Can ZPIC Audits Base Their Overpayment Demand on a Mere Sample of Claims? Maybe. . .Maybe Not. . .

July 12, 2010 by  
Filed under Featured, ZPIC Audits

(July 12, 2010):  A ZPIC’s use of extrapolation can be a surefire way of destroying a provider’s practice.  We’ve known it for years and yet the government’s passion for statistical sampling only seems to be growing.  This makes it essential for providers to involve experienced counsel as soon as possible after the audit has been conducted.

“Extrapolation” is the process of using statistical sampling in a review to calculate and project (extrapolate) alleged overpayments made in connection with Medicare claims.  Basically, ZPICs seek out errors in an alleged “statistically relevant sample” of the provider’s Medicare claims and then calculate and apply the “error rate” to the entire universe of claims covering a given period of time.  This long-standing practice allows ZPICs to grossly inflate the monetary demands on their audit targets while avoiding actually reviewing each of the Medicare claims in the universe for which they are seeking recoupment or offset.

The practice dates back twenty years to a decision by the Secretary of Health and Human Services (HHS) to authorize the use of statistical sampling in lieu of engaging in onerous claim-by-claim reviews.  In Chaves County Home Health Services v. Sullivan, 931 F.2d 914 (D.C. Cir. 1991), the district court upheld extrapolation as being within the Secretary’s discretion.

In 2003, after years of protest, physicians groups and others succeeded in convincing Congress to place some limitations on the use of extrapolation. Under Section 935 of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA), before an auditor can employ extrapolation, there must be either a determination of a sustained or high level of payment error, or documentation that educational intervention has failed to correct the payment error.  While this opens the door to challenging an extrapolation, we also work with a statistical expert to identify other errors made by the ZPIC when conducting an extrapolation.

Over the years, Liles Parker has worked with a number of the best statisticians in the country, challenging the extrapolation and having it invalidated at either the Qualified Independent Contractor (QIC) level or at hearing before an Administrative Law Judge (ALJ).  If your practice or clinic is audited by a ZPIC, we strongly recommend that you engage experienced legal counsel to represent your interests during this complex process.  The legal arguments utilized are driven by the facts in each case.  As a result, you should retain counsel with extensive real-world knowledge of how to best challenge the use of statistical sampling by ZPICs and PSCs.

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.

 

Counsel for HHS-OIG Discusses the Impact of Health Care Reform on Enforcement with Congress

June 22, 2010 by  
Filed under Featured, Medicare Audits

(June 22, 2010):  In his testimony last week before the Health and Oversight Subcommittees of the House Committee on Ways and Means, Lewis Morris, Chief Counsel to the Inspector General (OIG) of Health and Human Services (HHS), emphasized the increasing speed and intensity of HHS-OIG’s multi-pronged health care fraud enforcement efforts.  Morris’ testimony reinforces the need for Medicare providers and suppliers to aggressively prepare for a knock on the door from HHS-OIG or one of its many enforcement partners.

Morris highlighted numerous new enforcement tools available under the Patient Protection and Affordable Care Act (PPACA), paying particular attention to innovations in data access and use.  These measures include consolidating and sharing data across agencies, as well as deploying new technology that allows “investigators to complete in a matter of days analysis that used to take months with traditional investigative tools.” 

He further praised the enhanced accountability measures contained in PPACA, such as HHS-OIG’s ability to impose civil monetary penalties for “failing to grant [upon reasonable request] timely access to HHS-OIG for investigations, audits, or evaluations.”  Notably, PPACA Section 6408 provides for a penalty of $15,000 for each day for failure to grant access.

Morris’ testimony also reminded the health care community that:

  • PPACA allows the HHS Secretary to suspend payments to providers or suppliers based on credible evidence of fraud.  At the same time, it expands the types of conduct constituting Federal health care fraud offenses under Title 18.
  • HHS-OIG has improved access to information from entities directly or indirectly involved in providing medical items or services payable by any Federal program.

Perhaps most significantly:

  • Medicare and Medicaid program integrity contractors (i.e., ZPICs and PSCs) are required to provide performance statistics, “including the number and amount of overpayments recovered, number of fraud referrals, and the return on investment of such activities.” (emphasis added).

