Kusserow’s Corner: Winning Strategies in Challenging Demand Letters

In a surprising number of cases, providers confronted with a demand letter from the government, or one of its contractors, fail to take proper action and often aggravate their situation. To have the best outcome, it is critical to properly prepare to (a) evaluate the reliability of methods used to create the demand letter; and (b) appeal a decision.

Determining Reliability/Confidence Behind a Demand Letter

The most common mistake providers make upon receiving a demand letter based upon over-payment extrapolation is accepting the sample used as valid and reliable. In many cases, if not most, it is not. The sheer volume of cases has led contractors and government agencies to cut corners or be sloppy in how they draw their claims sample. As such, challenging the analysis of the claims selected for review is the wrong approach to address the problem at a considerable cost of time and effort. It is far more useful to first determine the accuracy of the methodology employed to project the amount demanded. If it is flawed, the entire result is undermined and the conclusions questionable. A flawed sample of claims, resulting in low confidence and reliability, overstates the amount questioned many times what can be supported; exposing this may reduce the true error amount to a small fraction of the demand amount. Focusing on the individual claims used in the sample by the demanding party may only marginally affect their result.

If it can be determined that there was significant errors in the process, it is imperative to draw your own sample using a proper methodology, under federal government guidelines. The most credible approach is using the Office of Inspector General RAT STATS sampling method. Using an independent outsider expert to do the evaluation and be available to stand behind their results before the government and in a hearing before an Administrative Law Judge (ALJ), if necessary, can make all the difference. This would not only provide more credible results but puts the demanding party on notice that they face a real challenge that may encourage them to reach an early reasonable settlement. It is best to have this review done under attorney privilege, until the results of the independent review are known. This review is best performed by a law firm that is not an advocate of the organization and is viewed as independent.

Dr. Cornelia Dorfschmid, a nationally recognized expert on claims appeals, is frequently called upon to assist law firms in dealing with addressing demand letters. She makes the point that providing stronger and more persuasive evidence than the demanding party before the agency and ALJs is a winning strategy. She suggests that it is important to know the true error exposure. This can be done by using only a probe sample from a RAT STAT cell to gain a general understanding with what you are dealing. According to her, this probe sample would not be a true representation of the universe, and as such, would not have to be disclosed. What it will do is give your attorney an idea of the true situation. If the results are positive to the organization, the decision can be made to complete the sample. If there is a significant difference between the two findings, there can be room for finding a proper settlement. She emphasizes there is no substitute for having better methodology and data than the opposing party.

Proper Preparation for ALJ Appeals

The second avenue of defense relates to those many cases that undergo appeals through the ALJ process. The Office of Medicare Hearings and Appeals (OMHA) admits to a growing backlog and delays in the ALJ appeals process that now often lasts 28 months. In addition, after a case is docketed it may be months before a hearing is scheduled and held, and a decision issued. The result is that the overwhelming number of appeals being filed and pending at OMHA will face significant delays in receiving a decision. Therefore, it is important to use strategies that will facilitate the appeals process. It is critical for providers to properly follow the Medicare claims appeals at the ALJ level of review and to take steps to facilitate a timely facilitation of issues with the best possible outcome. This means avoiding common mistakes that can delay or jeopardize an appeal. Many appeals are doomed from the beginning and languish in the long queue of cases. Therefore, providers and suppliers need to develop and use creative and responsive appeal strategies to improve the likelihood of success.

Tom Herrmann, who served six years as an Administrative Appeals Judge on the HHS Medicare Appeals Council and over 15 years with the development and implementation of the Medicare claims appeals process, notes that there is a lot that can be done to expedite the claims appeals process and improve the chances for a more timely and favorable appeal decision, including following various practices, techniques, and methods. He notes that many appeals are jeopardized as the appellant fails to properly organize and present evidence at the qualified independent contractor (QIC) level of review, as any “new” evidence presented later will be routinely be denied. He also states that the second biggest mistake made by providers is in the preparation and submission of an “Appeal Memorandum” or “Prehearing Brief” prior to a scheduled hearing. There is an art to this, as too little or too much information can work against the appellant. According to Herrmann, these are just a couple of issues that can make all the difference in timeliness and outcome.

By addressing demand letters with the two lines of defense cited herein, providers are sure to have a timelier and better outcome. These are, of course, only a couple of ideas among many that can be employed to obtain a fair adjudication from challenges to errors in claims submitted for payment.

Richard P. Kusserow served as DHHS Inspector General for 11 years. He currently is CEO of Strategic Management Services, LLC (SM), a firm that has assisted more than 3,000 organizations and entities with compliance related matters. The SM sister company, CRC, provides a wide range of compliance tools including sanction-screening.

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Copyright © 2013 Strategic Management Services, LLC. Published with permission.