<h4><i>Fraud and Abuse Implications of Future CMS Activities<\/i><\/h4>\r\n<img style="float: right; border: 1px solid gray; margin: 0px 0px 10px 10px;" src="https:\/\/opedge.com\/Content\/OldArticles\/images\/2010-10_01\/10-01_01.jpg" alt="" \/>\r\n\r\nIn recent years, heavy emphasis has been placed on catching fraud and abuse in the Medicare program and moving away from the "pay and chase" model that has come to characterize the Medicare payment system. Congress and the administrative agencies including the Centers for Medicare & Medicaid Services (CMS) have addressed this focus by encouraging Medicare contractors of all types to engage in claims review to ensure that claims are properly paid and that improperly paid claims are identified and the money is returned to the Medicare program.\r\n\r\nIn the broader context of the effort to fight fraud and abuse, the focus on overutilization has led to the creation of the Recovery Audit Contractors (RACs) as well as a number of other program integrity contractors including Program Safeguard Contractors (PSCs) and Zone Program Integrity Contractors (ZPICs). These audit contractors have vigorously investigated claims by a wide variety of providers and suppliers under the Medicare program and continue to do so. While the O&P profession has largely been spared to date, many other segments of the healthcare industry have been weighed down by the burden imposed by such audits.\r\n\r\nA prime example of this is the inpatient rehabilitation hospital and unit audits. These audits have been carried out through:\r\n<ol>\r\n \t<li>probe reviews by fiscal intermediaries;<\/li>\r\n \t<li>audits under the RAC three-year demonstration project; and<\/li>\r\n \t<li>current and ongoing investigations by the PSCs\/ZPICs.<\/li>\r\n<\/ol>\r\n \r\n\r\nOther areas that have been heavily hit include hospitals related to short inpatient stays for observation and\/or treatment following emergency room admissions, and durable medical equipment (DME) suppliers related to wheelchair bundling and the provision of urological supplies.\r\n\r\nIn fact, DME has been a highly suspect area under many of the fraud and abuse initiatives begun in recent years. Given the O&P field's close relationship to DME in the eyes of many at CMS-as evidenced by the traditional tendency to lump the two fields together-it is not surprising that some contractors have recently turned their eyes to O&P practitioners and suppliers.\r\n\r\nThe RACs already have a smattering of issues listed among their audit targets that deal with O&P suppliers. Within the past few weeks, the RACs have begun listing the first "complex medical review" issues they plan to target in the future. These are audits aimed at determining whether services provided were appropriately documented as reasonable and necessary. With the relatively high reimbursement levels available for O&P care within the durable medical equipment, prosthetics, orthotics, and supplies (DMEPOS) benefit, it is likely that additional O&P scrutiny will develop, perhaps in the near future. In light of the potential for future audits and the relative inexperience of the O&P field with the auditing environment as it currently exists, this article is designed to provide a broad overview of the auditing and appeals process within the context of the broader fraud and abuse environment.\r\n<h3>Part I: Medicare Audits<\/h3>\r\n<h4><em>Meet the Contractors<\/em><\/h4>\r\nAs indicated above, there are a number of Medicare contractors engaged in claims review, payment, and auditing. Their various rights and responsibilities are listed below.\r\n<h4 style="font-style: italic; color: #ef6531;">RACs<\/h4>\r\nCongress established the RAC demonstration as a three-year demonstration project for three states that was later made permanent and extended to all 50 states. The permanent RACs have been operational throughout the course of the past year. RACs are tasked with identifying Medicare overpayments and underpayments although few expect RACs to aggressively seek ways to pay providers more than they billed to Medicare for patient care. One of the most troubling incentives to RACs involves the method in which they are paid by the federal government: <i>They receive a percentage of the identified errors as payment for their services.<\/i>\r\n\r\nCMS has not issued any specific regulations governing the RAC program though the RACs are required to adhere to certain existing regulations governing the Medicare program as well as the manual provisions set out in the Medicare <i>Program Integrity Manual (PIM).<\/i> In the absence of implementing regulations, the tasks set out for RACs are primarily encompassed in the permanent RAC Statement of Work (SOW).\r\n\r\nUnder the SOW, RACs are required to identify overpayments (and underpayments) in a variety of areas, including those resulting from incorrect payment amounts, payments for non-covered services-including services that are not considered reasonable and necessary under the Social Security Act-payments based on incorrect coding, and payments made for duplicate services, with certain exclusions.