Medicare Administrative Contractors (MACs) are Flexing Their Muscles in Connection with Recent CERT Audit Findings

(November 23, 2011):

I.             What is a CERT Audit?

The “Comprehensive Error Rate Testing” (CERT) program was created as a tool for the Centers for Medicare and Medicaid Services (CMS) to assess whether  Medicare Administrative Contractors (MACs) are paying claims properly. Essentially, the CERT program serves as an integral management tool for CMS as well as an important feedback mechanism for the MACs. When problem areas are identified, they can be addressed by Medicare contractors with audit responsibilities.  Notably, several of the MACs around the country have been aggressively reasserting their program integrity roles.

Essentially, MACs write reimbursement checks on behalf of CMS.  As a result, they play a central role in the Medicare reimbursement process. Therefore, when a CERT auditor finds that a MAC has been incorrectly reimbursing providers for claims which may not qualify for coverage, it is very important that the MAC immediately address this system-wide deficiency.

II.            Recent Actions Taken by MACs in Response to CERT Audit Findings.

In response to certain CERT audit findings, one MAC recently sent notification to providers of Evaluation and Management (E/M) services explaining that new “stringent corrective actions” will be taken to address some of the more common claims errors identified by the CERT auditors when conducting their reviews of MAC payment practices.  As recent correspondence to a provider reflects, MACs are taking the results of CERT audits quite seriously, and are expanding their program integrity efforts.  As one MAC recently wrote, the contractor stands ready to:

• Suspend a provider if that provider has “too many” payment errors (it does not state how many is “too many”);
• “[R]efer every physician” to that region’s ZPIC if those providers continue to bill for services which may constitute payment errors;
• “[R]efer every physician” to the ZPIC if there is a pattern of past payment errors; and,
• “[C]onduct prepayment reviews” of future claims, up to 100% of a provider’s claims.

To be clear, none of these potential corrective actions represent new authorities.  Nevertheless, the fact that MACs are now reasserting these points is reflective of CMS’ ongoing concerns regarding the prevalence of improper claims.  Indirectly, CMS is making it crystal clear that as the initial recipient and screener of Medicare claims submitted by providers for payment, MACs play an essential role in screening out improper claims and bad providers.  As Medicare’s primary gatekeepers, MACs are responsible for identifying both improper claims and providers who may be engaged in abusive and / or fraudulent practices.

III.           What Should You Do if You Are Notified of a CERT Audit?

Should you receive a CERT audit request for documents from a CERT Documentation Contractor (CDC), it is important to keep in mind that your practice or clinic is not being accused of fraud or wrongdoing.  Fundamentally, a CERT audit is primarily designed to identify deficiencies and mistakes made by Medicare contractors.  Nevertheless, it is imperative that you take a CERT audit request quite seriously.  At the end of the day, it will be you, not the MAC, who is responsible for any overpayments identified as a result of the audit. Moreover, bad results on a CERT audit may lead to further auditing in the future.

IV.          What Actions Should a Compliance Officer Take to Avoid Being Audited?

As an organization, if you are subjected to a CERT audit, the “horse is already out of the barn,” so to speak.  Your goal is to review and monitor your organization’s coding, billing and utilization practices on an ongoing basis so that improper claims are never submitted to your MAC in the first place.   In most cases, you can check your MAC’s website to determine if their CERT auditor has already identified certain areas of concern. For instance, one MAC recently reported that out of 508 errors identified in a CERT audit of certain Medicare claims, the contractor found that:

• 311 errors were due to “insufficient documentation.”  Notably, a majority of the errors in this category were because the medical record “did not contain a valid physician’s signature” or because a diagnostic test performed “did not contain a valid physician’s order” or an identification of the provider who rendered the service.
• 132 errors were due to “lack of medical necessity” based on the medical documentation submitted.
• 37 errors were due to “incorrect coding” (primarily related to laboratory testing).
• 10 errors were due to “invasive procedures that were assessed to be without medically necessity.”
• 9 errors were due to an “incorrect procedure code” used when billing the service.
• 6 errors were the result of “billing for services that were not rendered.”
• 2 errors were due to “other errors.”
• 1 error was due to an “incorrect discharge code being used.”

Compliance Officers can take these “general” risk areas, add them to the “practice-specific” risk areas already noted, and take special note of these concerns when conducting internal reviews. The only way to avoid the scrutiny of Medicare’s various administrative contractors (MACs, ZPICs, RACs and CERT auditors) is to avoid payment errors altogether.  While no provider is perfect, the development, implementation and adherence to an effective Compliance Plan can significantly reduce the number of improper claims submitted by a provider to a MAC for reimbursement.

V.            What Actions Should a Compliance Officer Take After Receiving a CERT Audit Letter?

As Compliance Officer, upon receipt of a CERT audit request, you should carefully review the request and take steps to assemble a complete set of medical records and other supporting documentation related to the specific claims at issue.  It is important not only to make sure that your documentation is complete when sending in records to a CERT contractor, but to make sure that compliance is a daily part of your practice. Ensuring that your documentation is appropriate and accurately documents both medical necessity and the level of services performed can greatly assist you in avoiding trouble down the road.

Now, more than ever, it is important that you have an effective Compliance Plan in place.  Your Compliance Plan should explicitly set out your organization’s policies about how to correctly assess the need for, and document the services provided to a Medicare beneficiary. Otherwise, as demonstrated by the tough stance being taken by the MAC discussed above, CERT audits and other Medicare post-payment audits could raise serious problems for your practice.

Liles Parker attorneys represent health care providers in CERT, MAC, ZPIC and RAC audits and investigations.  Our attorneys have extensive compliance experience and can conduct “gap” analyses designed to place your practice or clinic on solid regulatory footing.  To speak with one of our attorneys, call 1 (800) 475-1906 for a free consultation today.

Five Essential (Yet Fundamental) Medicare Compliance Concepts that Everyone Can Understand.

