MACs, MICs, RACs and ZPICs: Latest...

MACs, MICs, RACs and ZPICs: Latest Developments Preparing for Medicare and Medicaid Audits and Appealing Unfavorable Results

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WEDNESDAY, OCTOBER 3, 2012

Presenting a live 90-minute webinar with interactive Q&A

Paula G. Sanders, Principal,Post & Schell, Harrisburg, Pa.

Anna M. Grizzle, Member, Bass Berry & Sims, Nashville, Tenn.

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4

MACs, MICs, RACs and ZPICs:

Latest Developments

October 3, 2012

Paula G. Sanders Anna M. Grizzle

Post & Schell, PC Bass, Berry & Sims PLC

[email protected] [email protected]

5

http://www.hms.com/our_services/services_program_integrity.asp

6

60 Day Repayment Rule

7

Mandatory Refunding of

Overpayments (3/2010) • Providers, suppliers, Medicaid MCOs, Medicare

Advantage plans, and PDP sponsors must report and return overpayments to HHS, the State, or a Medicare intermediary or carrier by the later of:

− 60 days of identification of overpayment, or

− Due date of cost report

• Treble damages and CMPs up to $50K for knowing failure to return overpayments on time

• Knowing failure also a false claim under the Federal False Claims Act

8

CMS Proposed Rule On 60 Day

Repayment Obligation

9

CMS Proposed Rules:

Knowledge Of The Overpayment • Overpayment is “identified” if the provider has

“actual knowledge of the existence of the overpayment or acts in reckless disregard or deliberate ignorance of the overpayment”

• Rule creates an incentive to exercise reasonable diligence to determine whether an overpayment exists

• Provider may receive information about a potential overpayment; the provider must make “reasonable inquiry”

10

RACs

11

RAC Jurisdictions

Diversified

Collection

Services, Inc.

CGI Technologies

and Solutions, Inc.

Connolly

Consulting

Associates, Inc.

HealthDataInsights,

Inc.

12

RAC Overview

• Objective to recover overpayments, not

fraud hunters

• Extensive use of data mining

• All issues must be pre-approved by

CMS and posted on RAC website

• http://www1.cms.gov/RAC/01

Overview.asp#TopOfPage

13

Prepare for Additional

Development Requests (ADRs) • As of 3/15/2102, annual limit for records requested

every 45 days is 2 percent of all claims submitted in

the prior year, divided by eight, capped at 400 per 45

days

• For SNFs, 1 ADR represents a beneficiary’s entire

episode of care

− All medical records for all services rendered from

admission to discharge http://www.cms.gov/Recovery-Audit-

Program/Downloads/Providers_ADRLimit_Update-03-12.pdf

14

Prepare for ADRs

• 3 year look back: do you know where

your records are?

– Storage, soft files, filing back log

• Request extension if needed

• Copy entire medical record and all

relevant documents, and keep a copy

15

Prepare for ADRs

• Follow document production

requirements http://dcsrac.com/Documentation.aspx

• Proof of mailing/proof of receipt

• Monitor deadlines

• Consider appeal options

16

Claims Review

• Review claims on post-payment basis

• Uses same Medicare policies as FIs, Carriers, and

MACs including LCDs, NCDs and Medicare Manuals

• Areas of focus chosen based on data mining

techniques, OIG / GAO reports, CERT reports, and

experience and knowledge of staff

• Approved audit issues posted on RAC contractor

website

Source: Statement of Work for the Recovery Audit Program; available at:

http://www.cms.gov/RAC/downloads/Final%20RAC%20SOW.pdf

17

Automated Review

• Uses data analysis to determine improper

payments

• Does not involve a review of medical records

• Contacts providers directly to collect any

overpayments or repay any underpayments

• Consumes less resources than a complex

review and conducted more frequently

18

Complex Review

• Uses medical records to further analyze the claim when data analysis is insufficient

• Identifies discrepancies between the medical records and the claim

• Provider has 45 days to submit medical records

• Review must be completed within 60 days of receipt of medical records

• Sends the hospital a determination letter with its findings

19

Expansion of RAC Program

• Expands RAC program to Medicare

Parts C and D and Medicaid

• States required to contract with a RAC

for review of Medicaid claims by

December 31, 2010

– RACs paid on contingency basis

– States required to have appeals process

Source: Section 6411 of the Patient Protection and Affordable Care Act (Pub. L. 111-148)