\r\n\r\nThe RACs have the power to review a supplier's claims for up to three years following payment, as long as they do not go back further than October 1, 2007. The RACs have the power to conduct both automated and complex reviews. "Automated review" is performed on the basis of the information submitted by the provider with the claim for payment and typically addresses issues such as medically unlikely codes and duplicate claims. "Complex review" is more advanced and involves requesting medical records from the supplier.\r\n\r\nRACs are supposed to be limited in the number of medical records that can be requested at one time from a single supplier, but the applicable limits for entities providing professional services and DME suppliers have not been publicly released.<sup>1<\/sup> Otherwise, RACs are given fairly broad authority to audit suppliers, including O&P suppliers.\r\n\r\nOne additional limitation on the RACs' review of claims is the requirement that they obtain approval of each new issue to be audited. CMS' New Issue Review Board must examine each RAC's plan for auditing activity in a specific area and approve the audit before it begins. For instance, RACs may request permission from the Review Board to audit the provision of microprocessor-controlled components or various types of prosthetic feet.\r\n<h4 style="font-style: italic; color: #ef6531;">PSCs and ZPICs<\/h4>\r\nPSCs are Medicare contractors created by Congress in 1996 to fulfill program integrity functions under the Medicare program, including fraud and abuse detection and deterrence. They are now joined-or in some instances replaced-by ZPICs, which are auditing contractors with functions similar to the PSCs. These contractors are given the authority to review claims under the same basic rules as the RACs for purposes of identifying fraud primarily, operating pursuant to CMS' <i>PIM<\/i>.\r\n\r\nUnder this authority, PSCs\/ZPICs are empowered to carry out post-payment audits of suppliers, including O&P suppliers. As with the RACs, such reviews may be carried out regardless of any other ongoing reviews, investigations, or audits. In fact, PSCs\/ZPICs and RACs are often directed to, or gravitate toward, the same areas of concern because they rely on the same sources for identifying alleged "problem areas" within the Medicare program, including reports from the Office of the Inspector General (OIG) and other government publications. Therefore, it is possible that multiple contractors could request multiple patient files within the same time frame.\r\n<h4 style="font-style: italic; color: #ef6531;">Carriers and Medicare Administrative Contractors<\/h4>\r\nUnder the Medicare program, carriers and their replacements, the Medicare Administrative Contractors (MACs), constitute the first line of review for most Medicare Part B claims, including those for O&P items and services. These contractors are responsible for making the majority of initial payment determinations. Along with this responsibility comes the authority to conduct reviews of those claims submitted to ensure they are properly documented and reimbursable.\r\n\r\nCarriers and MACs are also given discretion to perform post-payment review. Because they fall under the Medicare Integrity Program, in addition to their primary review and payment functions with respect to claims, carriers and MACs have the same scope of responsibilities and the same basic set of tools as the PSCs\/ZPICs in post-payment review situations.\r\n\r\nDespite the allowance for significant post-payment review activities, the carriers and MACs appear to primarily focus on their claim review functions on a pre-payment basis, with occasional probe reviews of suppliers. In certain instances, carriers and MACs may even place individual suppliers on 100 percent pre-payment review, requiring additional documentation for every claim submitted. However, the use of such methods is supposed to be limited to those instances where a prior probe review indicates a "sustained or high error rate" in claims submission. Furthermore, even where 100 percent pre-payment review is permissible, it is typically limited to a one-year period, with quarterly evaluations of the supplier's error rate.\r\n<h4><i>Extrapolation<\/i><\/h4>\r\n"Extrapolation" is a concept that should keep O&P suppliers up at night. It is by far the most burdensome authority the Medicare contractors possess. Under certain circumstances, most Medicare contractors involved in auditing claims can extrapolate their findings to cover many more claims than just those actually examined. In extrapolations, the contractor samples a relatively small number of claims and then uses the results of that review to estimate the overpayment due from a larger universe of claims that frequently spans anywhere from one to three years. Under extrapolation methods, the resulting overpayment determinations can be staggering. The only necessary finding by a contractor to support the use of extrapolation is that the supplier's error rate was found to be "high or sustained" or that previous education provided to correct erroneous billing has in some way failed.