Know the auditors and audit process, you’ll be audited someday

Providers and suppliers will be audited by CMS at some point, so it is important to understand the various types of audits and the appeals process, according the presenter of a Health Care Compliance Association (HCCA) webinar titled “Medicare Audits & Audit Appeals—From A to Z(PIC).” Scott R. Grubman, Esq., of Chilivis Cochran Larkins & Beyer LLP, focused his discussion on recovery audit contractors (RACs) and zone program integrity contractors (ZPICs) and the various steps of the audit appeals process, from the initial determination to judicial review.

RACs

Charged with “identifying and correcting improper payments through detection and collection of overpayments,” the RAC program started as a demonstration project and completed its first audits in 2011-2013. As new RAC contracts were awarded in October 2016, RAC audits will continue into the future. RACs are paid a contingency fee (somewhere between 7 and 17 percent of the recovery), but only when a favorable reconsideration is made, so they have a financial incentive to find and recover overpayments. According to Grubman, RACs “may not work on the side of fairness for providers.” But RACs are limited in the number of claims they can audit per provider per year and must maintain a 95 percent accuracy rate and an overturn rate of less than 10 percent. RAC audits, as well as MAC audits, are desk reviews, contrary to ZPIC audits.

ZPICs

Grubman warns to be careful when going through a ZPIC audit. ZPICs are tasked, for example, to investigate potential fraud and abuse and to refer parties for CMS administrative actions or for law enforcement; conduct investigations (not just as desk audits, but through interviews and onsite visits, too) and data analysis under the CMS Fraud Prevention System; and to identify the need for administrative actions such as payment suspensions. While RACs typically look at unintentional overpayments, ZPICs respond to intentional overpayments.

Audit process

Whatever the auditor that reviews the claim, an initial determination is first made as to whether the item and services are covered and the amount payable. The auditor then notifies the provider/supplier of the decision following specific notice requirements. A provider or supplier may appeal that decision, following this chronology:

1. Redetermination. A request for a redetermination must be filed within 120 calendar days from receipt of the initial determination, and within 30 calendar days to avoid CMS starting to recoup the overpayment. (Grubman suggests starting the count on the date listed on the determination, not receipt, to avoid running into any issues.) The redetermination involves an “independent review” performed by the same contractor (but a different individual). New issues may be raised by the contractor during redetermination, but a redetermination must be issued within 60 days from receipt of request.
2. Reconsideration. Within 180 days of the redetermination (or within 60 days to avoid recoupment), a party may file a request for reconsideration, which is an independent review of the evidence and findings conducted by a qualified independent contractor (QIC). QICs are bound by national coverage determinations (NCDs), CMS rulings, precedential Medicare Council decisions, and applicable laws and regulations. (Local coverage determinations (LCDs) and CMS program guidance is not binding but given substantial deference.) A QIC has 60 days to issue its reconsideration, and if the deadline isn’t met, the appellant can escalate to the next level of appeal.
3. Administrative law judge (ALJ). If the amount at issue exceeds $160, a request for an ALJ decision may be filed within 60 days of the reconsideration (recoupment cannot be avoided). A hearing is typically held either in person, video conference, or telephone, and parties may submit evidence and/or present witnesses. An ALJ decision is a de novo review and ALJs have wide discretion over the hearing. ALJs are bound by the same NCDs and laws and regulations and must give deference to non-binding authority as with reconsiderations. An ALJ must issue a decision within 90 days, however, there exists an immense backlog in issuing decisions, which has even become the subject of a legal challenge (see Court sets a timeline for Medicare claims backlog, December 6, 2016).
4. Medicare Appeals Council. Within 60 calendar days of the ALJ’s decision, a review by the Medicare Appeals Council may be requested. The Council’s review is limited to those issues the appellant claims to disagree with. Briefs are filed by the parties but no new evidence is provided. Typically a decision is made with no oral arguments and must be made within 90 calendar days.
5. Judicial review: Within 60 calendar days of receipt of the Council’s decision, a suit may be filed in the district court where the provider/supplier resides or has its principal place of business, with the Secretary of HHS named as defendant.

Feds allege 412 individuals responsible for $1.3B in Medicare fraud

In the largest health care fraud enforcement action by the Medicare Fraud Strike Force, 412 individuals allegedly participated in schemes involving almost $1.3 billion in false billings. The Department of Justice (DOJ) and HHS noted that the charges were levied against the individuals across 41 federal districts and included 115 doctors, nurses, and other licensed medical professionals. Over 120 defendants were named, including doctors for their roles in prescribing and distributing opioids and other dangerous narcotics. Thirty state Medicaid Fraud Control Units participated in the arrests. HHS also initiated suspension actions 295 providers, including doctors, nurses and pharmacists.

