Overpayments, audits and reimbursement conundrums 7.7.15

Polsinelli PC. In California, Polsinelli LLP

Overpayments, Audits and Reimbursement Conundrums

Bragg Hemme, Jason Lundy, R. Ross Burris III

Webinar – July 7, 2015

real challenges. real answers.SM

PresentersR. Ross Burris, [email protected]

Bragg E. [email protected]

Jason T. [email protected]


Agenda

1. Considerations for Internal Investigations2. Dealing with Overpayments3. Audits/Appeal


They’re ALL Watching You …

RACs/ZPICs

StateLegislatures

State AGs

Congress Medicaid

HHS

FTC

FDA

DOJPlaintiffLawyers

Whistle-blowers

Commercial Payors

PersonalInjury

Litigants

CompetitorsOIG

PRESS

Medicare/CMS

YOU

4

The (Not Always) Unique World of Health Care


Case Studies

1. A billing system update was implemented in 2010. You receive a call from the IT department alerting you that there was an error in the system update and an incorrect modifier was put on claims.

2. You are notified by HR that a hospital nurse was practicing for a short time without a state license.

3. 90 y/o man presents to the ED after an episode of syncope at his home. An attending physician orders that the patient be admitted for various testing and concern that co-morbidities raise the risk of a major cardiac arrest. During the patient’s time at the hospital, the State survey agency conducts a complaint investigation that results in COP deficiencies relating to nursing services and infection control being cited. The patient is discharged home after one day of admission.


Considerations for Internal Investigations

� What should the scope of review be?� What payers should we review?� How far back should we look?� Who should be involved? � Should the investigation be conducted

under attorney/client privilege?� Is it really a reimbursement issue?� If I find an overpayment, when does the 60

day clock start?


Scope of Review

� Factual scenario may drive scope� Clearly define scope prior to pulling data,

reviewing claims, etc.� Where possible, limit scope to key area(s)

of review (e.g., certain modifier, certain procedures)

� Errors outside the original scope may be found requiring additional investigation


What Payers?

� Government Payers � Medicare (including Medicare Advantage)� Medicaid (including Medicaid managed plans)� VA, Tricare, FEHBP

� Commercial?� Considerations:

� Determine whether investigation should apply to one or all payers (depends on the factual scenario)

� Don’t assume Medicare rules apply to all payers� Commercial plans should be considered, but risk

dependent on contractual obligations, state law


How Far Back?

� Factual limit: “When did the problem start?”� Changes in billing, software or billing system

changes, etc.

� Legal limits:� Medicare Claims Reopening: 4 years (this could

be extended)� Contractual: ?? (e.g., Medicare Advantage

required to look back 6 years; could contractually pass that obligation to providers)

� False Claims Act: 6 years


Who Should Be Involved?

� Depends on the factual scenario� Balance between ensuring key stakeholders

involved and protecting confidentiality/privilege

� Consider including:� Legal (internal and/or external)� Compliance� Individuals with knowledge of issue (e.g., IT,

Billing, HR)� Leadership


When to Consider External Counsel

� Factors that favor use of external counsel:– Protecting privilege

– Need for objectivity and independence

– Subject matter expertise

� Reimbursement expertise

� Ability to efficiently scope risk for non-Medicare payers

– Potential for significant financial risk

– Systemic or wide ranging issues

� Factors that favor use of internal counsel only:– Cost

– Internal institutional knowledge

– Routine billing/coding issues


Should the Investigation be Conducted Under Privilege?

� Factors that favor use of privilege:� Apparent seriousness of concern� Potential criminal issues � Whistleblowers� Potentially significant exposure� Complex reimbursement issues

� Factors that disfavor use of privilege:� Simple billing/coding issues� Finite period and issues� Lack of concern about improper intent


Is it Really a Reimbursement Issue?