20

Medicaid RACs

• Contracts with state Medicaid agency

• Typically paid on contingency

• Must have a licensed medical director

and certified coders

• States determine record limits, medical

necessity reviews and extrapolation

• National 3 year look-back

21

Be Alert for RAC-Like Auditors

• Medicare Advantage and commercial

insurance doing RAC-like audits

• ~ 20% Medicare beneficiaries enrolled

in Medicare Part C

• Medicare Advantage plans have

different appeals processes

22

Prepayment Demonstration Project

• Time Period: Aug. 27, 2012-Aug. 26, 2015

• States Subject to Review − Fraud and error-prone states (FL, CA, MI, TX, NY, LA, IL)

− States with high volumes of inpatient stays (PA, OH, NC,

MI)

• Focus on claims with high improper payment

rates

23

Prepayment Demonstration Project

• ADR issued by MAC

• Records response due within 30 days

• Results sent to providers within 45 days

• Providers have appeal rights

24

Current Areas of Focus

• http://www.connolly.com/healthcare/pages/ApprovedIssues.aspx

• https://www.dcsrac.com/IssuesUnderReview.aspx

• https://racinfo.healthdatainsights.com/home.aspx?ReturnUrl=%2fPublic%2fNewIssues.aspx

• http://racb.cgi.com/Issues.aspx?st=1

25

RAC Trends (AHA, 8/22/2012)

• Medical records requests increased

22% from first to second quarter 2012

• 14% increase in automated denials

• 29% increase in complex denials

• $5.3 billion targeted

26

Automated Denials

• Outpatient billing errors - 39%

• Outpatient coding errors -17%

• Inpatient coding errors - 9%

• Duplicate payments - 6%

• Incorrect discharge status - 4%

• Other – 25%

27

Complex Denials – 97% of Denied $

• Medically unnecessary short stays –

78%

• Incorrect MS-DRG or other code error -

12%

• Outpatient coding or billing error – 4%

• Medically unnecessary inpatient stays

lasting >3 days – 1%

28

Average $ Value of Denials

• Automated denial = $548

• Complex denial = $5,564

29

Underpayments

• ~75% hospitals received at least 1

underpayment determination

• Underpayments totaled ~$75 million

• 63% - incorrect MS-DRG

• 18% - discharge disposition

30

It Pays to Appeal

• >1/3 hospitals had a denial reversed

during discussion period

• $507.1 million appealed claims

• Hospitals average 118 appealed denials

• >40% of denials appealed

• 75% of completed appeals overturned

in favor of hospital

31

It Pays to Appeal

• Nearly ¾ of all appealed claims still in process

• $76.6 million in overturned denials

• 56% of denials overturned on medical necessity

• 43% of denials overturned for additional information substantiating claim

http://www.aha.org/aha/issues/RAC/ractrac.html

32

ZPICs

33

Zone Program Integrity

Contractors (ZPICs) • Consolidation of PSCs and MEDICs

• Coordination of claims processing and benefit integrity activities

• Ensure integrity of ALL Medicare-related claims – Parts A, B, C, D, Home Health, DME, Hospice and

coordination of Medi-Medi data matches

• Use “innovative data analysis methodologies” for early fraud detection and prevention

Source: Chapter 4 – Benefit Integrity; Medicare Program Integrity Manual; available at:

http://www.cms.gov/manuals/downloads/pim83c04.pdf

34

ZPIC Zones

Zone Geographic Area

1 American Samoa, California, Guam, Hawaii, Mariana Islands, Nevada

2 Alaska, Arizona, Idaho, Iowa, Kansas, Missouri, Montana, Nebraska,

North Dakota, Oregon, South Dakota, Utah, Washington, Wyoming

3 Illinois, Indiana, Kentucky, Michigan, Minnesota, Ohio, Wisconsin

4 Colorado, New Mexico, Oklahoma, Texas

5 Alabama, Arkansas, Georgia, Louisiana, Mississippi, North Carolina,

South Carolina, Tennessee, Virginia, West Virginia

6

Connecticut, Delaware, District of Columbia, Maine, Maryland,

Massachusetts, New Hampshire, New Jersey, New York,

Pennsylvania, Rhode Island, Vermont

7 Florida, Puerto Rico, U.S. Virgin Islands

35

ZPICs

• Zone 1 – SafeGuard Services, LLC

• Zone 2 – NCI, Inc. (previously AdvanceMed)