\r\n\r\nAlong with the PSCs\/ZPICs, RACs have also been given authority to use extrapolation methods as a part of their claim auditing functions. However, RACs must have explicit approval from the New Issues Review Board to use extrapolation in their audits. While CMS has indicated that it is unlikely that the RACs will use such tools, in light of the RACs' contingency-fee payment structure, there are obvious incentives in place for them to minimize the administrative drain on their staffs and maximize their return by extrapolating large overpayment amounts from relatively small samples of claims.\r\n\r\nCertain aspects of an extrapolation are not appealable; for example, the determination that an error rate is "high or sustained." Nonetheless, suppliers do have means of challenging extrapolations. First, the supplier may always use the normal administrative appeals process to challenge the findings for the individual claims specifically identified by the contractor as improper overpayments. A favorable outcome for each case in an extrapolated sample will have an exponential effect in reducing the amount of the overpayment. Each individual claim that is appealed and decided in favor of the supplier is no longer considered an overpayment, and the supplier will be paid for that claim. However, the overpayment extrapolation is also reduced by the percentage represented by that individual claim in the sample. This exponentially decreases the amount of the extrapolated overpayment.\r\n\r\nIn addition to challenging the underlying claims denials, suppliers can also challenge the extrapolation itself, including the methodology used in the course of the extrapolation. An appeal filed can question the sampling methodology used by the contractor though fairly broad discretion is usually allowed to these contractors in creating samples. Challenging the methodology of an extrapolation usually requires the hiring of a statistician who is familiar with extrapolations of Medicare claim audits to appear at a hearing as an expert witness before an Administrative Law Judge (ALJ).\r\n\r\nAlternatively, the actual propriety of carrying out the extrapolation in the first place may be challenged. As noted above, there are limits on the use of extrapolation. Under those limits, contractors may use statistical sampling for determining overpayments and extrapolating the results when "it has been determined that a sustained or high level of payment error exists, or where documented educational intervention has failed to correct the payment error." In the absence of such a finding, or where such a finding can be shown to be erroneous, the extrapolation can be attacked as improper in the administrative appeals process.\r\n<h4><i>Overlap of Contractor Responsibilities<\/i><\/h4>\r\nResponding to repeated admonitions from Congress about Medicare overpayments and fraud and abuse, CMS has dramatically intensified its efforts to identify and correct claims payment errors. These efforts have been implemented through a variety of programs, utilizing a variety of private entities that contract with Medicare to provide oversight. However, whenever a new set of contractors-such as RACs and ZPICs-has been tasked with oversight and auditing functions to identify overpayments, rarely has similar authority been removed from the other contractors already operating in that capacity.\r\n\r\nThis has resulted in Medicare providers and suppliers being exposed to multiple contractors with concurrent and duplicative authority to audit Medicare claims on a post-payment basis (in addition to those involved in pre-payment reviews). Compounding this confusing situation is the fact that an ongoing audit by one contractor will not necessarily keep a supplier from being simultaneously audited by another contractor with virtually the same authority to conduct claims review.\r\n<h3>Part II: The Administrative Appeals Process<\/h3>\r\nSuppliers have specific appeal rights for every denial that results from a contractor's audit. These appeal rights are set out in the regulations and are required to be communicated to the supplier as a portion of the written denial. In all instances and at all levels, the supplier's appeal must be made in writing, identify the issues that the supplier disagrees with, and be submitted within the time frame allowed for that specific level of appeal. Careful attention should be paid to the instructions provided by the denying contractor to avoid technical dismissals and denials of appeals on the basis of omitted information or failure to comply with the proper appeal process or appeal format.\r\n<h4><i>Appealing O&P Claims Denials: The Basics<\/i><\/h4>\r\nThere are five basic appeal levels for any Medicare provider or supplier, including O&P suppliers, and each level of appeal must be pursued in order to gain access to the next appeal level:\r\n<ol>\r\n \t<li>Redetermination.<\/li>\r\n \t<li>Reconsideration.<\/li>\r\n \t<li>Administrative Law Judge (ALJ) hearing.