� Some issues/errors may not impact reimbursement� COPs/CFCs

� Generally, COPs are not conditions of payment

� Whistleblowers and DOJ continue to bring these cases, however

� PPS/Bundled Payment Environment

� Even if a portion of a PPS payment not covered, it does not render the whole service non-covered

� Billing error related to manual provision or CMS posting only

� Generally, manuals are not binding law, but shows CMS intent and they are given deference

� Consider clarity of regulations and statutes

� Review on a case-by-case basis


Reporting & Returning Overpayments

� The “60-day Rule”

� PPACA requires reporting and refund of overpayments within 60-days of identification, with FCA liability for failure to do so



Patient Protection and Affordable Care Act

(“PPACA”) Section 6402 (enacted March 2010)

� If a person has received an overpayment, that person shall –� report and return the overpayment . . . and

� notify the Medicare contractor . . . In writing of the reason for the overpayment

� An overpayment must be reported and returned by the later of –� the date which is 60 days after the date on which the

overpayment was identified; or

� the date any corresponding cost report is due, if applicable



Definitions:� “Overpayment” – any funds that a person

receives or retains under Title XVIII or XIX to which the person, after applicable reconciliation, is not entitled under such title

� “Person” – provider or supplier; not individual employees

� “Identified” - ???



� CMS issued a Proposed Rule in February 2012 related to Section 6402 – would add new regulations at 42 C.F.R. §§ 401.301-305 and amend 42 C.F.R. § 405.980

� Extensive public comment and stakeholder feedback to provisions of the Proposed Rule

� Final Rule is still on hold for policy and operational issues to be resolved, expected February 2016

� *Even without CMS regulations, statutory requirements of §6402 are in effect.



Key Considerations from the Proposed Rule:

� Definition of “Overpayment”

� Requisite Knowledge for “Identification” of Overpayments

� Report and Return Deadline

� When the 60-Day Clock Begins

� Procedure for Reporting and Returning Overpayments

� Interplay with OIG and CMS Self-Disclosure Programs

� Look-Back Period for Overpayments



� Examples and Overpayments� Medicare payment for a non-covered service� Medicare payment in excess of an allowable amount� Errors in a cost report� Duplicate payments� Medicare payment when another payor has primary

responsibility to pay� ??? – Medicare payment for a service when the provider was

noncompliant with a Condition of Participation?



� Reasons an Overpayment occurred� Incorrect service date� Duplicate payment� Incorrect CPT code� Insufficient documentation to support the claim� Lack of medical necessity



� How is an Overpayment identified?“knowing” or “knowingly” standard� actual knowledge of an overpayment� deliberate ignorance of an overpayment� Reckless disregard to the existence of an

overpayment

*Cannot ‘stick your head in the sand’



� How is an Overpayment identified?from the CMS Proposed Rule:

� “A provider or supplier may receive information concerning a potential overpayment that creates an obligation to make a reasonable inquiry to determine whether an overpayment exists.”

� reasonable inquiry

� with all deliberate speed

� diligently conduct the investigation



� When does a provider need to report and return overpayments?� A) 60 days from identification� B) date of cost report, if applicable (especially

for claims reconciled on a cost report)



� When does the 60-day clock start ticking?� Examples:

� Provider reviews bills or payments and discovers incorrect payments

� See claim dates after the date of a patient’s death� Learn that services were rendered by an unlicensed

or excluded individual � Perform an internal audit and find errors� Experience a significant increase in Medicare

revenue for no apparent reason



Report, then refund vs. report and refund� Reporting without a refund is an invitation

for an external audit� Quantifying the overpayment is part of the

identification� Internal audit example: 60-day clock

starts when your audit identifies the overpayment, not when you make the decision that an audit is needed



� Primary goal: make the refund in a manner that achieves finality, but minimizes risk of additional governmental review

� Re-process claims if possible and practical � Refund letter

� Cover letter as needed to describe process� Include supporting details, including claim by claim

information� Take care to ensure that all statements are accurate� Avoid unnecessary admissions



� Elements of refund letter� Provider and claims details� How the error was discovered� Reason for the overpayment� Describe corrective actions taken to prevent

recurrence of error� Time frame and amount� If statistical sampling, the methodology� The refund $, via check

* most MACs have forms for the report and refund



� Statistical Sampling to determine overpayments?

� CMS permits calculation of overpayments based upon sampling and extrapolation

� RAT-STATS can be used, but not required � OIG process expects 90% confidence and 25%

precision level

� If sampling, expect to disclose methodology to MAC – including sample size, universe size, methodology, etc.