• Zone 3 – Cahaba Safeguard Administrators, LLC

• Zone 4 – Health Integrity, LLC

• Zone 5 – NCI, Inc. (previously AdvanceMed)

• Zone 6 – Cahaba Safeguard Administrators, LLC

• Zone 7 – SafeGuard Services, LLC

36

ZPIC Responsibilities

• Fraud case development

• Fraud complaint processing

• Provider education related to fraud

investigations

• Ability to initiate payment suspensions

and provider exclusions



37

ZPIC Audits

• Unannounced or limited notice

• Review of claims

– Prepayment or post payment

» Potential for payment suspension

– Probe sample or statistical sampling and

extrapolation

• Employee or beneficiary interviews



38

ZPIC Triggers

• Aberrant patterns

– Statistical deviations from the norm

– Changes in facility’s historical patterns

– High utilization (e.g., RU/RV therapy)

– High cost services or items

39

Audit Results

• Referral to law enforcement – Baptist Healthcare Systems, Inc. and Hardin County,

Kentucky d/b/a Hardin Memorial Hospital 8/2011 Settlement

• Forward findings to MAC for

overpayment recoupment action

• Provider education



40

Use of Statistical Sampling for

Overpayment Estimation

• A Medicare contractor may not use

extrapolation to determine overpayment

amounts . . . . unless . . .

– There is a sustained or high level of

payment error; or

– Documented educational intervention has

failed to correct the payment error

42 U.S.C. §1395ddd(f)(3)

41


Overpayment Estimation • Sustained or high level of payment error can be

determined by:

– Error rate determinations by MR unit, PSC, ZPIC

– Probe samples

– Data analysis

– Provider/supplier history

– Information from law enforcement investigations

– Allegations of wrongdoing by current or former employees of provider or supplier

– Audits or evaluations conducted by the OIG



42


Overpayment Estimation

• Additional Factors to Consider

– Number of claims in universe

– Dollar values associated with claims

– Available resources

– Cost effectiveness of expected sampling

results



43

Payment Suspensions

• OIG analyzed 253 payment suspensions 2007-2008

• Majority of suspended providers exhibited characteristics that suggest fraud

• 250 received no advance notice, indicating suspected fraud or willful misrepresentation

44

Payment Suspensions

• 74% had questionable billing patterns

• 63% supported by information from beneficiaries or other providers that raised questions

• 55% failed to submit medical records

• 24% billed Medicare from vacant physical locations

OIG: The Use of Payment Suspensions to Prevent Inappropriate Medicare

Payments, 0EI-01-09-00180 (11/1/2010)

45

Affordable Care Act Expands

Suspension Authority

• Payments suspended pending an

investigation of a credible allegation of

fraud unless good cause not to suspend

payments

• CMS to consult with OIG regarding

credible allegation of fraud

46

“Discretionary” Payment

Suspensions

• Based on “credible allegation of fraud”

• Indicia of reliability

– Fraud hotline complaints

– Data mining

– Patterns of problems identified thru audits

– Civil false claims cases

47

Payment Suspensions Difficult to

Challenge

• Exhaustion of administrative review

required

• All claims must be presented to HHS

• No real remedy under Medicare statute

• Nichole Medical Equipment & Supply,

Inc. v. Tricenturion, Inc., 2012 U.S. App.

LEXIS 19218 (3d Cir., Sept. 13, 2012)

48

MACs

49

Medicare Administrative Contractors

(MAC)

• Medicare Prescription Drug, Improvement

and Modernization Act of 2003 (MMA), Pub.

Law 108-173, Subtitle B, Section 911 (42

USC 1395kk-1)

• Consolidated Fiscal Intermediaries (FI) and

Carriers

• Regional Hospice and Home Health

Intermediary (RHHI)

50

Medicare Administrative Contractors

51

Coming Soon: Consolidated A/B MAC

Jurisdictions

52

MACs Are. . .

• Responsible for:

– Provider enrollment

– Processing claims

– Auditing providers

• Authorized to make Local Coverage Determinations (LCD)

42 USC 1395kk-1(a)(4)

• Re-bid every five (5) years 42 USC 1395kk-1(b)(1)(B)

53

MAC Audits

• Conducting data analysis comparing

providers to peers

• Outliers receiving audit requests

• High error rates can result in

prepayment reviews

54

MICs

55

Three Types of MICs

• Review-of-Provider MICs

• Audit MICs

• Education MICs

56

Current MIC Audit Targets

Physicians/Practitioners DME

Home Health/ Transportation/

Skilled Nursing Ambulance

Hospice Lab/X-ray

Hospital Pharmacy

Nursing Facility Renal Dialysis

57

How Are Providers Selected For

Audit?