(July 15, 2011):  There are “rules of life” we have learned that can really bring certain essential Medicare compliance concepts into focus. While sometimes considered little more than a cliché, these helpful sayings and principles can be quite helpful when explaining fundamental compliance concepts to new staff or non-compliance personnel.  Five fundamental compliance concepts that everyone can understand include: 

(1)  “If it isn’t yours, give it back” 

Sound familiar? This is one of the first principles we are taught as children.  Nevertheless, it is as true today as it was then.  Medicare providers have a statutory obligation to promptly return any and all overpayments identified. In fact, with the passage of the Affordable Care Act (ACA) in 2010, it is now a requirement that providers return Medicare overpayments to the government within 60 days of identification or face significant liability under the False Claims Act.    

While the prompt, mandatory return of a known overpayment is clearly required, we were recently asked about a provider’s obligations when it comes to less clear, potential overpayments.  For example, suppose that a provider identifies a specific claim that was improperly submitted and paid by Medicare.  When reviewing how the overpayment occurred, the provider also learns that a former employee mistakenly believed that a certain service was covered by Medicare.  While the provider may only have evidence that a single claim was improperly submitted and paid by Medicare, the provider may suspect that the former employee may have incorrectly handled similar claims.  The issue therefore becomes whether a provider has an obligation to further investigate and determine whether other, unconfirmed overpayments may exist.  In considering this issue, we believe that the general principle still applies, regardless of the fact that the mandatory return provisions set out under the ACA may not cover this situation.  Remain unconvinced?  In addition to being the ethical and right action to take, it is important to keep in mind that even if the 60-day repayment provisions of the ACA may not technically apply, a provider who turns a blind eye to possible overpayments is exposing the practice to a potential whistleblower suit under the False Claims Act by a current or former employee. Do you know of a potential overpayment?  More than likely, someone else in your practice is also aware of the problem. The bottom line is simple — “If it isn’t yours, give it back” 

(2)  “Participation in the Medicare program is a privilege, not a right.”

 Remember taking driver’s education in high school?  After 30 years I still remember my driver’s education teacher repeatedly reminding us that we did not have a right to have a driver’s license.  Rather, it was a privilege to be permitted to drive – a privilege that could be taken away by the State as quickly as it was granted if we failed to follow the laws of the State and the rules of the road.  Frankly, Medicare is no different.  Health care providers do not have a right to participate in the Medicare program.  It is a privilege that must be earned.  Should a provider fail to adhere to Medicare’s coverage, coding and billing requirements, this privilege can be taken away.  With this in mind, providers must actively work to better ensure that they fully comply with Medicare’s coding and billing requirements. Should they not fully understand one of more of the program’s guidelines, it is the provider’s responsibility to learn Medicare’s rules and ensure that the provider’s business practices fully comply with the program’s provisions. 

(3)  “If it sounds too good to be true, it probably is.”  

Physicians, small group practices and clinics should exercise caution when dealing with ‘consultants’ or ‘experts’ who boast of guaranteed increases in revenues or profits.  Unfortunately, many providers are having to deal with ongoing, steady declines in both Federal and private payor reimbursement rates.  In the current weak economy, unemployment rates have remained high and many patients are having a difficult time meeting their financial obligations (including monies owed to their health care provider).  In this environment, the promises and assertions of unscrupulous  individuals and companies who claim to know of “innovative” business models or ways to modify a provider’s coding / billing practices which will significantly increase a practice’s revenues can be tempting to a provider experiencing financial difficulties.  Have you been approached by someone with a “deal” which sounds too good to be true?  Be sure and check out HHS-OIG’s “Fraud Alert” titled “Special Advisory Bulletin: Practices of Business Consultants.”  While published a decade ago, the lessons and concerns discussed in the bulletin are as current today as they were a decade ago.  Check it out – and remember — the age old cliché “If it sounds too good to be true, it probably is,” is especially true when it comes to health care business opportunities. 

(4)  “Everyone does it, so it must be okay.”

 In years past, a number of drug companies and medical device companies played fast and loose with Medicare’s rules, showering physicians with lavish gifts, inviting them to attend paid vacations and entering into sham “advisory” or “consulting” agreements which paid the physicians regular stipends for little, if any, work.  Why did these companies engage in these practices?  In many instances, the companies wanted to influence the physicians’ decision-making when it came time to prescribe certain drug or order medical devices to be used in the care and treatment of their patients. These actions amounted to kickbacks – plain and simple.  Today, drug and medical device industry representatives have made great strides in educating their members and in eliminating these illegal practices.  At the height of these practices, many physicians appeared to take the position that since their peers accepted kickbacks, it must be okay.  Clearly, this mindset is just flat wrong.  Unfortunately, it isn’t limited to drug and medical device companies. Generally, physicians should exercise care before accepting any thing of value from a company or clinical practice with whom the physician works – especially when the physician either makes referrals to the company or recommends / prescribes items or devices sold by that company to their patients.  In considering this issue, it is often helpful to ask, “Where do I send my referrals?” and / or “Where do I send my patients for Medicare-covered medical items or supplies?” Additionally, ask yourself, “From whom do I receive business or referrals?” Once answered, these business relationships should be carefully reviewed to ensure that there are no transactions that could give even the appearance of being improper. A typical example which repeatedly arises involves the use of “Medical Director” agreements where a physician is paid a monthly stipend which exceeds the fair market value of any services which are provided under the agreement.     

(5)  “Neatness and accuracy count.”   

Our Firm represents a wide variety of health care providers when responding to post-payment claims audits conducted by ZPICs and other Medicare contractors. Over the last two years, we have noted a significant increase in the number of claims being denied because medical documentation is either illegible or incomplete. From a compliance standpoint, these problems are among the easiest for a provider to remedy on a going-forward basis. 