The Medicare Fraud Strike Force cases are being prosecuted and investigated by U.S. Attorney’s Offices in the states of Florida, Michigan, New York, Texas, California, Louisiana, and Illinois, along with Medicare Fraud Strike Force teams from the Criminal Division’s Fraud Section, the FBI, DEA, and various state fraud entities. In addition to the Strike Force locations, enforcement actions included cases and investigations brought by an additional 31 U.S. Attorney’s Offices.

Charges

The charges focus on Medicare, Medicaid, and TRICARE billing schemes for medically unnecessary prescription drugs and compounded medications that often were never purchased or distributed to beneficiaries. According to court documents, patient recruiters, beneficiaries and other co-conspirators were allegedly paid cash kickbacks in return for supplying beneficiary information to providers, so that the providers could then submit fraudulent bills to Medicare for services that were medically unnecessary or never performed. The fraud schemes also involved medical professionals who unlawfully distributed opioids and other prescription narcotics.

For example, in the Southern District of Florida, a total of 77 defendants were charged with offenses relating to their participation in various fraud schemes involving over $141 million in false billings for services including home health care, mental health services, and pharmacy fraud. The DOJ highlighted one case where the owner and operator of a purported addiction treatment center and home for recovering addicts and one other individual were charged in a scheme involving the submission of over $58 million in fraudulent medical insurance claims for purported drug treatment services. The allegations included recruiting patients to move to South Florida in order to bill insurance companies. Patients were provided kickbacks in the form of gift cards, free airline travel, casino trips, and drugs.

Seven defendants in Louisiana were charged in connection with health care fraud, wire fraud, and kickback schemes involving more than $207 million in fraudulent billing. In another instance, a pharmacist was charged with submitting and causing the submission of $192 million in false and fraudulent claims to TRICARE and other health care benefit programs for dispensing compounded medications that were not medically necessary and often based on prescriptions induced by illegal kickback payments

Fraud perpetrators receive lengthy prison sentences for false claims, kickbacks

Two health care fraud scheme perpetrators in separate cases successfully prosecuted by the Department of Justice (DOJ) have been sentenced for their crimes. A physician who accepted kickbacks and committed tax fraud received a sentence of seven years in prison. A Detroit medical biller received a sentence of 50 months in prison for her role in billing $7.3 million in fraudulent claims to Medicare and Medicaid.

Physician

A Pennsylvania physician was sentenced to 84 months in prison with three years’ supervised release, 60 months of which run concurrently with a sentence imposed by a Florida district court. The DOJ presented information to the court showing that the physician, who practiced anesthesiology and pain management, owned and operated pain management clinics. The physician conspired to receive kickbacks from a drug testing lab in exchange for referring patients to the lab, totaling over $2.3 million. Medicare and Medicaid paid the lab over $4.5 million based on the physician’s referrals. The physician also failed to remit employment taxes for a corporation of which he was a 100-percent shareholder.

Medical biller

At trial, the DOJ showed that the medical biller submitted fraudulent bills on behalf of a physician for services that she knew could not have been rendered or were not rendered as billed as part of a $7.3 million fraud scheme. She received 6 percent of the total billings received from Medicare. She was sentenced to 50 months in prison with one year of supervised release and ordered to pay restitution of $3.2 million jointly and severally with co-defendants.

Former ALJ pleads guilty for role in $550 million scam

A former administrative law judge (ALJ) for the Social Security Administration (SSA) pleaded guilty in federal district court in Kentucky on May 12, 2017, for his part in a scheme that defrauded the SSA of over $550 million in federal disability payments for thousands of claimants.

For more than 20 years, the ALJ adjudicated disability claims on behalf of the SSA. As part of his guilty plea, he admitted to accepting over $609,000 in cash payments over some seven years in more than 3,100 cases from a Kentucky Social Security disability lawyer. The former ALJ admittedly divided the cash deposits among various accounts in an attempt to conceal the source of the cash.

In exchange for the illegal gratuities, the ALJ advised the lawyer as to the type of medical evidence to submit for his clients and he awarded disability benefits to thousands of claimants represented by the lawyer without holding hearings. As a result, the lawyer received at least $7.1 million in representative fees from the SSA, and by his misconduct, the ALJ obligated the SSA to pay more than $550 million in lifetime benefits to claimants.

The ALJ was indicted on April 1, 2016, along with the lawyer and a clinical psychologist. They were charged with conspiracy, fraud, false statements, money laundering and other related offenses in connection with the scheme. The lawyer pleaded guilty to the fraud scheme earlier this year; the clinical psychologist is currently awaiting trial; and the ALJ’s sentencing is set for Aug. 25, 2017.