 While not surprising, it is nonetheless disconcerting that ZPICs and PSCs are essentially being “graded” based on the amount of overpayments recovered,” along with the number of enforcement actions handled and referred to law enforcement.  Based on these performance measures, is there any real difference between ZPICs and RACs?  While RACs may be compensated directly based on the amount of overpayments collected (and ZPICs are not), it is crystal clear that the government’s expectations of ZPICs are quite similar.  Now, more than ever before, it is essential that providers implement effective compliance measures to cover their practices and clinics.

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.

Part II: A Look at the ZPIC System – The Appointment of Health Integrity to Handle Zone 4

April 1, 2010 by  
Filed under Featured, ZPIC Audits

(April 1, 2010): Last week, we posted an initial article examining the ZPIC audit process and the various companies chosen by CMS to administer the program in one or more of the seven “Zones” around the country (based on Medicare Administrative Contractor (MAC) jurisdictions).  As Kim Brandt, CMS’ Program Integrity Group Director has noted, five of the seven zones are considered “hot spots.”  These include: California, Florida, Illinois, New York and Texas.  These five “hot spots” align with Program Integrity field offices.

In September 2008, Health Integrity was awarded the first Zone Program Integrity contract for Zone 4, covering Texas, Colorado, Oklahoma and New Mexico.

On February 1, 2009, Health Integrity began performing program integrity functions for Medicare Part A, Part B, Durable Medical Equipment (DME), Home Health and Hospice services.  Health Integrity was also designated as responsible for handling the Medicare – Medicaid Data Match Projects.  Overall, these responsibilities cover the following six tasks:

  • Performing Data Analysis and Data Mining.
  • Conducting Medical Reviews in Support of Benefit Integrity.
  • Supporting Law Enforcement and Answering Complaints.
  • Investigating Fraud and Abuse.
  • Recommending Recovery of Federal Funds through Administrative Action.
  • Referring Cases to Law Enforcement.

According to Health Integrity, through these efforts, it will “develop innovative data analysis methodologies for detecting and preventing abusive use of services early, develop high quality fraud case referrals for law enforcement, and identify appropriate corrective actions.”

Health Integrity will manage this workload from offices located in Dallas, Texas; San Antonio, Texas; Houston, Texas; Brownsville, Texas; Denver, Colorado; Oklahoma City, Oklahoma; and Albuquerque, New Mexico.  Health Integrity staff include data analysts, nurse reviewers, and fraud investigators.

As you will recall, like RACs, ZPICs are tasked by CMS to “find and prevent waste, fraud and abuse in Medicare.” Consistent with this mandate, ZPICs look at health care provider billing trends and patterns, focusing on those whose billings for Medicare services are higher than their peers. While most cases appear to have been generated as a result of “data mining,” several of our clients are convinced that the audit has been triggered by complaints, likely filed by a former disgruntled employee.

ZPICS are required to use a number of techniques, both proactive and reactive, to address fraud.  These techniques include the ZPIC IT Systems that combine claims data (fiscal intermediary, regional home health intermediary, carrier, and durable medical equipment regional carrier data) and other data to create a platform for conducting complex data analysis. By combining data from various sources, the ZPIC will be expected to present an entire picture of a beneficiary’s claim history regardless of where the claim was processed. The primary source of this data will be the CMS National Claims History (NCH).  Note that RACs are expected to report cases of suspected fraud. However, a RAC denial resulting in a provider repayment will not necessarily prevent a ZPIC and / or HHS-OIG from investigating and prosecuting, if appropriate, allegations of fraud or abuse arising from the overpayment.

Over the last year, we have worked on several cases involving Health Integrity.  Generally, we have been quite pleased with their willingness to consider arguments initially presented the provider.  Moreover, it has been our experience that Health Integrity takes the new 15-day “rebuttal” stage seriously.  Rather than merely “rubber-stamp” their initial findings, the contractor carefully reviewed the “rebuttal” information we submitted, ultimately deciding to significantly reduce the amount of the alleged overpayment.

Unfortunately, our initial concerns regarding the contractors use of statistical extrapolations in estimating damages remain.  As discussed in previous articles, we strongly recommend that you engage the services of experienced counsel if your practice or clinic is subjected to extrapolated 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.

 

Part I: A Look at the Opposition – For AdvanceMed, It’s Not Personal, It’s Just Business — Big Business . . .