Handwritten Portions of a Medical Record Must be Legible –   When assessing claims denial reasons cited by ZPICs, our attorneys, paralegals and other personnel are often required to go through medical records as we assemble responsive arguments in support of payment.  More often than not, we don’t have any problem deciphering the records cited by the ZPIC as being “illegible.”  Having said that, ZPICs and other contractors have an enormous audit caseload, making it difficult to spend an inordinate amount of time trying to make sense out of poorly written passages.  As a result, if their reviewers cannot readily read a passage, they merely deny the claim and move on.

The lesson to be learned is clear – physicians, nurses, therapists, counselors and others must ensure that any handwritten comments, signatures, dates or other information entered into a medical record can easily be read by an outside third party who is not experienced in reading the handwriting of your staff.  It is important ot keep in mind that if there is an audit or review of this information by a ZPIC or another government contractor, it is likely to be several years in the future. During that period, the writer may no longer be with the practice and it may be difficult (if not impossible) to easily locate the writer for assistance in deciphering handwritten passages.  From a compliance standpoint, regular self-audits can prove quite helpful in identifying possible problems.

If you are conducting a self-audit and find that words or passages are illegible or incorrect, you should consider taking the following remedial steps:

Advise your staff of the problem and follow-up to ensure that future entries are legible and accurate – Physicians, nurses and staff should be educated regarding the importance of ensuring that their handwriting is easily legible and the information they are providing is accurate. In most instances, once this is identified as an issue, most staff are willing to work with you so that future problems do not arise.  We recommend that regular follow-ups are conducted to ensure that problematic handwriting does not again deteriorate to where it is again illegible.

Correcting illegible or erroneous words, phrases or passages – Should you find that certain portions of a patient’s record documenting prior services rendered are illegible, you cannot merely erase it or use white out to hide the original handwritten section  before re-writing the passage so that it is legible. We recommend that you contact your Compliance Officer or legal counsel before making any changes to a medical record (regardless of whether the record is handwritten or electronic).  Legal counsel can guide you on the correct way to make changes or corrections to a medical record which documents services previously rendered. If a change or correction to a word or passage is necessary, you should not erase, white-out, scratch out or use a marker to conceal the original remark.  Instead, we usually recommend that a single line through the incorrect or illegible phrase or passage is made. If you are audited, an outside reviewer will be able to readily see the original passage. Next, the corrected entry should be carefully written next to or above the original entry. It should then be signed and dated by the individual making the correction.  In this fashion, an outside reviewer will not be misled in any way about what was originally written, when the corrected entry was made and / or the identity of the person making the change to the record.

As set out in Chapter 3, Section 3.3.2 of the Medicare Benefit Policy Manual, the Centers for Medicare and Medicaid Services (CMS), when conducting a “Medical Review,” CMS advises ZPICs to consider the following:

“3.3.2 – Medical Review Guidance

For example, ZPIC staff looks for some of the following situations when reviewing documentation:

 • Possible falsification or other evidence of alterations including, but not limited to: obliterated sections; missing pages, inserted pages, white out; and excessive late entries;

 • Evidence that the service billed for was actually provided; or,

 • Patterns and trends that may indicate potential fraud.” (emphasis added).

 As a participating provider in the Medicare program, it is essential that you ensure that the care and treatment you provide is factual, accurate and recorded in a legible fashion.  

To that end, one Medicare Administrative Contractor (TrailBlazer Health Enterprises) has suggested that when reviewing medical documentation, providers should check to ensure that: 

• Records are legible; reasonable clinicians will easily recognize that all abbreviations and symptoms
• The patient’s name and the date of service appears on every page of the record (including the back side of double-sided forms).
• The medical record clearly indicates the identity and professional credentials of all people who contributed to the service and / or the record, and who contributed which portion(s) of the service and or record.
• Information in the record clearly supports all diagnoses reported on the claim.
• Information in the record clearly demonstrates that all of the work described by the code(s) and / or modifier(s) reported on the claim was performed.
• All procedures reported are clearly documented.
• Education and Management (E/M) services reported on the same day as a procedure are clearly documented, medically necessary, significant and separate from the procedure.
• The record of services performed “incident to” a physician service demonstrates the link between the employee’s work and physician’s service.
• The record of services split / shared by a physician and non-physician practitioner demonstrates the face-to-face encounter and contribution to patient management by each practitioner involved.

Ultimately, providers who diligently work to achieve these points will have made significant strides towards a compliant culture in their  practice or clinic.

Liles Parker attorneys have extensive experience assisting providers in establishing an effective Compliance Plan.  Should you have questions regarding compliance or how to instill a compliant culture in your clinic or practice, please give us a call.  Give us a call for an initial complimentary consultation at:  1 (800) 475-1906. 

Report by HHS-OIG Likely Precedes an Increase in ZPIC Audits of Skilled Nursing Facilities — Providers Should Prepare to be Audited and Compliance Officers are Well Advised to Review their Practices and Take Corrective Steps, as Appropriate

(April 1, 2011):

Background:

            The Prospective Payment System (PPS) under which Skilled Nursing Facilities (SNFs) are reimbursed by Medicare has long been criticized by many concerned with “benefit integrity” and curbing waste, fraud, and abuse in the Medicare program. Critics argue that, because the SNF reimbursement rate is prospective in nature and largely commensurate with the extent of skilled services provided to a beneficiary, SNFs will be more likely to provide unnecessary or unreasonable services for beneficiaries, thus increasing their reimbursement rates. For example, simply increasing the number of minutes of therapy a beneficiary receives (or providing a second or third therapy modality) could upgrade the Resource Utilization Group (RUG) to which the patient has been assigned, thereby resulting in a substantially higher reimbursement rate for the provider. This concern has prompted increased scrutiny of SNF billing practices.

