Under Siege: CMS Audits Take Their Toll on O&P
August 2013 Issue
Pendulums swing. Processes evolve. Perspectives and philosophies change. These facts may be an inevitable part of life, but as O&P professionals face this tempestuous chapter in the industry's history, many do so with grim expressions and trepidation about the future, fearful that the pendulum has swung too far one way and may not swing toward the center in time to save businesses under siege.
Tales of O&P facilities that have endured Medicare contractor audits within the last 12 months are rampant, and a common thread throughout these stories is that facilities continue to pay a price, regardless of the audit's outcome.
There's a strong and pervasive sentiment that this crisis, engendered by the Centers for Medicare & Medicaid Services' (CMS') August 2011 "Dear Physician" letter that some regard as a declaration of war, is not really about investigating Medicare fraud and seeing malefactors punished but about finding creative methodologies and loopholes that save and recover money, legitimately or otherwise. (Editor's note: Follow the link for more information on the "Dear Physician" letter.) Introduce the subject of Recovery Audit Contractor (RAC) audits, and sources are passionately and colorfully outspoken-terms like "witch hunt," "bounty hunters," "crooks," "mercenaries," and "hired guns," were frequently heard (but not attributable!).
A daunting overabundance of testimony provides painful reasons for bitterness and anger, as well as the other stages of grief, as Dennis Clark, CPO, president, Orthotic and Prosthetic Group of America (OPGA), Waterloo, Iowa, points out. "This is an odd twist for us, as we have been helping persons who are grieving the loss of function due to amputation or a neurologic/orthopedic disruption, but as a profession, we are also grieving. Each of us is experiencing denial, anger, bargaining, depression, or acceptance."
OANDP-L listserv postings claim variously that 17 percent of Medicare Region B's small O&P facilities have closed due to audits, while 75 percent have cut staff. OPGA's Speak4OandP website, www.speak4oandp.com, showcases videos describing similar plights of affected businesses from 37 states-many of them well established and highly respected.
Bruce "Mac" McClellan, CPO, LPO, FISPO, FAAOP, Prosthetic-Orthotic Associates, Tyler, Texas, and immediate past president of the American Academy of Orthotists and Prosthetists (the Academy) reports hearing of several practice owners who anticipated closing due to cash flow issues as a result of audits demanding the recoupment of payments for multiple devices. Other owners have told him of employee layoffs.
Rob Cripe, senior vice president of global marketing, Freedom Innovations, Irvine, California, has seen some customers go out of business while most fight and succeed. "The issue is can you absorb the cash flow problem while you're fighting [an audit]? That's why the smaller customer is so greatly affected- because they can't afford to have 30 to 40 percent of their revenue being held up for three or four months."
Clark counts 15 members that have canceled OPGA memberships this year. "The majority have either sold out or merged with another company; maybe three just closed their doors and are pursuing other opportunities."
"Like everyone else, our members are suffering," Catherine Pruitt, president of the PrimeCare Network for Orthotic, Prosthetic, Pedorthic & Complex Rehabilitation, Germantown, Tennessee, says. "This is particularly true with the smaller facilities that may not have the cash flow or resources to bounce back from the effects of multiple denials, appeals, and recoupments that date back two to three years after the prosthesis has been delivered. The lag time in getting before an ALJ [Administrative Law Judge] is getting longer and longer, of course, with the explosion of audits. Our members' horror stories track right along with what everyone is seeing on the [OANDP-L listserv] and talking about in general."
Snell Prosthetic & Orthotic Laboratory, Little Rock, Arkansas, CEO Rick Fleetwood, MPA, tells of a Kentucky O&P business owner with a 36-year history who announced at the American Orthotic & Prosthetic Association (AOPA) Policy Forum that he would be closing his doors as a result of the audits. "And he's not alone," Fleetwood says. "Most of the hardest hit are one-, two-, or three-facility companies. If you lose an audit on a $30,000 to $50,000 item it hurts any company, but it's devastating to the mom-and-pop operations."
Ray Fikes, CPO, Fikes Brace & Limb, Mesa, Arizona, has been forced to lay off a technician and two clinicians due to financial constraints from the audits. He now has to cover three offices himself and has to make a six-hour round trip to reach one of them. He says that although it was not in their already tight budget, "We hired a lawyer as our compliance officer, and I would advise others to do the same if you can afford it. It's vital to dot the i's and cross the t's-and make sure it's all done right."
John Tyo, CP, BOCP, Syracuse Prosthetic Center, New York, who utilized patient support to save a business critically threatened by RAC audits, points to other practices' similar struggles.
(Editor's note: Read more about Tyo's story in "Advocating for Ambulation," in the June 2013 issue of The O&P EDGE.)For example, an owner of a 45-year family business, who has also been a practitioner for 21 years, told AOPA Policy Forum attendees he has had to release half of his six-person staff, including a relative, because he has been targeted by more than 20 prepayment RAC audits on every K3 Medicare patient in his files. Investigations were pending after 11 months, and he was still due $300,000. Unfortunately, in the time since he gave his testimony, he has closed his practice.