March 26, 2010 by  
Filed under Featured, ZPIC Audits

(March 26, 2010):

OverviewOver the next few days, we will be publishing a brief overview of specific Zone Program Integrity Contractors (ZPICs) – the companies who have been hired by CMS to conduct the medical reviews of Part A and Part B health care providers around the country.  As we have previously discussed, over the last year, ZPICs have been taking over where Program Safeguard Contractors (PSCs) left off.  While our firm is still handling a number of cases that were initiated by PSCs, all of our recent cases have involved ZPICs.

As PSCs and ZPICs have been so quick to point out, they are not paid a percentage of the Medicare overpayments identified like their fellow medical reviewers – Recovery Audit Contractors (RACs).  Nevertheless, as you will soon see, they are handsomely paid for their efforts, albeit in a different fashion than are RACs.

It is essential to keep in mind that both RACs and ZPICs are designed to “find and prevent waste, fraud and abuse in Medicare.” Further, like their RAC cousins, ZPICs look at billing trends and patterns, focusing on providers whose billings for Medicare services are higher than the majority of providers in the community (e.g. their peers).

AdvanceMed:

AdvanceMed Corporation was awarded a $107,957,737.00 five-year contract to handle the ZPIC duties for Zone 5.   Zone 5 covers the states of Alabama, Arkansas, Georgia, Louisiana, Mississippi, North Carolina, South Carolina, Tennessee, Virginia, and West Virginia.  Yes, you read this correctly, AdvanceMed is being paid over $100 million.

As the ZPIC for Zone 5, AdvanceMed assumed the Benefit Integrity functions for Medicare Parts A, B, Durable Medical Equipment, and Home Health and Hospice, as well as establishing a Medicare / Medicaid (Medi-Medi) data matching program for each state within the Zone.

The AdvanceMed Zone 5 ZPIC contract performs the following functions for CMS as a ZPIC:

  • Medicare fraud investigation and prevention, including referrals to law enforcement;
  • Medicare data analysis (discovery, detection, investigation, and overpayment projection);
  • Medical Review to support fraud case development, including coverage and coding determinations;
  • Reviewing audit, settlement, and reimbursement of cost reports, and conducting specified audits;
  • IT Systems for case and decision tracking and data warehousing;
  • Interface with the Medicare contractors, the medical community (outreach & education), and law enforcement; and
  • Medicare/Medicaid data matching program safeguards work for each state in Zone 5.

AdvanceMed’s Extrapolations of Alleged Damages:

Over the years, we have gone up against AdvanceMed numerous times, challenging their interpretation of LMRPs / LCDs and assessing the methods they utilized to engage in a statistical extrapolation of the alleged damages in our client’s cases.  To give the company its due – their statistical experts are smart, aggressive and do not hesitate to respond when their methods have been challenged.  We like that – it keeps us sharp.

With the help of some of the best statisticians in the country (including, but not limited to the late Will Yancey, Ph.D.), in  a number of cases, we have been able to show that their extrapolation of damages (and that of other PSCs and ZPICs) has not complied with applicable requirements, and is therefore invalid.  To be fair, every extrapolation is different, both in terms of facts, the methodology employed, and in the associated calculations conducted.  As attorneys, we work with our experts to break down and assess AdvanceMed’s (and other ZPICs) calculations.  Perhaps they handled it appropriately – or maybe they didn’t.  There really isn’t any way to know if it was handled properly without a complete copy of their file (including associated work papers and calculations) so that we can fully assess their actions.

Over the last year, we have seen a marked increase in Medicare contractor (e.g. PSC and ZPIC) participation (as “participants” not as “parties”)  in ALJ hearings.  Their experts have consistently been professional, concise and ready to answer any questions posed by the ALJ.  Our recommendation – both counsel and their defense expert better be prepared.  It’s never to early to start thinking about how to best contest the extrapolation that has been conducted.  As a final point, we are aware of a number of instances where a  provider (or their representative) has chosen to ignore the extrapolation as a contestable issue.  In other words, they just accept the extrapolation as a foregone conclusion and focus solely on the claims.  We respectfully disagree with that approach.  If we identify deficiencies with the extrapolation, we aggressively challenge its application.

AdvanceMed’s Medical Reviews:

Once a provider has been identified as an outlier (or identified as a possible problem through a variety of other mechanisms), a medical review of their claims is often conducted by a ZPIC, such as AdvanceMed.