II.         Questionable Billing Practices by Skilled Nursing Facilities:

          The Office of the Inspector General of the Department of Health and Human Services (HHS-OIG) recently released a report entitled “Questionable Billing Practices by Skilled Nursing Facilities” (Report No. OEI-02-09-00202). The three chief objectives of this report were to:

 Ascertain the extent to which billing practices by Skilled Nursing Facilities (SNFs) changed between 2006 and 2008;

Determine the extent to which billing varied by type of SNF ownership in 2008; and

Identify SNFs that engaged in questionable billing practices in 2008.

             HHS-OIG analyzed all Part A SNF claim line items from 2006 and 2008, including the types of RUGs billed by SNF, beneficiary characteristics, and the average length of stay in the SNF for each beneficiary. OIG specifically focused on SNFs that billed frequently for higher paying RUGs (or “therapy RUGs”), namely those falling under the “Rehabilitation” or “Rehabilitation Plus Extensive Services” categories.  

            Based on the data it reviewed, OIG reached several conclusions regarding the billing practices of SNFs between 2006 and 2008, most notably:

The percentage of “Ultra High” therapy RUG placements (corresponding with the highest possible reimbursement rates) increased substantially between 2006 and 2008, while RUG assignment rates for all other categories decreased or remained static. This increase in “Ultra High” therapy RUG billing represented approximately $5 billion in additional Medicare payments to SNFs between 2006 and 2008.

For-profit SNFs were more likely than non-profit or government SNFs to bill for higher paying RUGs.

Three quarters of all SNFs had up to 39% placement rates in “Ultra High” therapy RUGs.

             HHS-OIG then outlined several recommendations based on its conclusions, one of which entailed increased oversight of SNFs that bill for higher paying RUGs:

CMS should instruct its contractors to monitor the SNFs billing for higher paying RUGs using the indictors discussed in this report. Specifically, the contractors should determine for each SNF: (1) the percentage of RUGs for ultra high therapy; (2) the percentage of RUGs with high ADL scores, and (3) the average length of stay. CMS should develop thresholds for each of these measures and instruct contractors to conduct additional reviews of SNFs that exceed them. If SNFs from a particular chain frequently exceed these thresholds, then additional reviews should be conducted of the other SNFs in that chain.

Contractors should use this information to target their efforts to more effectively identify and prevent inappropriate billing. Contractors could conduct medical reviews of a sample of claims from SNFs that exceed these thresholds. Contractors could use their findings to recover inappropriate payments, to place certain SNFs on prepayment review, and to initiate fraud investigations.

In response to this recommendation, the director of the Centers for Medicare and Medicaid Services (CMS) remarked,                              

The CMS concurs….We will use the results of this review to determine whether additional safeguards, including thresholds, shall be put in place by the Medicare Administrative Contractors (MACs) to target their efforts to identify and prevent inappropriate billing…CMS will share the OIG report and any additional claims information with the appropriate Medicare contractors to consider the issues identified in this report when prioritizing their medical review strategies and other interventions.

             The message to Medicare contractors is thus crystal clear: SNFs, especially those that have a significant placement rate for “Ultra High” therapy RUGs- should be increasingly targeted for audits. Meanwhile, OIG has shown no signs of relenting in its scrutiny of SNFs, noting in its 2011 Work Plan that:

We will review the extent to which payments to SNFs meet Medicare coverage requirements… We will conduct a medical review to determine whether claims were medically necessary, sufficiently documented, and coded correctly during calendar year (CY) 2009.

           Providers should ensure that their medical records and documentation satisfy applicable regulations and that they have an effective compliance plan in place to deter future audits. Otherwise, SNFs targeted for review could face the imposition of prepayment review status, payment bans, or civil monetary penalties (CMPs).

III.        Areas of Focus by Medicare Contractors:

             Based on the concerns raised by HHS-OIG, Zone Program Integrity Contractors (ZPICs), MACs, other Medicare contractors conducting audits of SNFs are likely to focus on the following issues:

Proper RUG Placement: SNF care must be provided at the appropriate level. This means that all services are necessary and reasonable and information entered on all Minimum Data Sets (MDS) for each beneficiary is complete and accurate. Contractors will closely scrutinize all RUG assignments, particularly those falling under the “Ultra High” therapy category.

Necessity and Reasonableness of Therapy Care: All therapy services must be consistent with the nature and severity of the beneficiary’s illness or injury. In many instances, contractors may question the therapy modalities provided to a beneficiary, the amount of therapy a beneficiary receives, or even the activities in which a beneficiary participates during therapy.

Provision of Skilled Care: All care provided by an SNF must be “skilled,” meaning that it can only be safely or effective provided by technical or professional personnel, such as nurses or therapists. Contractors will often conclude that skilled care is not supported by documentation that is vague, generic, or repetitive.

             Providers should review their medical documentation and related policies to ensure that, at a minimum, all of the elements and requirements discussed above are adequately addressed. There are also a number of additional steps providers can take to limit their liability in any future audits.

IV.        Recommendations for Providers:

1.           Tailor Each Care Plan to the Beneficiary’s Individual Needs: As discussed above, care provided by an SNF must be necessary and reasonable, meaning that it is consistent with the beneficiary’s illness or injury. This is essentially a principle of proportionality. Providers should ensure that all RUG classifications and care plans created for beneficiaries- especially therapy care plans- are tailored to the beneficiary’s individual needs and designed to address the beneficiary’s functional deficits. Contractors will be on the look out for RUG assignments or care plans that provide for overly extensive services or excessive treatment modalities.

2.          Maintain Detailed Medical Records: SNFs must provide beneficiaries with “skilled” care, so all documentation should be sufficiently detailed to reflect the technical or specialized knowledge of the SNF staff. SNFs should also amply document all activities related to management and evaluation of beneficiary care plans, observation and assessment of beneficiaries’ medical conditions, any beneficiary education services regarding self-care, or any therapeutic exercises conducted with the beneficiary.

3.          Ensure that the MDS is Consistent with the Beneficiary’s Clinical Record: The first document a contractor will scrutinize when it questions a RUG placement will be the MDS. Contractors will often argue that the information coded on the MDS is inconsistent with the clinical record. Providers should thus ensure that all data entered on every MDS is supported by the corresponding clinical record. A more robust record will make it much harder for a contractor to successfully challenge a RUG classification.