Tyo compares the situation to the McCarthy Era. "This is no different, only a lot more people are going to be affected and livelihoods are being ruined. Everybody in my facility right now is fearful for their jobs and their future."
Due to staff limitations, these small businesses are often ill prepared to deal with audits.
Kimberly Hanson, director of reimbursement-North America, Ottobock, Minneapolis, Minnesota, tracks the number of reimbursement support calls Ottobock receives, and reports that calls have increased 40 percent over six months-primarily with regard to more expensive devices. "People are afraid to bill for something they may not get paid for. It's a really common comment."
Due to the prepayment reviews and the intense focus on prosthetics, customers relate that they are not receiving payment from CMS within the usual 30 days. "It's now 180 or even 210 days, so it's definitely impacting their cash flow," she says. "We're hearing 12 to 18 month delays with ALJ hearings, which are a challenge." Hanson adds that she often hears them wonder, "Should they-can they-build that Medicare cash flow into their business?"
How many in the profession are being impacted by the RAC audit crisis? "My gut will tell you 100 percent," says Aaron Sorensen, CPO, who also provides reimbursement consultation through O&P Billing Solutions, Murfreesboro, Tennessee, where he is getting calls and e-mails every week. "College friends are calling to ask for advice; I'm hearing from large and small business owners alike. They're forced to hire additional staff-and not value-added staff; it's an extra expense with no return except further loss prevention.
"We are seeing K3 components utilized less frequently because it's easier for a prosthetist now to medically justify K2-level components-and of course that's affecting the momand- pop shops because they have revenue coming through for the same numbers of patients they have had traditionally but fewer reimbursement dollars per patient.... That, coupled with increased expenses, is pinching the small independent practice," he notes.
Peter Thomas, JD, shares his concern. "The big question is not whether providers will go out of business-obviously that's a major problem. But the real question is the chilling effect this will have on prosthetic prescription. A number of practitioners seem to be moving toward more common or routine prescription of functional-level two components, rather than functional-level three components, even if the patient has the potential to function at level three. This is a mistake," Thomas asserts. "Practitioners need to stand by patients and fight for them to receive the most appropriate and functional prosthesis needed by the beneficiary. It's a major patient access issue."
While smaller practices seem to be in the greatest peril, larger businesses are feeling the heat as well. "I'm a 34-year veteran of the O&P field," says Roger Marzano, CPO, CPed, vice president of clinical services, Yanke Bionics, headquartered in Akron, Ohio, which has 16 locations. "This is changing the face of the prosthetics industry right now. There are businesses in Ohio that are considering closing or have laid off practitioners because of what's taking place. It's really a very scary time.
"As a fairly large business, we do a significant amount of volume, and the higher your volume...the higher your risk of being subjected to an audit."
Across the board, Marzano is experiencing an increase in documentation requirements not just from Medicare, but from other insurers as well. "The private insurers that carry a Medicare buyout policy are doing the same thing. Humana and Medical Mutual have all subjected us to various audits of some sort. Oftentimes it's a post-payment audit. They initially paid us for it, but then we have to backtrack and jump through hoops. And these aren't even heavy, high-dollar prosthetic claims."
Clearly, even winning can be expensive. Brian Gustin, CP, president, Forensic Prosthetic & Orthotic Consulting, Suamico, Wisconsin, also observes that for his reimbursement consultancy's clients, victory comes with a price tag: "One particular company with a recent recoupment in the seven-digit area got it all back by responding appropriately on each of their claims. In the meantime, however, it killed their cash flow since they had to pay the money back or pay an exorbitant amount of interest on the money if they lost their appeal. They were forced to draw on a line of credit, but the interest rate on a line of credit was a whole lot less than the 11 percent interest rate the government was charging if you didn't pay the money back. Find me a CD [certificate of deposit] today where I can get 11 percent interest!"
The threat to O&P practices is not limited to CMS. Fleetwood says that many other payers duplicate what CMS does, and this adds to the burden. "For most companies, Medicare is probably the leading payer source; our company registers about 50 percent, which is substantial. Private payers, rehab, state Medicaid, and the VA [U.S. Department of Veterans Affairs] constitute the other 50 percent."
Fleetwood notes that Snell P&O Laboratory, with 11 Arkansas locations, has also suffered setbacks as a result of the audits and plans to pursue several cases to the ALJ appeal level. The company has restructured, with one staff member earmarked as a reimbursement watchdog and all others awareness-trained concerning CMS requirements.
"It won't be long," he warns, "before local Medicaids will be performing audits, too."
He points out that the consequences the patients suffer are more serious, however. "Attempts to get the appropriate and complete documentation from doctors-which is required before we can provide service-has caused delays of nearly nine months in delivering prosthetic devices to patients. If we're not able to get them taken care of in a timely manner and they remain wheelchair-bound, their overall health is increasingly affected-they gain weight, they lose weight, they grow depressed. It creates additional and unnecessary suffering for them."
Unavoidable customer service issues are frustrating Sorensen's patients, too. Patients in need of a new prosthesis or socket don't understand why a return visit to their physician is necessary to get documentation-and why, meanwhile, temporary repairs or adjustments to their existing device must tide them over during the potentially lengthy delay.