A number of year ago, Kevin Gerold, CMS’ former Acting Deputy Director for Program Integrity was quoted as saying that the agency had revamped its approach to claims processing in an effort to better “grasp the experience of the patient encounter.” Mr. Gerold was further quoted as saying that CMS was going to “let medical reviewers assess a claim’s legitimacy based on the big picture of the patient encounter, not on a nit-picking slavery to perfect documentation.” Unfortunately, in our humble opinion, AdvanceMed’s medical reviews have conducted have been extremely technical — resulting in the denial of many claims based on minor omissions, technical deficiencies and / or the contractors’ own peculiar spin regarding the application of an LCD.

In responding to AdvanceMed’s reasons for denial, it is essential that you obtain each and every reference relied upon by the contractor when denying the claims at issue.  We have identified multiple instances where a contractor (not necessarily AdvanceMed) attempted to apply an LCD retroactively.  Moreover, it is important to examine the underlying statutory authority to determine whether the contractor’s interpretation of a coverage provision is consistent with the underlying law or regulation.  Finally, it isn’t enough to merely “poke holes” in AdvanceMed’s reasons for denial – we like to go one step further – show that the particular claims at issue do, in fact, qualify for coverage and payment.

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.

Are ZPICs Tougher than RACs when Conducting a Medicare audit?

February 27, 2010 by  
Filed under ZPIC Audits

(February 27, 2010):  The Recovery Audit Contractor (RAC) program is an integral part of the Center for Medicare and Medicaid Services’ (CMS’) “benefit integrity” efforts which seek to identify and recoup alleged overpayments paid to Medicare providers. While the RAC program is still being expanded in many of the country (to cover not only hospitals but also other providers and types of Medicare claims), health care providers should be aware that the Zone Program Integrity Contractors (ZPICs) are already active in many areas and are actively auditing physicians, home health agencies, hospices, DME companies, therapy clinics, chiropractors and other small to mid-sized health care providers.  Despite the “hype” surrounding RACs, at this time, ZPICs represent a significantly greater risk to non-hospital providers than do RACs.  The purpose of this article to examine a number of the differences between these Medicare contractor programs.

What are the chances of your practice being reported by a ZPIC or RAC to HHS-OIG or DOJ for possible fraud violations?

While both contractor programs are designed to “find and prevent waste, fraud and abuse in Medicare,” the fact is that to date, ZPICs have been much more likely than RACs to report possible incidents of “fraud” that are identified while conducting a medical review.  Frankly, it makes sense.  RACs make money by identifying alleged overpayments – not by making a fraud referral to law enforcement.  Notably, as a result of recent criticism by HHS-OIG, CMS will be requiring RACs to be much more diligent in the future about making referrals to law enforcement when it appears that a health care provider’s conduct represents fraud rather than merely an overpayment.  CMS has provided training to RACs on how to identify fraud in the near future.  Importantly, a RAC denial of claims which results in a provider repayment will not necessarily prevent HHS-OIG from investigating and making a referral to DOJ for possible prosecution, as appropriate, if there are allegations of fraud or abuse arising out of the alleged overpayment. 

Notably, recent letters by ZPICs in South Texas and in other parts of the country have been seeking copies of business related records (copies of contracts, agreements with Medical Directors, lease agreements and more), along with its request for claims-related medical documentation.  Importantly, the contractor is assessing the provider’s business relationships to help verify that referral and other business relationships do not violate the Federal Anti-Kickback Statute.  To reduce the possiblity of civil or criminal liability, it is essential that Medicare providers take affirmative steps to better ensure that their practices are compliant with applicable statutory and regulatory requirements.  2011 will be the “Year of Compliance.”  All providers, regardless of size, should take steps to implement an effective Compliance Program.  Should you not have an compliance program in place, give us a call — we can help. 

What is different about ZPICs and their predecessors, Program Safeguard Contractors (PSCs)?

Both ZPICs and Program Safeguard Contractors (PSCs) readily point out that they are not “bounty hunters.”   ZPICs are not paid contingency fees like RACs and are paid directly by CMS on a contractual basis.  Nevertheless, common sense tells us that if ZPICs aren’t successful at identifying alleged overpayments, the chances of a particular contractor getting their contract with CMS renewed are pretty slim.  Experience has shown that both ZPICs and PSCs don’t always appear to strictly adhere to medical review standards established by Medicare Administrative Contractors (MACs) and approved by CMS.  In our opinion, there appear to have been cases where these contractors applied their own unwritten standards, often denying claims based on conjecture and speculation rather than a strict application of the applicable LCD or LMRP. 