4.          Consult Qualified Counsel: The consequences of an audit can be financially devastating to a provider. In light of increased scrutiny from Medicare contractors and the overall complexity of the medical review process, providers should consult qualified counsel if they have concerns regarding the sufficiency of their medical documentation or a potential audit. Counsel can assist providers with designing and implementing a comprehensive compliance plan or, if necessary, effectively responding to an audit initiated by a Medicare contractor.  Liles Parker attorneys and staff have extensive experience handling both (a) administrative appeals of denied claims in post-payment audits by ZPICs and PSCs, and (b) working with therapy and other providers to devise effective compliance plans and provisions designed to assist these providers in meeting their statutory, regulatory and administrative obligations under the Medicare and Medicaid programs.

             In our opinion, Medicare contractors (including ZPICs, PSCs and RACs), acting at the direction of CMS and HSS-OIG, will continue to expand their audit efforts against SNFs, particularly those with a significant number of beneficiaries assigned to “Ultra High” therapy RUGs. Accordingly, SNFs should review the quality and sufficiency of their documentation and implement comprehensive compliance efforts to deter potential audits.  Therefore, it is imperative that affected providers immediately take steps to assess their current practices and take remedial steps to correct any deficiencies identified.

Liles Parker attorneys and staff have extensive experience representing Medicare providers in post-payment audits of therapy and related skilled claims by ZPICs and other contractors.  Should you have questions regarding this article or the defense of post-payment audits, please give us a call for complimentary consultation.  We can be reached at 1 (800) 475-1906. 

Have You Screened Your Employees Lately? HHS-OIG is Aggressively Targeting Health Care Providers That Employ Individuals Who Have Been Excluded from Participation in Federal Health Benefits Programs

(December 11, 2010):  Earlier this week, HHS-OIG announced that it had assessed significant civil monetary penalties against a health care provider that employed seven individuals who the provider “knew or should have known” had been excluded from  participation in Federal health care programs. These individuals were alleged to have  furnished items and services for which the provider was paid by Federal health care programs.

 The provider paid $376,432 to resolve these allegations.  As Lewis Morris, Chief Counsel to the Office of Inspector General stated:

“Providers self-disclosing such violations will ultimately pay lower settlement amounts. . . But in cases initiated by the government — such as this one — providers will, as a matter of course, be required to pay more to resolve the matter.’ 

As Mr. Morris further noted: 

“This case illustrates yet again that OIG will pursue CMPs when providers have employed an excluded person for the furnishing of items or services paid for by Federal health care programs,”

 Notably, this matter was referred to HHS-OIG for investigation by the State Medicaid Fraud Control Unit (MFCU).

 Lessons to be Learned:

 This case illustrates a number of important lessons for all health care providers who participate in Federal Health Benefits Program, regardless of size.  These lessons include:

Screening employees is easy and quick: It takes very little effort for a provider to screen current and prospective employees against HHS-OIG list of excluded parties and GSA’ s list of parties who have been debarred from participation in Federal contracts.  Notably, the failure to screen employees can be quite costly.

 No mention of actual fraud or overpayment was mentioned in this case.  Nevertheless, the employment of excluded individuals was found to be quite serious by HHS-OIG:   HHS-OIG won’t hesitate to pursue civil monetary penalties against a provider who employs excluded individuals, despite the fact that no mention is made of any wrongful billings.  Regular screenings of your employees should be made to ensure that none of your employees have been excluded from participation.

The government is serious about self-disclosing problems:   HHS-OIG’s Chief Counsel went out of his way to point out that provider’s who self-disclose will ultimately pay a lower amount of damages to the government.  While we recognize the government’s preference in this regard, should you identify a problem, you should contact legal counsel before making a self-disclosure.  HHS-OIG’s voluntary disclosure protocol has a number of requirements that should be fully assessed prior to deciding to make a disclosure under the program.  To be clear, if you owe money to the government, you must pay it back.  The issue to be resolved is how to go about returning any monies to which you are not entitled. Depending on the circumstances, a provider may be better off working with their Medicare Administrative Contractor to resolve a problem.   In other cases, HHS-OIG’s protocol may be the best option.  Every situation is different and should be carefully assessed before action is taken.

Federal and State law enforcement teams are coordinating their actions and findings:   Notably, these violations were first identified by a State MFCU who then contacted HHS-OIG.  Similarly, we are seeing State Medical Boards advising ZPICs of actions they are taking against licensed health care providers.  In several cases, the State Medical Board found that the provider was either not providing adequate supervision over subordinate Nurse Practitioners and Physician Assistants.  The ZPIC has then used this as a basis to argue that the claims did not qualify for Medicare coverage.   

In summary, health care providers should continually be reviewing their compliance efforts to ensure that basic mistakes such as the ones in this case (failure to properly screen employees) do not occur.    

Liles Parker attorneys represent health care providers around the country in connection with compliance and other health law issues.  Should you have questions about a health law issue, feel free to call us for a free consultation.   We can be reached at 1 (800) 475-1906.      

As Noted at the Los Angeles DOJ/HHS Health Care Fraud Summit — Data Mining is Being Used by DOJ to Target Health Care Providers

(August 31, 2010): 

Introduction: Last week, department heads of the U.S. Department of Justice (DOJ) and the Department of Health and Human Services (HHS), met in Los Angeles, CA and conducted the second of a planned series of “Regional Health Care Fraud Prevention Summits.”  Following-up on a similar conference held in Miami, DOJ Attorney General Eric Holder HHS Secretary Kathleen Sebelius discussed a number of ongoing concerns and remedial steps that are being taken to identify, investigate and prosecute instances of Medicare fraud.  In addition to these agency heads, participants learned of current and additional planned fraud enforcement initiatives from Federal and State law enforcement officials.