• MICs select based on data analysis by

other CMS contractors and/or referrals

from state agencies

• Efforts to ensure that MIC audits do not

duplicate state MA audits or interfere

with potential law enforcement

investigations

• No MIC/RAC audit is “random”

58

What Are the MICs Looking For?

• Did Medicaid pay for a “covered service?”

• Was the service actually provided?

• Was the service properly billed?

• Was the service properly documented?

• Was the service reimbursed appropriately according to state policies, rules and regulations?

59

Records Requests

• Length of time to respond to record

requests expanded to 30 days

– MIC can give 15 day extension

– CMS approval needed for further

extensions

– Extensions typically given as long as

neither the integrity nor the timeliness of

the audit is compromised

60

Records Requests

• Requests may include demand for color

copies or scanned documents on CD

• Unlike RACs, no apparent limit on

number of documents that may be

requested

• National 5 year look-back period for

audits

61

What Happens After MIC Audit?

• MIC prepares draft report, shares with

state and then with provider

• State and provider may comment on

draft findings

• CMS considers comments and prepares

a revised draft audit report which is then

shared only with state for final

comments

62

What Happens After MIC Audit?

• CMS issues final audit report and

specifies overpayment, if any

• State pursues collection of overpayment

• Providers have full appeal rights under

state law

– No explicit federal right of appeal

• Audit MIC supports state during appeal

process

63

OIG Reviews MICs

• Review MICs had problems with data and analyses

• 81% of audits did not identify overpayments

• 11% audits completed: $6.9 M in overpayments

– $6.2M resulted from 7 completed collaborative audits involving Audit MICs, Review MICs, States and CMS

• States invalidated more than one-third of sampled potential overpayments

• Medicaid Statistical Information System needs additional data elements important to detecting Medicaid fraud, waste and abuse

• http://oig.hhs.gov/oei/reports/oei-05-10-00200.pdf (2/22/2012)

• http://oig.hhs.gov/oei/reports/oei-05-10-00210.pdf (2/22/2012)

64

Audit Regions

CMS Region Audit MIC

Regions I/II

CT, MA, ME, NH, NJ, NY, PR, RI, VI & VT

IPRO

Regions III/IV

AL, DC, DE, FL, GA, KY, MD, MS, NC, PA, SC, TN,

VA & WV

Originally:

Booz Allen Hamilton

Now:

Health Integrity

Regions V/VI

IA, IL, IN, KS, MI, MN, MO, NE, OH & WI

Health Integrity

Regions VI/VIII

AR, CO, LA, MT, ND, NM, OK, SD, TX, UT & WY

HMS

Regions IX/X

AK, Am. Samoa, AZ, CA, Guam, HI, ID, NV, No.

Marianna Isl., OR & WA

HMS

65

Medicaid RACs and MICs

• States required to contract with contingency-fee paid RACs to conduct audits of Medicaid providers

• Recent OIG report concluded that RACs should have been incentivized to make fraud referrals

• Unclear how RACs will interface with Medicaid Integrity Contractors (MICs)

66

Responding to an Audit

67

Preparation Before Audit is Key.

• Develop effective policies and

procedures by:

– Establishing company policy

– Training your employees

– Identifying your team

– Knowing the issues and your exposure

– Preparing for extensive document

production

68

Review Your Contracts

• What are your obligations regarding notice of claims?

• An audit may not be the same as a claim denial

• Define cooperation obligations

• When is your claim final?

• Do you have to complete the entire appeals process?

• What are you entitled to recover?

• Who is ultimately responsible?

