of the letter, you can’t prove that they actually received it, they’re dismissing cases.”
“But they’re doing it two to three years after the request,” he continues. “So they’re holding suppliers accountable to minute details of federal regulations while blatantly violating those same regulations themselves. [Such as the fact that ALJs are supposed to render decisions within 90 days.]”
Another surprise that could turn into a trend is the overturning of favorable decisions by ALJs. CMS has a contractor called an Administrative Qualified Independent Contractor that reviews ALJ decision, and, at least in one case, they are electing to appeal decisions to the Medicare’s Appeals Council.
“We had that happen in one case and the MAC overturned the judge’s favorable decision,” van Halem explains. “Once that happens, our only option is to go to Federal District Court, which is essentially filing suit against the Secretary of Health and Human Services, which obviously is something that’s cost prohibitive for a company to undertake. I know that they have people that review decision, but it’s the first time I’ve seen that happen in our practice.”
Following the old adage that once is a fluke, twice is a coincidence and three times is a trend, that recent overturn can be filed under the “fluke” category for now, but van Halem says he’s keeping an eye out for other cases like it.
Two other key developments in the appeal process are new pilot programs OMHA has taken in an effort to reduce the ALJ backlog. One is called a Settlement Conference and the other is called Statistical Sampling.
Under a Settlement Conference, both sides come to the table and a facilitator tries to get them to come to an agreement. If they can agree, a settlement is reached. If not, the appeal goes back into the waiting line for a hearing with an ALJ. The option could be a good opportunity for a provider with a lot of appeals waiting to get resolved, according to van Halem. However, there are a number of requirements such as the type of claim, number of claims submitted, and when they were submitted, that limit the appeals that can benefit from a Settlement Conference.
Under Statistical Sampling, if a provider has a certain number of pending appeals for claims of certain types and for certain amounts, it can opt to have a sample those appeals reviewed and whatever amounts the judge determines to be in favor of the provider, that result would be projected across that set of pending appeals.
“The problem with [Statistical Sampling] is that if you get a judge that is really strict, then that is going to be extrapolated across the appeals,” van Halem explains. “So there is a risk associated with that.
“I don’t know anyone that has participated in these pilot programs, yet,” he adds.
Looking at audits themselves, a key development is that CMS is doing away with the Zone Program Integrity Contractor (ZPIC) and replacing it with a Unified Program Integrity Contractor (UPIC). The issue was that ZPICs were examining Medicare claims while Medicaid Program Integrity Contractors were reviewing Medicare claims. CMS sought to unify both under one contract.
Also van Halem says that he is seeing an increase in audits in the managed care arena, which is important, because many providers have perhaps treated managed care providers slightly different than other Medicare partners.
“But the reality is that the same policies apply,” he notes.
But perhaps the biggest “here and now” audit trend is that DME MACs have transitioned to pre-payment review, which van Halem says in his opinion is a better option than a post-payment review. (This type of pre-payment review is not to be confused with provider-specific pre-payment review, where a majority of claims from a documentation-challenged provider are put through the prepayment review process. The pre-payment reviews recently being implemented by the DME MACs are widespread, randomized reviews.)
“Claims will get denied, but at that point, unless it’s an item that is subject to the Affordable Care Act, [providers] have the opportunity to just start over — pick the equipment, have the patient prequalified, and just start over and get better documentation,” he explains. “That’s a whole lot more reasonable than trying to fight it through the appeal process.”