 Issues Discussed at the Summit:

 As Attorney General Holder discussed, the administration’s current enforcement actions were having a significant impact on health care fraud.  In fact, additional funding has been allocated to expand the HEAT program to additional cities:

 “. . . Last year brought an historic step forward in this fight.   In May 2009, the Departments of Justice and Health and Human Services launched the Health Care Fraud Prevention and Enforcement Action Team, or “HEAT.”   Through HEAT, we’ve fostered unprecedented collaboration between our agencies and our law enforcement partners.   We’ve ensured that the fight against criminal and civil health care fraud is a Cabinet-level priority.   And we’ve strengthened our capacity to fight health care fraud through the enhanced use of our joint Medicare Strike Forces.    

 This approach is working.   In fact, HEAT’s impact has been recognized by President Obama, whose FY2011 budget request includes an additional $60 million to expand our network of Strike Forces to additional cities.   With these new resources, and our continued commitment to collaboration, I have no doubt we’ll be able to extend HEAT’s record of achievement.   And this record is extraordinary.

 In just the last fiscal year, we’ve won or negotiated more than $1.6 billion in judgments and settlements, returned more than $2.5 billion to the Medicare Trust Fund, opened thousands of new criminal and civil health care fraud investigations, reached an all-time high in the number of health care fraud defendants charged, and stopped numerous large-scale fraud schemes in their tracks.

 We can all be encouraged, in particular, by what’s been accomplished in L.A.   Criminals we’ve brought to justice here – in the last year alone – include the owners of the City of Angels Hospital, who   pleaded guilty to paying illegal kickbacks to homeless shelters as part of a scheme to defraud Medicare and Medi-Cal; a physician in Torrance who defrauded insurance companies by misrepresenting cosmetic procedures as “medically necessary”; an Orange County oncologist who pleaded guilty to fraudulently billing Medicare and other health insurance companies up to $1 million for cancer medications that weren’t provided; a Santa Ana doctor who pleaded guilty to health care fraud for giving AIDS and HIV patients diluted medications; and a ring of criminals who defrauded Medi-Cal out of more than $4.5 million by using unlicensed individuals to provide in-home care to scores of disabled patients, many of them children.“ (emphasis added).

 As HHS Secretary Sebelius further noted:

“In March, we gave him some help when Congress passed and the president signed the Affordable Care Act — one of the strongest health care anti-fraud bills in American history. Under the new law we’ve begun to strengthen the screenings for health care providers who want to participate in Medicaid or Medicare.  And I am proud to announce that CMS is issuing a final rule strengthening enrollment standards for suppliers of durable medical equipment, prosthetics, orthotics, and supplies (DMEPOS).

This rule and others coming soon mean that only appropriately qualified suppliers will be enrolled in the program. The days when you could just hang a shingle over a desk and start submitting claims are over. No more power-driven wheelchairs for marathon runners.  Under the new law, we’re also making it easier for law enforcement officials to see health care claims data from around the country in one place, combining all Medicare-paid claims into a single, searchable database. And we’re getting smarter about analyzing those claims in real time to flag potential scams.  It is what credit card companies have been doing for decades:  If 10 flat screen TV’s are suddenly charged to my card in one day, they know something’s not quite right. So they put a hold on payment and call me right away. 

We should be able to take the same approach when one provider submits ten times as many claims for oxygen equipment as a similar operation just down the road.  It’s about spotting fraud early before it escalates and the cost grows.  As we step up our efforts to stamp out fraud, we’re holding ourselves accountable. The President has made a commitment to cut improper Medicare payments in half by 2012.”

While DOJ Attorney General Holder’s and HHS Secretary Sebelius’ presentations provided an overview of law enforcement’s current and future efforts, the comments of DOJ Assistant Attorney General for the Criminal Division, Lanny A. Breuer, were especially enlightening in terms of how providers are being identified and targeted for investigation.   As Mr. Breuer discussed:

“In 2007, the Criminal Division of the Justice Department refocused our approach to investigating and prosecuting health care fraud cases. Our investigative approach is now data driven: put simply, our analysts and agents review Medicare billing data from across the country; identify patterns of unusual billing conduct; and then deploy our “Strike Force” teams of investigators and prosecutors to those hotspots to investigate, make arrests, and prosecute. And as criminals become more creative and sophisticated, we intend to use our most aggressive investigative techniques to be right at their heels. Whenever possible, we actively use undercover operations, court-authorized wiretaps and room bugs, and confidential informants to stop these schemes in their tracks.” (emphasis added).

 As Mr. Breuer’s comments further confirm, health care providers are being identified based on their billing patterns.  Through the use of data-mining, providers who coding and billing practices identify them as “outliers,” are finding themselves subjected to  administrative, civil and even criminal investigation. 

 Commentary:

 As counsel for a wide variety of health care providers around the country, we are especially concerned that honest, hard-working health care providers are finding themselves and their practices / clinics under investigation merely because:  (1) their productivity is higher than that of their peers, or (2) their focus is specialized and often treats a higher percentage of seriously sick patients which ultimately requires a more detailed or comprehensive examination than one might normally find.  Ultimately, through our representation of health care providers who have been targeted through data-mining, we believe that it is fundamentally unfair to investigate a provider merely on the basis of statistical data which can be manipulated in a thousand different ways in order to justify going after a specific provider or a type of practice.

 On the administrative side, when data-mining is used as a targeting tool, providers are being audited and pursued by ZPICs, PSCs and RACs – each of is incentivized (either because they receive a percentage of any overpayment OR they are under contract with CMS to find overpayments and wrongful billings) to find fault with the provider.

 Continuing Concerns:

 Under the current system, providers targeted through data-mining are likely to be saddled with extrapolated damages which can easily run into the millions of dollars, regardless of the fact that a large percentage of these providers are eventually exonerated (either fully or partially) when the case is heard by an Administrative Law Judge. 