<\/li>\r\n \t<li>Medicare Appeals Council (Council).<\/li>\r\n \t<li>Federal district court.<\/li>\r\n<\/ol>\r\n \r\n\r\nEach level has a different time frame for submitting a request for an appeal. At the "redetermination" level, where the appeal is always filed with the carrier or MAC regardless of what contractor issues the denial, a supplier has 120 days from the date of receiving the initial denial to file a request for redetermination. The carrier or MAC has 60 days to issue a redetermination decision.\r\n\r\nIf the redetermination results in continued denial of the claim, the supplier may proceed with a request for "reconsideration." A reconsideration decision is issued by another Medicare contractor known as a Qualified Independent Contractor (QIC). The QIC is obligated to have clinical personnel examine the claim, <i>not<\/i> billing clerks or other non-medical staff. The intent is for the QIC to give the appeal a closer examination from a medical perspective, but experience has shown that in most instances, the QIC is little more than another level of review prior to gaining access to an ALJ. The supplier has 180 days from the date of the redetermination decision to file an appeal with the QIC. The QIC then has 60 days to issue its decision on whether to overturn or continue to deny the claim.\r\n\r\nIf the claim is again denied, the supplier may request a hearing before an ALJ within 60 days of the reconsideration decision. Upon receiving such a request, the ALJ has 90 days to hold a hearing and issue a decision on the claim. The ALJ hearing is generally a fair forum for Medicare providers and suppliers. ALJs are employed by CMS but tend to be fairly independent in their thinking. The ALJ hearing itself is usually held by teleconference and is non-adversarial, which means that the government usually does not participate and cannot cross-examine the supplier.\r\n\r\nALJ hearings should not be taken lightly, however. ALJs are administrative court judges, and providers should be prepared to make their case and understand the rules before entering into such a hearing. Depending on the size of the claim or claims at issue, engaging legal counsel should be seriously considered prior to and during an ALJ appeal, especially in the case of large overpayments or extrapolations.\r\n\r\nIf the ALJ continues to deny the claim, the supplier may proceed to seek review by the Medicare Appeals Council by filing a request for review within 60 days of the ALJ's decision. The Council has another 90 days to issue its own decision on the claim. At that point, if the Council also denies the claim, the supplier's only remaining option is to proceed into federal district court by filing an appeal within 60 days of the Council decision. Given the costs of federal court litigation, it is likely that the only claims appealed to this level of review in the O&P field are likely to be high-dollar extrapolation cases.\r\n<h4><i>Important Details: Time Deadlines<\/i><\/h4>\r\nProviders and suppliers can accelerate the appeals process by quickly addressing appeal denials and filing early at each level of appeal. But this is not always possible considering the everyday demands on the typical O&P practice. In those instances when providers and suppliers are not able to turn appeals around quickly, specific deadlines apply that are critical to understand.\r\n\r\nEach of the appeal time frames is governed by a specific set of rules as to when an appeal is considered to be received, how many days are allowed for mailing of such requests, and what happens if any of these deadlines are missed, either by the supplier or by the entity deciding whether to overturn or continue to deny the claim. With respect to receipt of an appeal, the appeal is considered to be "filed with" the reviewing entity on the day it is actually <i>received<\/i> by that entity, <i>not<\/i> the date of mailing. Therefore, adequate time for mailing an appeal must be built into the relevant time frame in order to ensure an appeal is filed in a timely manner.\r\n\r\nBecause the time frame for filing an appeal begins on the date of the supplier's receipt of the underlying decision, it is commonly presumed that five days will lapse between the date a decision is issued by a decision maker and actual <i>receipt<\/i> of that decision by the supplier. It is typically allowable to add these five days to the time frame for filing the next level of appeal unless it can be proven that a different number of days should be added. Proof usually consists of the presence of a date or time stamp on the decision letter indicating when it was actually received by the supplier.\r\n\r\nIn the event that a supplier misses the time frame for filing an appeal, it may be possible to request permission to file late, if the supplier can show good cause for missing the original deadline. "Good cause" is usually reserved for instances involving mailing to incorrect addresses, failure to receive the underlying decision, and natural disasters. If an appeal is filed and later dismissed by the reviewing entity because it was filed late, the supplier has the option to either request that the entity dismiss the appeal, reconsider that dismissal and vacate it on grounds related to good cause for filing late, or dispute that the claim was filed late. Alternatively, the supplier may also appeal the dismissal to the next higher level. However, if that level of appeal upholds the dismissal, the supplier's rights to continue the appeal are effectively ended.