In any event, over the last year, both ZPICs and PSCs have been increasingly placing health care providers on pre-payment review, conducting post-payment audits, recommending suspensions of payment.  Additionally, in many cases they have been extrapolating the alleged damages based on a sample of claims reviewed. Finally, as discussed above, identified instances of potential fraud are being referred by ZPICs and PSCs to HHS-OIG for possible investigation, referral for prosecution and / or administrative sanction.

What sources of coding / billing data are used by ZPICs?

ZPICS are required to use a variety of techniques, both proactive and reactive, to address any potentially fraudulent practices.  Proactive techniques will include the ZPIC IT Systems that will combine claims data (fiscal intermediary, regional home health intermediary, carrier, and durable medical equipment regional carrier data) and other source of information to create a platform for conducting complex data analyses. By combining data from various sources, ZPICs have been able to assemble a fairly comprehensive picture of a beneficiary’s claim history regardless of where the claim was processed. The primary source of this data is reportedly CMS’ National Claims History (NCH) database.

How do ZPICs conduct medical reviews?

ZPICs conduct medical reviews of charts to determine, among other things, whether the service submitted was actually provided, and whether the service was medically reasonably and necessary.  Based upon their findings, ZPICs may approve, downcode or deny a claim.  To date, we have never seen a ZPIC conclude that a claim should have been coded at a higher level, only a lower level.  Regrettably, ZPICs are not required to have a physician review a claim in order to deny coverage.  In most of the cases on which we have worked, the contractor’s medical reviewer has been a Registered Nurse.   While some Federal courts have found that a treating physician’s opinion should be given paramount weight, others have ruled that the opinion of a treating physician should not be given any special consideration.  Generally, ZPICs have completely disregarded the “Treating Physician Rule,” despite the fact that a patient’s treating physician was the only provider to have actually seen and assessed the patient at issue. 

How should you respond to a ZPIC audit?

In responding to a ZPIC audit, it is important to remember that although they may not technically be “bounty hunters,” in our opinion, they are in the business of finding fault.   Moreover, they are quite adept at identifying “technical” errors, many of which they will readily cite when denying your Medicare claims.  Unfortunately, it is not at all uncommon for a ZPIC to find that 75% — 100 % of the sample of claims reviewed did not qualify for coverage and payment by Medicare.  After extrapolating the damages to the universe of claims at issue, health care providers often find that they are facing alleged overpayments of between $150,000 and several million dollars.  In many cases, the assessment is far in excess of the provider’s ability to pay.  As such, the administrative appeal becomes a “bet the farm” matter for the health care provider.  If the assessment remains, the provider will have no choice but to declare bankruptcy. 

It is also important to remember that ZPIC enforcement actions are not limited to merely overpayment assessments.  In recent months, ZPICs have been increasingly conducting unexpected site visits of health care provider’s offices and facilities, often requesting immediate access to a limited number of claims and the medical records supporing the services billed to Medicare.  Typically, they then require that a provider send supporting documention covering a wider list of claims within 30 days of their visit.  In other cases, should a ZPIC identify serious problems when reviewing the medical records requested, they may recommend to CMS that the provider’s Medicare billing privileges be suspended.  From a practical standapoint, few providers are diversified (in terms of payor mix) to the point that they can easily do without Medicare reimbursement.  The practical effect of a Medicare suspension is therefore that provider cannot continue in business throughout the 180-day initial period of suspension typically imposed by CMS.   Finally, in a limited number of cases, after a ZPIC or PSC has visited an office, the provider will subsequently learn that the contractor has recommended that the provider’s Medicare number be revoked.  In a fairly recent case we are aware of (not involving a client of the Firm), the contractor claimed that the provider failed to cooperate, a clear violation of the provider’s “Conditions of Participation” with Medicare.  As a result, the contractor recommended (and CMS approved) the revocation of the provider’s Medicare number.    Short of exclusion from participation in the Medicare program, this is arguably the most serious and far-reaching administrative action that can be taken against a Medicare provider.     

In light of the seriousness of the situation, regardless of whether you are contacted by a RAC, a ZPIC or a PSC, you must take great care when responding to the contractor’s request for business records, claims information or medical records.  Administrative enforcement actions can be extraordinarily serious.  Therefore, is essential that you engage an experienced attorney and law firm to represent your interest. 

Liles Parker attorneys have extensive experience representing health care providers around the country in connection with ZPIC audits and reviews by other Medicare providers.  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.

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