Make overpayment refunds to whom?� “Routine” overpayment refunds

� MAC for Medicare claims

� Medicaid varies by state, but typically use payment contractor

� Other self-disclosure options� CMS – Stark Law disclosure protocol

� U.S. Department of Justice

� HHS Office of the Inspector General

� Self-disclosure protocol for Stark Law violations if there is a “colorable” AKS claim or intent to induce



� Penalties for failure to report and return overpayments� Overpayment becomes an “obligation” that

gives rise to FCA liability� Provider may also be liable under the Civil

Monetary Penalty law and may lead to exclusion from participating in the federal health care program



� Consider the overlap between the 60-day overpayment provisions and the OIG Self-Disclosure Protocol and Stark Self-Referral Disclosure Protocol



Look-back period� How far back do I have to worry about

overpayments?

� In the Proposed Rule, CMS wants a 10 year look-back period� a source of many comments and industry

objections to the Proposed Rule



Should the audit/review be conducted by or at the direction of an attorney?� Consider privilege issues at the outset

� No “one size fits all” solution

� Factors that favor use of privilege � apparent seriousness of concern � potential criminal issues (AKS, etc.)� whistleblowers � potentially significant exposure � complex reimbursement issues

� Factors that disfavor privilege � simple billing/coding issues� finite period and issues � lack of concerns about improper intent


Medicare Claim Appeals

� Covers pre-payment and post-payment claim disputesfor:– Part A providers,– Part B providers and suppliers,

� including Durable Medical Equipment, Prosthetics, Orthotics, and Supplies(DMEPOS) suppliers (also commonly referred to as "providers")

– Medicare beneficiaries, and– Medicaid State Agencies

� HHS components involved in Medicare claim appeals:– CMS– Office of Medicare Hearings and Appeals (OMHA)– Departmental Appeals Board (DAB)

� Part A providers have a separate appeals process fordisputes arising from cost reports– Provider Reimbursement Review Board (PRRB) at CMS


Medicare Claim Review Programs

� Who are the Medicare contractors?�Medicare Administrative Contractors (MACs)

� Process claims submitted by providers and suppliers� Submit payment to those providers in accordance

with Medicare rules and regulations� Includes identifying and correcting underpayments

and overpayments

�Zone Program Integrity Contractor (ZPICs)� Identify cases of suspected fraud� Implement corrective actions


Medicare Claim Review Programs

� Supplemental Medical Review Contractor (SMRC)� Conduct nationwide medical reviews� Includes identifying underpayments and overpayments

� Comprehensive Error Rate Testing (CERT) contractors� Collect documentation and perform reviews on a statistically-

valid random sample of Medicare FFS claims� Produce an annual improper payment rate

� Recovery Audit Contractor (RAC)� Identify underpayments and overpayments, as part of the

Recovery Audit Program

� Quality Improvement Organization (QIO)� Some QIO actions have limited appeals (DRG validations)


First Shot: Rebuttal to the MAC

� Not technically an "appeal“ because MAC is not required to issue a decision

� Must be filed within 15 days of the demand letter or initial determination

� Used to raise obvious errors by the auditor or plead provider's case as to why recoupment is not appropriate

� Rebuttal does not stay recoupment or extend deadline to file request for redetermination (but MAC may stay recoupment based on the rebuttal)


5 Levels of Appeal

� Administrative appeals process has 5 levels: 1. Redetermination2. Reconsideration3. Administrative Law Judge Hearing Decision4. Medicare Appeals Council Review5. Judicial Review by U.S. District Court

� See 42 C.F.R. §§ 405.900 et seq.. � If a QIO is involved, other rules may apply,

depending on the basis of denial (part 405, subpart J; part 478).