\r\n\r\nThe contractors and other decision-making entities in the appeal process are also tied to deadlines for issuing decisions when an appeal request is made. Except at the redetermination level, provision is made under the regulations for "escalating" such appeals in the event a decision maker fails to comply with his or her deadline. Escalation may be accomplished by first notifying the overdue decision maker of the supplier's intent to escalate the case to the next review level without an underlying decision, and allowing for a short time period for the decision maker to issue his or her decision. In the absence of such a decision, the supplier may appeal to the next level without first obtaining a decision from the contractor or reviewing entity that missed its deadline.\r\n<h3>Part III: Specific Issues Critical to the Appeals Process<\/h3>\r\n<h4><i>Reopening Claims<\/i><\/h4>\r\nPost-payment review by a Medicare contractor involves "reopening" a claim that has already been favorably determined and paid. Regulations limit the ability of contractors to reopen claims to certain time periods. Specifically, contractors may reopen claims for any reason within one year of the initial payment date. In addition, a contractor may reopen a claim between one and four years if the contractor shows good cause for reopening. A contractor may establish "good cause" when there is new and material evidence that was not available or known at the time the original payment determination was made and which may result in a different conclusion, or when there is evidence that was considered in the determination that shows an obvious error.\r\n\r\nAfter the four-year mark from the date of payment, a contractor may only reopen a claim when fraud or similar fault can be shown. Theoretically, these limitations on reopening paid claims provide some protection and some certainty for suppliers that once a determination is made to pay a claim, the supplier will not have to maintain documentation supporting the claim indefinitely. Functionally, however, CMS has taken the position that a Medicare contractor's assertion of good cause for reopening a claim may not be reviewed by an ALJ or the federal courts upon appeal by the supplier. Therefore, while the good cause standard for reopening claims does exist in the CMS regulations, it is not actually enforced, and contractors frequently circumvent the requirement to demonstrate good cause without consequence.\r\n<h4><i>Recoupment of Overpayments<\/i><\/h4>\r\n"Recoupment" is the process by which Medicare obtains repayment of an identified overpayment by offsetting it against amounts owed to a supplier related to other claims. There is a limitation on recoupment that applies at the first and second levels of the appeal process if a supplier takes the necessary steps to trigger the protection. Specifically, if a provider files a request for redetermination within 30 days of the initial determination denying the claim, the contractor shall not begin recoupment on the denied claim until a final redetermination decision has been issued on that claim.\r\n\r\nThis limitation may be continued at the reconsideration level if the claim is denied at the redetermination level. To continue the protection, the request for reconsideration must be filed by the supplier within 60 days of the redetermination decision. If the reconsideration decision is unfavorable to the supplier, no further limitation on recoupment is allowed, and the overpayment amount will be recouped following the issuance of the reconsideration decision. The provider may also pay the government the amount of the alleged overpayment in full at any time during the appeal process and recover that amount if the appeal is eventually reversed in favor of the provider. It is important for a supplier to remember that even though recoupment may be limited, interest continues to accrue on the outstanding overpayment amount.\r\n<h4><i>Interest Payments<\/i><\/h4>\r\nFor all post-payment claim denials, interest due from the supplier to Medicare accrues from date of final determination until the amount owed is repaid. Thus, as noted above, for a supplier who avoids recoupment of the denied reimbursement during the first and second levels of appeal, if that supplier is not successful in getting the denial reversed before appealing to an ALJ, interest penalties are incurred. The rate of interest is set by regulations and currently hovers around 11 percent. Upon the issuance of a fully or partially unfavorable reconsideration decision, the supplier will immediately owe Medicare both the amount of the claim alleged to be an overpayment and the interest that has accrued on that amount since the claim was initially denied.