Medicare Audits - Monday Morning Quarterbacks
East Tennessee Medical News – May 2008
by Diana L. Gustin
Can Medicare deny a claim after payment is made? Yes.
Post-payment review of Medicare claims and the resulting overpayments can cause extreme financial hardship for providers, practitioners and suppliers. Two different review programs have unique attributes. Both can result in overpayments followed by collection letters and high interest rates.
Health Insurance Portability and Accountability Act included a provision that established the Medicare Integrity Program which gives Medicare the authority to enter into contracts with "specialized entities" to combat fraud, waste, and abuse in the Medicare Program. These entities are called Program Safeguard Contractors. In May 1999, CMS awarded twelve Indefinite Delivery-Indefinite Quantity (IDIQ) contracts for the Program Safeguard Contractors (PSC). The PSCs use statistical sampling and extrapolation to identify overpayments.
The Recovery Audit Contractor (RAC) program started in March 2005 as a three year demonstration project in 3 states: California, Florida and New York. The demonstration project ended in March 2008, but it was so successful at identifying and recovering overpayments, the government decided to make it a permanent program. It will expand to all 50 states by 2010. The RACs are paid a percentage of the overpayment recovery (and also have some financial incentives to identify underpayments). RAC contingency fees halfway through the 3 year demonstration project were at $12 million. The payment of that percentage and other costs of the program still gave the government "a respectable return on investment of 373 percent." (CMS RAC Status Document FY 2006 – November 22, 2006)
Can Medicare demand repayment of claims that were not denied? Yes.
The Program Safeguard Contractors often rely upon Statistical Sampling and extrapolation of the sample results to create an overpayment. This approach allows the auditor to perform a minimal review that can yield maximum results. The use of statistical sampling and extrapolation by CMS’ program safeguard contractors (PSCs) often results in allegations that a Medicare provider has been astronomically overpaid. Statistical sampling and extrapolation of the sample results are used to establish an error rate. This error rate is then applied to the “universe” of claims made by a provider in a given time period.
In 1990, the use of statistical sampling and extrapolation to calculate an overpayment was challenged in the case of Chaves County Home Health Services, Inc. et al. v. Sullivan, U.S. District of Columbia, U.S. District Court for the District of Columbia, (Feb. 12, 1990) Civil No. 86-2691. The Court ruled that the Secretary of Health and Human Services had considerable discretion under the Medicare Act to use any reasonable means to recover overpayments, and given the fact that a case-by-case review of each individual claim was not feasible, the use of the statistical sampling method was reasonable. The case was appealed to the U.S. Court of Appeals for the District of Columbia Circuit. The Appeals Court upheld the decision, stating that because the plain language of the statute did not directly address the sampling issue, deference to the Secretary’s interpretation was required.
In light of the Chaves decision, physician and provider organizations began to lobby Congress to stop the use of the statistical sampling. Excessive overpayments threatened the viability of small practices. (Statistical Sample denials might result in a few thousand dollars in denied claims, but the extrapolated overpayment may be hundreds of thousands of dollars). The American Medical Association and the American College of Physicians urged reform, advocating the elimination of extrapolation of alleged overpayment amounts to other non-audited claims in first time assessments of an alleged overpayment to a physician.
As a result, a limitation on the use of extrapolation was signed into law on December 8, 2003, as part of the Medicare Prescription Drug, Improvement and Modernization Act of 2003, Public Law 108-273. (Title 42 U.S. Code Section 1395ddd.) Section 935 of this legislation limits the use of extrapolation, clearly prohibiting the practice unless the Secretary can show one of two requirements: (A) sustained or high level of payment error; or (B) that documented education given to the provider has failed to correct the payment error. If no education is given to the provider prior to the sample, extrapolation should only be permissible if the Secretary can show a sustained or high level of payment error. The question remains as to whether the sample itself can be used as evidence of a high level of payment error, or if the procedure must encompass a two-step process. The limitation on extrapolation will be most effective if the first sample is used to identify problems with education to correct the deficiencies. This would set the stage for a second sample where extrapolation would be permissible if the documented educational intervention failed to resolve the billing error(s). Legal interpretation of the limitation on the extrapolation is currently pending in several cases working their way through the administrative appeal process. The results could change the impact of the Chaves decision for those faced with post-payment audits based on statistical sampling and extrapolation.
How can the overpayment be contested? Appeal the claims, the sample and the extrapolation.
A demand for repayment will advise of the Administrative Appeal process. Revisions to the federal regulations added a new level of appeal (the Qualified Independent Contractor review) and changed the collection procedures whereby Medicare cannot collect during the first two levels of appeal. A new CMS transmittal on collection rules dated Feb. 2008 instructs Medicare Carriers not to withhold or attempt collection during the first two levels of appeal. The new regulations also created special Medicare Administrative Law Judges to hear these Appeals.
Disclaimer: The information contained herein is strictly informational; it is not to be construed as legal advice. |