5 Levels of Appeal: Level 1

� Redetermination� Following the initial determination, a party to the initial

determination has 120 days to request that the MAC perform a redetermination of the claim(s)� Note: if the initial determination found an

overpayment, CMS will begin recouping this amount beginning 41 days following the demand2

� Provider must file its appeal within 41 days to stay any recoupment action3

� MAC will conduct an independent review of the claims using individuals not involved in the initial review, but that rule is changing on August 1st



� Reconsideration� Parties to the redetermination have 180 days

to request reconsideration from a “qualified independent contractor” (QIC)

� CMS will begin recouping overpayment beginning after the 60th day from redetermination decision4

� Last opportunity where all supporting evidence will be accepted without potential exclusion



� Administrative Law Judge � The amount in controversy of the claim is at least

$150 5

� Requests must be filed within 60 calendar days of receipt of the QIC’s reconsideration decision

� ALJs must give “substantial deference” to Local Coverage Determinations, Local Medical Review Policies, and CMS guidance, but are not boundby the guidance like the MACs



� Medicare Appeals Council� Provider may appeal ALJ's decision to the

Department Appeals Board (DAB) Medicare Appeals Council (DAB/MAC) within 60 calendar days of the ALJ’s decision

� No new evidence considered at this level absent good cause

� No hearing requirement (at discretion of Council)� DAB/MAC reviews the decision of ALJ on the records

de novo� Provider may escalate request to Federal court after

that time (180 days if the appeal was escalated from OMHA to the DAB)



� Federal District Court� Provider may appeal decision of the DAB/MAC to

federal district court within 60 days of the decision� Provider may also appeal to District Court if the

DAB/MAC fails to rule within its required timeframe

� Amount in controversy is at least $1,460� Venue for the claim will either be in the District of

Columbia or the provider's home district� DHHS Secretary's findings are conclusive if

supported by "substantial evidence"


OMHA Appellant Forum: Receipts v. Decisions


OMHA Appellant Forum:Receipts by Medicare Type


Ongoing Issues with Appeals

� The potential initiatives announced by OMHA:� Develop an Adjudication Manual with more detailed

direction on procedural rules and requirements � In development

� Sampling and extrapolation by OMHA-provided statisticians when requested� Being piloted

� OMHA facilitated claims mediation� Being piloted

� Review process using OMHA attorneys fast-track potentially favorable claims or narrow the issues on review and address procedural issues earlier� Not piloted to date


Ongoing Issues with Appeals

� Creating a website for viewing appeals status online� AASIS released December 2014 � Go to www.hhs.gov/omha, go to “Appeals Status Lookup”

� Creating a document generating system using fillable forms to improve data processing efficiency with a planned release date of end of calendar year 2014� Implemented, with new forms being added in phases

� Create Electronic Case Adjudication and Processing Environment (ECAPE)� planned implementation in three phases from Fall 2015

through Fall 2016


CMS Settlement Proposal to Hospitals

� Announced August 29, 2014� Offer to enter into an administrative

agreement with eligible hospitals for 68% of net payable amount

� On June 11, 2015, CMS announced that it had entered into settlements with over 1,900 hospitals for over 300,000 disputed inpatient billing claims


Congressional Action

� Senate Committee Passes Reforms to Medicare Appeals � The Audit & Appeal Fairness, Integrity, and Reforms in

Medicare (AFIRM) Act of 2015 proposes an extensive overhaul of the current process.

� New Medicare Magistrate program would allow attorneys with expertise in Medicare law to review claims with an amount in controversy less than $1,460.

� Raises the amount in controversy for review by an ALJ to $1,460

� Create a system of eligibility for hospitals with low error rates to receive one-year exemptions from post-payment audits by RACs and MACs


RAC Activity

� After a five-month hiatus, the program restarted some reviews in August 2014, but only on a limited basis, and are expected to resume audit activity in September 2015

� In late June 2015, CMS proposed new exceptions to its controversial requirement for inpatient admissions to cross two midnights and said that audits will be less aggressive

� Roughly 700-page document describes payment policies for 2016, but focus has been on tweaks to the two-midnight rule, which was adopted in 2013 but won't be fully enforced until October at the earliest.

� Modifies existing policy that allows exceptions to the two-midnight rule to "emphasize the role of physician judgment" by allowing exceptions for shorter stays on a case-by-case basis.

� CMS said that it will hand most responsibility for audits of short-stay inpatient claims to QIOs instead of RACs


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Overpayments, audits and reimbursement conundrums 7.7.15