5 Fundamental Medicare Compliance Concepts

Introduction to Medicare Compliance

There are “rules of life” we have learned that can really bring certain essential Medicare compliance concepts into focus. While perhaps cliché, these sayings and principles can be quite helpful when explaining fundamental Medicare compliance concepts to new staff or non-compliance personnel.  These 5 essential Medicare compliance concepts 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 back then.  Medicare providers have a legal obligation to promptly return any 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 in furtherance of Medicare compliance, we believe that the general principle still applies, regardless of the fact that the exact language of 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 apply (although CMS may believe differently), a provider who turns a blind eye to potential overpayments is possibly exposing the practice to a whistleblower suit under the False Claims Act. 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?  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 – a privilege that could be taken away as quickly as it was granted if we failed to follow the laws of the State and the rules of the road.  Frankly, Medicare compliance 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 and maintained.  Should a provider fail in their Medicare compliance activities, this privilege can be taken away.  With this in mind, providers must actively work to better ensure that their  Medicare compliance initiatives meet Medicare’s coding and billing requirements. Should they not fully understand 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 dealing with steady declines in both Federal and private payor reimbursement rates.  In the current economy, unemployment rates have remained high and many patients are having a difficult time meeting their financial obligations.  In this environment, the promises of “innovative” business models or ways to modify a provider’s billing practices which will significantly increase 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?  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.  And remember – the adage “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 for their patients. These actions amount to kickbacks – plain and simple.  Today, drug and medical device industry representatives have made great strides in educating their members to eliminate 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 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?” Additionally, ask yourself, “Who refers patients to me?” 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. This is an important area in Medicare compliance, as it also implicates potential criminal activities.

(5)  “Neatness and accuracy count.”   

We represent a wide variety of health care providers when responding to Medicare post-payment 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 Medicare compliance standpoint, these problems are among the easiest for a provider to remedy.

Handwritten Portions of a Medical Record Must be Legible – When assessing denial reasons cited by ZPICs, our attorneys 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 which the ZPIC alleges are “illegible.”  Having said that, ZPICs and other contractors have an enormous audit caseload, meaning they don’t spend a lot 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 to 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.  For Medicare compliance, 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 of the Medicare Benefit Policy Manual, the Centers for Medicare & Medicaid Services (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. Ultimately, providers who diligently work to achieve these points will have made significant strides towards Medicare compliance in their  practice.

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

SNF Medicare Denial Letters Follow HHS-OIG Report

I.  SNF Medicare Denial Letters Background

The Prospective Payment System (PPS) under which Skilled Nursing Facilities (SNFs) are reimbursed by Medicare has long been criticized by many concerned with 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. 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 and resulted in the issuance of SNF Medicare denial letters from Zone Program Integrity Contractors (ZPICs).

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”. The three chief objectives of this report were to:

1. Ascertain the extent to which billing practices by SNFs changed between 2006 and 2008;
2. Determine the extent to which billing varied by type of SNF ownership in 2008; and
3. Identify SNFs that engaged in questionable billing practices in 2008.

HHS-OIG analyzed 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, 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 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.

The message to Medicare contractors is crystal clear: SNFs, especially those that have a significant placement rate for “Ultra High” therapy RUGs, should be increasingly targeted for audits. Expect SNF Medicare denial letters to rise precipitously 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, facilities targeted for review could face the imposition of prepayment review status, SNF Medicare denial letters, payment bans, or even civil monetary penalties (CMPs).

III.        Areas of Focus by Medicare Contractors:

Based on the concerns raised by HHS-OIG, ZPICs, RACs, MACs, and 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 and reduce the chances of receiving the dreaded SNF Medicare denial letters.

IV.        How to Avoid SNF Medicare Denial Letters and What To Do if You Get One

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, and issue SNF Medicare denial letters. 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 appeal of Medicare post-payment audits, please give us a call for complimentary consultation.  We can be reached at 1-800-475-1906. 

Medicare Exclusion Screening of Your Staff is Essential.

(December 11, 2010):  Earlier this week, HHS-OIG announced that it had assessed significant civil monetary penalties (CMPs) 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. Medicare exclusion screening is essential.

I.      The Failure to Conduct Proper Medicare Exclusion Screening Activities Can Result in Significant CMPs.

 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).

 II.     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:

Medicare exclusion screening of your 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 conduct Medicare exclusion screening procedures of employees) do not occur.

Robert W. Liles serves as Managing Partner at Liles Parker.  Robert and our other health law 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.      

DOJ/HHS Regional Health Care Fraud Summits are Here — Data Mining is Being Used for Targeting

(August 31, 2010):

I.     Introduction — Regional Health Care Fraud Summits:

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.

II.     Health Care Fraud 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.

III.     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.

IV.     Continuing Health Care Fraud 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.

Robert W. Liles serves as Managing Partner at Liles Parker.  Should you need assistance in connection with Medicare matters and cases.  Should you have questions regarding these issues, give us a call for a free consultation.   Call us at: 1 (800) 475-1906.