 Health care providers subjected to an administrative audit (by a ZPIC, PSC or RAC), civil investigation (such as a review by the DOJ for possible False Claims Act liability), or criminal investigation (by DOJ or a State Medicaid Fraud Control Unit) should immediately contact your counsel.  Extreme care should be taken when making statements to Federal or State investigators.  Should the provider make a statement that is false or misleading, such comments could be used as the basis for bringing a separate cause of action.  Your legal counsel may choose to handle all contacts with the government.

Liles Parker attorneys represent health care providers in administrative, civil and criminal health care fraud and overpayment case.  Should you have questions regarding these issues, give us a call.  You may call 1 (800) 475-1906 for a free consultation.

With ZPICs and PSCs Fighting Most, If Not All, Extrapolation Challenges, Experienced Counsel Is Imperative if You Hope to Have the Extrapolation Invalidated

(July 20, 2010): In recent years, we have seen agents for the Centers for Medicare & Medicaid Services (CMS) increasingly rely on statistical extrapolation estimates when assessing claims overpayments. In early cases, we successfully invalidated countless extrapolations by identifying relatively basic reasons for why the calculations were inconsistent with accepted statistical principles and practices.  Now, however, providers should expect for ZPICs and PSCs (and soon, RACs) to send a team of statisticians and attorneys to vigorously oppose most (if not all) hearings challenging the validity of the extrapolation calculation.

Regardless of whether you are providing Partial Hospitalization, Evaluation and Management (E/M), Home Health, Physical Therapy, Surgical, or other services, should your practice or clinic find that it is facing an extrapolated Medicare audit, it is strongly recommended that you engage qualified, experienced counsel to represent you as early in the process as possible.  Your legal counsel can then engage an expert statistician to assess the contractor’s actions and assist with the attorney’s efforts to have the extrapolation thrown out by either the Qualified Independent Contractor (QIC) or the Administrative Law Judge hearing your case. 

Before you engage counsel, you should consider asking the following questions:

• Has the attorney ever handled large, complex contractor audits before? Some firms will happily take your case, despite the fact that they have little or no experience in this area of health law. Don’t pay for your attorneys to learn how to handle a case. While every case is different, an experienced firm will have developed a number of arguments and defenses that may be readily used in your case without having to conduct costly, extensive legal research.
• Can the firm provide client references who are willing to speak with you about the quality of work performed on their Medicare statistical extrapolation case?
• Who will be working on your case? Will it be an inexperienced Associate attorney or one of the partners who has actually fought and won a multitude of Medicare overpayment claims and cases where the damages have been extrapolated by the contractors?
• What are the credentials of the attorneys and paralegals who will be working on your case? Have they ever worked on the side of the government? One of our attorneys served as an Assistant U.S. Attorney for many years, ultimately being selected to serve as the First National Health Care Fraud Coordinator for the Department of Justice, Executive Office for U. S. Attorneys. In addition to a law degree, he also holds a Master’s in Health Care Administration. To fully appreciate the challenges faced by health care providers, you need an attorney who understands both the legal constraints and the practical business risks faced by health care providers.

In several of the cases we have handled, the alleged error rate has exceeded 90%.  With the resulting alleged damages often in the millions of dollars, few providers are in a position to merely pay such an overpayment.  Instead, they need experienced counsel to aggressively fight to have this overpayment overturned.  When defending these cases, it is essential that you challenge both the denial of claims and the extrapolation itself.

Liles Parker attorneys have extensive experience defending health care providers in cases where ZPICs and PSCs have extrapolated damages.  Should you have any questions regarding these issues, don’t hesitate to contact us.  For a complementary consultation, you may call us at:  1 (800) 475-1906.

South Texas Medicare Providers Are Under the ZPIC Microscope

(July 16, 2010):  If there were ever any doubts that ZPICs are going to make their presence known in South Texas now that they have replaced PSCs, those doubts can be put to rest.  Health Integrity LLC, the Zone 4 contractor, is proving to be an active and aggressive auditor of physician practices, physical therapy services, home health care, and other types of Medicare covered treatment in the region.

Even in a nationwide environment of intensifying oversight, Medicare providers in South Texas are under particularly close scrutiny.  According to a study by the Dartmouth Institute for Health Policy & Clinical Practice, updated as recently as May 12, 2010, “even after price adjustment, Miami and McAllen Texas are the highest cost regions in the country.” (Emphasis added).  And don’t forget that ZPICs are essentially being “graded” based on the amount of overpayments recovered, along with the number of enforcement actions handled and referred to law enforcement.

As many Medicare providers in South Texas can attest, the folks at Health Integrity (Zone 4 – ZPIC) are becoming a familiar sight in their offices and clinics — reportedly conducting extensive on-site audits with little if any notice.  To their credit, most providers have reported that Health Integrity’s representatives have been reasonable in their requests when conducting an on-site review, typically taking a sample of certain records and asking that the remaining records be sent within a reasonable amount of time after the visit.  Nevertheless, providers should take care when responding to the ZPIC’s requests for information.  While a provider may have an obligation to cooperate with the ZPIC, you should contact your counsel to ensure that your rights are protected while still fully meeting your obligations as a Medicare participant.  

Moreover, we have found that ZPICs are increasingly placing home health providers (and others) on pre-payment review.  This can effectively delay a provider’s cash flow up to six months (and in some cases even longer).  Given the GAO’s recommendation last month that CMS put more emphasis on automated pre-payment review, we expect to see this trend continuing precipitously upward.

Home health providers and other South Texas providers should not wait until their claims are under the microscope.  If you have not already done so, we strongly recommend that you implement an effective Compliance Plan covering your company, practice or clinic.

Should you have any questions regarding these issues, don’t hesitate to contact us.  For a complementary consultation, you may call Robert W. Liles or one of our other attorneys at 1 (800) 475-1906.