69

Internal Audits and Monitoring

• Gather disclosure information

• Review denied claims for legitimacy, rebuttal or appeal—root cause analyses

• Identify and fix any internal control or procedural deficiencies

• Refile corrected claims where appropriate

• Consult with counsel as necessary

• Remember the 60 Day Repayment Rule

70

The Importance of the Mail Room

71

Responding to Audits

• Provide complete documentation

• Don’t rush the process BUT meet deadlines

• Don’t sign statements certifying completeness

of records until confirming that all documents

have been provided

• Retain or request a copy of all documents

provided to contractor

72

Best Practices

• Select an Audit Coordinator to manage all

inquiries and coordinate evaluation of all

records sent out for audit/review

• Tell the RA the name and address of your

coordinator

– http://dcsrac.com/ProviderContactInformati

on.aspx

• Make sure your MAC has the right address

73

Timeliness Is Important

• Implement systems for timely responses to audit

• Develop a log

– Date stamp all correspondence and monitor electronic remittance advices

– Track requests for information, deadlines, extensions and dates sent

– Log all contacts with the RA (names, dates, times and summary of conversation)

– Log notices of overpayments, dates for repayment, dates for appeals

74

Timeliness Is Important

• Do you know where your records are?

– Storage, soft files, filing back log

• Request extension if needed

• Copy entire medical record and all relevant

documents, and keep a copy

• Follow instructions from the auditor (e.g. DCS--

http://dcsrac.com/Documentation.aspx)

• Proof of mailing/proof of receipt

75

Letters Requesting Self-Audit

• Engage counsel

• Assess risk

• Hospice of the Comforter, Inc.

Whistleblower Lawsuit

76

Appealing Unfavorable Results

77

Medicare Appeal Process

• Redetermination from the

Intermediary/Carrier

• Reconsideration from a Qualified

Independent Contractor

• Appeal to an administrative law judge

• Appeal to the Medicare Departmental

Appeals Board

• Appeal to a federal district court Source: 42 C.F.R. Part 405, Subpart I

78

Redetermination Phase

MAC Issues

Notice of Initial

Determination

Provider Requests

Redetermination

MAC Issues

Notice of

Redetermination 120

calendar

days

79

Reconsideration Phase

MAC Issues

Notice of

Redetermination

Provider Requests

Reconsideration

Adjudicated by

Qualified

Independent

Contractor

180

calendar

days

QIC Renders

Decision

60

calendar

days

80

Appeal to an Administrative

Law Judge

QIC Renders

Decision

Provider Requests

ALJ Hearing

ALJ Renders

Decision 60

calendar

days

90

calendar

days

81

Appeal to the Medicare

Department Appeals Board

ALJ Renders

Decision

Provider Requests

Appeals Council

Review

Appeals Council

Renders Decision 60

calendar

days

90

calendar

days

82

Appeal to a Federal District Court

Appeals Council

Renders Decision

Appeal to Federal

District Court 60

calendar

days

83

Beware of Recoupment

• Redetermination

• Reconsideration

• Subsequent levels of appeal

Source: 42 C.F.R. Part 405, Subpart C

84

Tips for Appeals

• Be prepared to appeal

• Know appeal timelines and

requirements for each appeal level

• Understand reasons for denial at each

level of appeal

• Look out for contractor participation

85

Tips for Appeals

• Develop multi-disciplinary appeals team

• Establish tracking system

• Review EVERY claim for possible appeal

– Procedural – Did the contractor follow rules?

– Substantive – Was claim medically necessary?

86

Tips for Appeals

• Consider Legal Defenses

– Provider Without Fault (SSA Section 1870)

– Waiver of Liability (SSA Section 1879(a))

– Treating Physician’s Rule

– Reopening Regulations

– Constitutional Challenges

87

Tips for Appeals

• If extrapolation is used, consider:

– Were allowed claims included in

overpayment sample calculation?

– Were calculations performed correctly at

each level?

88

Tips for Appeals

• Challenging Sampling Methodology

– No administrative or judicial review of determination of high level of payment error BUT determination must be made

– Failure to follow one or more requirements in Benefit Integrity Manual does not necessarily affect validity

– Not sufficient to argue better or more precise methods are available

89

Tips for Appeals

• Challenging Sampling Methodology

– Can challenge validity of sampling

methodology based on “the actual

statistical validity of the sample as drawn

and conducted”

– Contractor has burden of establishing

sample was in fact random and statistically

valid

90

Tips for Appeals

• When submitting appeal:

– Obtain internal and external reviews

(medical, coding, statistical) as appropriate

– Develop position paper with supporting

medical records and expert opinions

91

Contact Information

Anna M. Grizzle

Bass, Berry & Sims PLC

[email protected]

Paula G. Sanders

Post & Schell, PC

[email protected]

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