\r\n\r\nOn the other hand, when a claim denial is overturned in favor of the supplier during the first or second appeal levels, interest due to the supplier from Medicare accrues only from the date of the final determination. For those claims reversed in favor of a supplier by an ALJ, the Council, or a federal court, interest due to the supplier accrues from the original date of recoupment. Thus, at the higher levels of appeal, for any amounts recouped from the supplier prior to an appeal being filed, the supplier is entitled to interest from the date the money was actually taken back by the Medicare program. Similarly, for money recouped after a QIC's unfavorable reconsideration decision, the supplier is entitled to interest accruing from that date.\r\n\r\nUnfortunately, at the higher appeal levels, these interest provisions are rendered moot because of the method of repayment chosen by the supplier at the outset. Under the final regulations, the interest provisions are only applicable to those overpayments that are repaid through "recoupment," which is the recovery of outstanding Medicare debt through offset against other Medicare payments due to the supplier. For suppliers who choose to pay off alleged overpayments immediately through a lump sum or through an extended repayment plan, interest payments are not paid to the provider for the period of time between the lump sum repayment and the decision in favor of the provider.\r\n<h4>Conclusion<\/h4>\r\nThis article is intended as a broad overview of many of the issues related to auditing as it is currently undertaken by the various contractors in the Medicare program. Though it has not touched on every aspect of Medicare auditors and the appeals process, it should provide a good starting point for an O&P supplier's continuing education and preparation in dealing with these things under the Medicare integrity programs.\r\n\r\nThe most important take away from this article is the emphasis on suppliers knowing their rights and responsibilities under the auditing process as it progresses. A supplier's knowledge is the key factor in his or her success at being able to avoid audits, address ongoing audits, and successfully appeal any denials resulting from audits. It will also limit the chances of more serious enforcement actions by the federal government, including referrals for false claims and other fraudulent and abusive conduct.\r\n\r\nSuppliers can also take proactive steps in preventing audits by performing a self-examination of past and current claims to determine where their weaknesses lie. A self-audit may help to identify the areas where a supplier has the greatest exposure if a contractor were to approach the supplier about pre- or post-payment review.<sup>2<\/sup> The cost associated with such an effort is a small price to pay to avoid future audits and the burden that can come with pre-payment review or extensive RAC audits and even extrapolation.\r\n\r\nRegardless of whether or not a self-audit is undertaken, O&P suppliers should consider their preparedness for investigation by Medicare contractors as part of their overall commitment to regulatory compliance. Production of medical records once they are requested can be an administrative nightmare if record storage is not appropriately handled or if staff is not appropriately trained for dealing with the retrieval of and preparation for submission of additional documentation.\r\n\r\nIn addition to allowing O&P suppliers to appropriately prepare their own staffs for any potential audits, preparations should also be undertaken to identify and obtain legal counsel before responding to audit requests, without the added pressure of an immediately pending audit. By seeking counsel early and prior to the start of an audit, a supplier avoids the added pressure of having to obtain counsel while preparing for an immediately pending audit and may immensely aid itself by being as thoroughly prepared as possible and having thoroughly prepared staff in place.\r\n\r\nWhile it is almost inevitable that the O&P field will feel the effects of the heavy emphasis currently in place on Medicare integrity audits and fraud and abuse investigations, O&P practitioners and suppliers need not be taken by surprise. By taking proactive steps now to identify their vulnerabilities, know their rights and responsibilities, and prepare their staffs and facilities for any such audits, suppliers will go a long way toward protecting themselves going forward.\r\n\r\n<i>Peter W. Thomas, JD, serves as general counsel for the National Association for the Advancement of Orthotics & Prosthetics (NAAOP) and is a principal of Powers Pyles Sutter & Verville, PC. Christina A. Hughes, JD, is an associate of Powers Pyles Sutter & Verville, PC.<\/i>\r\n\r\n<hr \/>\r\n\r\n<sup>1<\/sup> It is likely that CMS will consider O&P suppliers to fall into one of these two categories.\r\n\r\n<sup>2<\/sup> However, any claims that a self-audit identifies as improperly paid must be repaid to avoid False Claims Act liability.