Are Orthotics and Pedorthics Immune?
Not only are orthotics and pedorthics not safe from the RAC audit threat, but pedorthic providers point out that this is old news to them.
Fleetwood identifies the 1993 Medicare Therapeutic Shoe Bill as the first shot that was fired in this battle, igniting a major audit that was dangerously debilitating to many companies-so much so that many companies decided it was not worth it, says Fleetwood. "They quit providing diabetic shoes and inserts to patients because it was too much trouble.... Many claims were denied and millions of dollars lost by providers not for lack of appropriate documentation from the OP&P practice, but from the prescribing doctors. Many legitimate and respected companies were forced out of business entirely."
Dennis Janisse, CPed, president and CEO, National Pedorthic Services, headquartered in Milwaukee, Wisconsin, remembers those days as well. He jokes about the first phone call he received 18 months ago from a prominent prosthetist who was shocked by the initial news that CMS was demanding additional and detailed physician documentation for prosthetic devices.
"Welcome to my world," Janisse responded. "The pressure has been on pedorthists for years, and many of the people I talk to at meetings just plain can't keep it up anymore. They're just going to discontinue pedorthics because the reimbursement continues to decline steadily-and every penny counts for us because the profit margin in shoes and inserts is nothing compared to what the prosthetists and orthotists are doing."
He's making changes to adjust to conditions, working harder and longer for a diminished return, and he is preparing to appeal a significant Medicaid audit. "There's nothing wrong with me working," he explains. "I have no plans of retirement, but this isn't what I thought I'd be doing at this stage of my life."
Opinions differ on whether orthotics are being targeted by the RAC audits, but if they aren't, they soon will be, most agree. "I anticipate that everything is going to be on their list at the end of the day," Hanson notes. "They're finding too many things wrong to be able to stop looking."
Although orthotics, for the most part, have been spared in the audit prepayment claims review process, Dave McGill, JD, vice president of legal affairs, Össur Americas, Foothill Ranch, California, notes that "we signaled months ago in our reimbursement and regulatory bulletin that this was likely to expand to the orthotic space, and in fact, all indications are that that is already starting to happen. Some practitioners were hit late last year on custom orthotic claims, and there has been significant audit activity in first quarter 2013 around issues the OIG's [Office of the Inspector General's] annual report identified as potentially abusive orthotic coding practices."
"It's coming!" says Sorensen. "RACs and CERT [Comprehensive Error Rate Testing auditors] just haven't gotten around to it. The low-hanging fruit are the higher priced claims for prosthetics; as they weed through those claims, now they're going to start looking at orthotics. If small business owners haven't changed their practices, they're about to get hammered on orthotics, too."
Not only are individual practices suffering at levels up to and including bankruptcy closures, but the ripples are also being felt throughout the profession.
"We're seeing it affect everything-cash flow, expenses, customer service-you name it. It's just crazy right now," Sorensen says.
Ancillary provider groups report an impact on member recruitment. Candidates research more carefully and bring higher expectations with their membership commitment, reports Pruitt. "It is much more difficult for independent facilities to budget beyond the basics when they have no idea what is going to be denied or recouped by Medicare from one day to the next."
Attendance at PrimeCare's educational symposiums continues to grow, especially in recently "beefed-up" administrative/ management tracks with a heightened focus on reimbursement issues. "Attendance in these classes has increased tremendously in the audit environment," Pruitt notes.
Manufacturers have likewise seen a change in buying patterns, as they monitor and devise ways to assist customers with struggles; the word "survival" can be used without melodrama in some of the cases they see.
"We see a different mix in ordering from our product portfolio," Cripe notes. "K3 products are being used less frequently by customers who shift over to K2 products, probably in an attempt to reduce the likelihood of their being audited. We're trying to address this, in part, by developing products that can more competitively compete in this space."
Yet still, marvels Tyo, an astonishing number-perhaps 70 percent of the profession, he speculates-do not really understand the gravity of the situation. "I've been in this field for 40 years and had even read warnings about the RAC audits, but my head was in the sand. I thought it was impossible, unenforceable, until it happened to me. As an industry, we are doing a poor job of getting the idea across of how devastating this is when it happens."
Chillingly, CMS seems to regard the RAC audit program as successful, Sorensen believes, based on the recent Medicaresponsored meetings he has attended. "If successful means putting small businesses out of business and making geriatric patients with disabilities wait for quality care and fitting a lesser quality device on a patient to avoid being audited, I guess they're right. They're looking at the raw, hardcore dollar, not at the face of the patient or small business owner behind that dollar who is being drastically affected.
"The repercussions within the next one to three years are going to be crazy-with fewer providers to go to, fewer qualified people entering the field because of these problems. It's already spinning out of control."
Judith Philipps Otto is a freelance writer who has assisted with marketing and public relations for various clients in the O&P profession. She has been a newspaper writer and editor and has won national and international awards as a broadcast writer-producer.
Editor's note: For proposed solutions, see "Fighting Back: Strategies to Address the RAC Audit Threat in this issue."