Providers Should Exercise Caution When Handling Overpayments, More Than Likely You Can’t Keep It, Even if the Payor Doesn’t Want it Back!

(July 15, 2010):  Since the May 2009 passage of the Fraud Enforcement and Recovery Act (FERA) and subsequent enactment of the PPACA, we’ve heard a lot about how the government looks at Medicare overpayments and how providers should handle them.  Two major misconceptions seem to underlie the public response to provisions clarifying that failure to timely refund Medicare overpayments can result in False Claims Act (FCA) liability.

I.          Historical Overview of the “Overpayment” Issue

Prior to the clarification and statutory reinforcement of the “overpayment” issue provided by PPACA, a number of providers have mistakenly believed that in the absence of a direct demand for repayment, an identified overpayment would belong to the provider.  Notably, this issue is not new.  In fact, the recent enacted provisions have merely reinforced the government’s long-standing position that a provider has a responsibility to voluntarily refund Medicare overpayments without an overpayment determination being made by the government.

As you will recall, the agreement to return any overpayments is fundamental to a provider’s eligibility to participate in the Medicare program.  Section 1866(a)(1)(C) of the Social Security Act (42 U.S.C. § 1395cc) requires participating providers to furnish information about payments made to them and to refund any monies incorrectly paid.  Implemented in 2006, the Medicare Credit Balance Report (CMS-838) is designed to ensure timely compliance with this obligation.

Secondly, PPACA Section 6402 echoes the requirements of CMS’ 2002 proposed rule that providers “must, within 60 days of identifying or learning of the excess payment, return the overpayment to the appropriate intermediary and carrier, at the correct address, and notify the intermediary and carrier, in writing, of the reason for the overpayment.”  (67 Fed. Reg. 3662 (January 25, 2002)).  A conservative reading of that proposed rule arguably suggested that HHS-OIG’s voluntary disclosure protocol may not be “voluntary” after all but a mandatory repayment may be required.  Thus, the government has long sought to clarify when, not if, overpayment refunds would be required.

Despite the publicity resulting from PPACA and its FCA implications, it is important to remember that this issue was addressed over a decade ago.  As set out in the 1998 holding in United States v. Yale University School of Medicine, Civil Action No. 3:97CV02023 (D.Conn.), the government intervened in a qui tam and obtained $1.2 million settlement based on alleged FCA  violations for failing to return credit balances.  In summary, providers who fail to promptly (within 60 days of identification) return an overpayment to the government do so at their own peril.

II.         Handling Non-Federal Overpayments

As an aside, even if the overpayment at issue is not owed to a Federal payor (such as Medicare or Medicaid), it is imperative to remember that virtually no overpayments belong to a provider.  In the case of non-Federal payors (such as a private insurance company), we are aware of numerous instances where the non-Federal payor has notified the provider that due to the administrative burden of applying an overpayment to a beneficiary’s account (typically due to the complexity of the payment history), the non-Federal payor has chosen to either “waive” collection of an overpayment or not to cash a check sent by the provider.  This also regularly occurs when the identified overpayment is under a certain amount (such as $25.00).  When faced with such a situation, a provider must review applicable State law to ascertain how an overpayment must be handled.  For instance, in Texas, Title 6 of the Property Code requires businesses and other entities holding unclaimed property to turn the property over to the Texas Comptroller’s Office after the appropriate abandonment period has expired.  As in most States, violation of these escheat laws can subject a provider to various penalties.

III.        Conclusion

The lesson to be learned here is quite clear – regardless of who the payor is, an overpayment can rarely, if ever, properly be retained by a provider, regardless of the amount in controversy.  A provider must carefully examine both Federal and State statutes when faced with this issue.  The best practice is to return an overpayment to the payor (Federal, State, or private patient), regardless of the amount, upon identification.  Should a provider be unable to identify who is owed an overpayment or cannot locate a valid address to return the overpayment (due to a variety of factors), your State’s escheat law must be considered.

This can be a complicated issue, especially when a large overpayment has been identified and it is owed to a Federal payor.  While time is of the essence, it is strongly recommended that you contact your legal counsel as soon as it appears that a potential large or complicated Federal overpayment has been found.  Your attorney can help guide you through this complex process.

Should you have any questions regarding these issues, don’t hesitate to contact us.  For a complementary consultation, you may call Robert W. Liles or one of our other attorneys at 1 (800) 475-1906.

PPACA Creates a Minefield for Medicare Providers Who Fail to Promptly Return Medicare Overpayments

(July 9, 2010):  Does the failure to promptly return a Medicare overpayment warrant liability under the False Claims Act (FCA)?  Congress thinks so.  The Patient Protection and Affordable Care Act (PPACA) creates new obligations under the FCA whereby a Medicare provider who fails to timely report and refund an overpayment may be subject to substantial damages and penalties.

Section 6402 of the PPACA requires Medicare providers, including physicians and partial hospitalization providers, among others, to a) return and report any overpayment, and b) explain, in writing, the reason for the overpayment.

This law creates a minefield for physicians and other Medicare providers.  First, providers have only 60 days to comply with the reporting and refund requirement from the date on which the overpayment was identified or, if applicable, the date any corresponding cost report is due, whichever is later.  Of course, the PPACA does not actually explain what it means to “identify” an overpayment.

Nonetheless, the PPACA makes this reporting and repayment requirement an “obligation” under the FCA.  Pursuant to the Fraud Enforcement and Recovery Act of 2009 (FERA) amendments to the FCA, an individual or entity may be liable if he or it “knowingly conceals or knowingly and improperly avoids or decreases an obligation to pay or transmit money or property to the Government.”  Thus, providers who fail to meet their 60 day “obligation” may be subject to monetary penalties of up to $11,000 per claim, and treble damages.

Should you have any questions regarding these issues, don’t hesitate to contact us.  For a complementary consultation, you may call Robert W. Liles or one of our other attorneys at 1 (800) 475-1906.

President Obama Appoints New Head of CMS

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