ZPIC Audits Seeking to Extrapolate Damages. Is Your Legal Counsel Experienced?

(July 20, 2010): In recent years, we have seen agents for the Centers for Medicare & Medicaid Services (CMS) increasingly rely on statistical extrapolation in ZPIC audit cases. 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 ZPIC audits to ultimately result in a team of staff from the ZPIC (such as a statistician, an attorney and a clinician) attending and participating in the Administrative Law Judge (ALJ) hearing in an effort to have their extrapolation calculations approved by the Court.

Regardless of whether you are providing Home Health, Hospice or Durable Medical Equipment services, if your organization is facing an extrapolated ZPC audit, it is strongly recommended that you engage qualified, experienced legal counsel to represent your interests as early in the appeals process as possible.  Your legal counsel can then engage an experienced 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 ALJ 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 ZPIC audit appeals cases we have handled, the alleged error rate has exceeded 90%.  With the resulting alleged damages often in the millions of dollars, few health care providers are in a position to merely pay such an assessment.  Instead, they need experienced legal counsel to defend their interests and set out the reasons why these claims should qualify for coverage and payment. When handling these cases, it is essential that you challenge both the denial of claims and the extrapolation itself (as appropriate).

Robert W. Liles serves as Managing Partner at Liles Parker.  Robert and our other attorneys have extensive experience defending health care providers in cases where ZPICs have sought to impose extrapolated damages.  Should you have any questions regarding these issues, don’t hesitate to contact Robert for a complementary consultation.  He can be reached 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

Identity Theft “Red Flags” Rule Treating Doctors Like Banks Is Delayed Once Again

(July 5, 2010): The Federal Trade Commission (FTC) has agreed to once again delay enforcement of its illogical and onerous “Red Flags” rule with respect to physicians. 

The “Red Flags” rule arises under the Fair and Accurate Credit Transactions Act of 2003 and requires “financial institutions” and “other creditors” to develop written plans to detect identify theft in their day-to-day operations.  Under the FTC’s interpretation of the rule, physicians who permit patients to pay after they have rendered medical service are transformed into “creditors.”

Extension of the rule to physicians has been delayed several times as the extent of the burden on health care providers has become clear.  As recently as May 28, the FTC made note of the concerns:

 “At the request of several Members of Congress, the [FTC] is further delaying enforcement of the ‘Red Flags’ Rule through December 21, 2010, while Congress considers legislation that would affect the scope of entities covered by the Rule….The Commission urges Congress to act quickly to pass legislation that will resolve any questions as to which entities are covered by the Rule and obviate the need for further enforcement delays.”

The June 25^th agreement arises in connection with a suit filed against the FTC last month by the American Medical Association (AMA) and others seeking to prevent enforcement of the “Red Flags” rule and alleging that the FTC overreached its bounds in seeking to enforce the rule against physicians.   A similar complaint by the American Bar Association (ABA) is currently making its way through the appeals process after the U.S. District Court for the District of Columbia enjoined enforcement of the rule against lawyers.  Until a ruling is issued in the ABA case, the AMA case will be held in abeyance and physicians will be safe from the “Red Flags” rule.

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.

GAO Testimony Recommends Stronger Contractor Oversight to Prevent Medicare Fraud, Abuse, and Waste

(June 23, 2010): In her June 15, 2010 testimony before Congress, GAO Health Care Director Kathleen M. King made clear that the Centers for Medicare & Medicaid Services (CMS) continue to face substantial challenges to preventing Medicare and Medicaid fraud, waste, and abuse.  Among the most significant of these challenges is lack of adequate oversight of the myriad contractors CMS relies on to process, pay, and audit the millions of daily Medicare claims.

King raised specific concerns about the national recovery audit contracting program’s failure to provide adequate post-payment review of large categories of claims.  Recall that recovery audit contractors (RACs) are private bounty hunters. 

“Because RACs are paid on a contingent fee based on the dollar value of the improper payments identified, during the demonstration RACs focused on claims from inpatient hospital stays, which are generally more costly services.” 

Therefore, GAO recommends that CMS direct othercontractors to focus on items and services known to have high levels of improper payments, such as home health and durable medical equipment.   What was it that RACs were supposed to be doing again?  Recall too that experience has shown that both ZPICs and PSCs do not necessarily strictly adhere to medical review standards established by CMS.  Instead, we have seen these contractors apply their own unwritten standards, often denying claims based on conjecture and speculation.

Finally, King’s testimony suggests that the RAC program alone does not resolve known improper payment vulnerabilities.  Where RACs have identified vulnerabilities, CMS still lacks policies and procedures to ensure that it “promptly (1) evaluates findings of RAC audits, (2) decides on the appropriate response and a time frame for taking action based on established criteria, and (3) acts to correct the vulnerabilities identified.”  GAO’s recommendations in this respect seem to fall under the category of “This isn’t happening now?” 

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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