Articles Posted in MACs

bloglogo2.jpgIf a Medicare provider’s claim for payment is denied or if a Recovery Audit Contractor (RAC) determines that a past payment was made improperly, the provider may appeal the denial. Medicare provides a 5-level appeal process that begins with a request that the Medicare Administrative Contractor (MAC) make a redetermination on the claim. If that is unsuccessful, the provider may seek reconsideration from a Qualified Independent Contractor (QIC). If the QIC agrees that the denial was proper, the provider may request a hearing before an Administrative Law Judge (ALJ) in the Office of Medicare Hearings and Appeals (OMHA).

ALJ.jpgOMHA was established by § 931of the Medicare Drug, Improvement and Modernization Act of 2003. In § 931(b)(2), Congress provided that:

The Secretary shall assure the independence of administrative law judges performing the administrative law judge functions … from the Centers for Medicare & Medicaid Services and its contractors. In order to assure such independence, the Secretary shall place such judges in an administrative office that is organizationally and functionally separate from such Centers.

There are currently 65 OMHA ALJs in 4 regional field offices. The ALJs are organized into teams and supported by OMHA attorneys, paralegals and legal assistants. While OMHA ALJs hear appeals involving, among other things, an individual’s eligibility for Medicare and coverage determinations under Parts C and D, the largest part of the ALJs workload comes from Part A and B provider appeals of pre and/or post payment denials by one of Medicare’s audit contractors.

The Effect of RAC Audits on the ALJ’s Caseload.

up_arrow.jpgAccording to the latest appeal statistics from CMS, RACs issued payment denials for 903,372 claims in fiscal year 2011 and providers filed 56,620 appeals in fiscal year 2011. According to statistics maintained by OMHA, it received 132,446 appeals in fiscal year 2012. Out of the 132,446 appeals filed, 40,386 or 30.5% were filed from RAC denials by Part A hospitals. By comparison, Part A hospitals filed just 1,545 appeals in FY 2011.

The increase in ALJ appeals is certainly not unexpected as a result of the nationwide expansion of the RAC program in 2010. The increased caseload has already impacted the ALJ’s ability to comply with the regulatory mandate set forth at 42 C.F.R. §405.1006 that appeals to the ALJ be decided within 90 days. There is little doubt that as more and more appeals reach the ALJs, providers will experience ever increasing delays in decisions by the ALJs. While some delay may be acceptable, a restrictive CMS policy regarding the payment of reasonable and necessary Part B services provided by a hospital to a beneficiary may cause such an increase in the level of ALJ appeals as to make timely decisions by an ALJ impossible and deprive a provider of the legally required prompt resolution of its appeal.

Appeals for Payment of Part B Outpatient Services Will Further Delay ALJ Decisions
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bloglogo2.jpgIn 1978, Congress passed the Inspector General Act “[t]o create independent and objective units to provide leadership and coordination and recommend policies for activities designed (A) to promote economy, efficiency, and effectiveness in the administration of, and (B) to prevent and detect fraud and abuse in, such [Government] programs and operations;…” A November 14, 2012 report issued by the Health and Human Services Inspector General arguing for “improvements” in the activities of Medicare Administrative Law Judges suggests that the Inspector General is anything but “independent and objective.”

The OIG’s report is based upon an analysis of appeals decided by ALJs between bias.jpgOctober 2009 and September 2010 (fiscal year 2010). The OIG found that providers filed 85% of the appeals decided, that the ALJs rendered fully favorable decisions in 56% of the appeals (62% of all Part A appeals but 72% of Part A appeals filed by hospitals). The OIG calculated that about two-thirds of the ALJs rendered fully favorable decisions in between 41 and 70 percent of the appeals they considered. The question raised by these statistics is why is there such a large discrepancy between the decisions reached by the QICs in their review of the claims and the ALJs, since presumably both groups had the same information and were interpreting the same regulations. The obvious answer is that either the QICs or the ALJs are not doing their job correctly.

One might suspect that the first step in finding out which group is incompetent would be to have an independent entity review a statistically valid sample of the appeal records and improve.jpgoffer an opinion as to whether the decision of the QIC or the ALJ was correct. Surprisingly, the OIG did not do that. Instead, the OIG appears to have assumed that the decision of the QICs was correct and then makes suggestions as to how to “improve” the decision making of the ALJs so that it will be more in line with that of the QICs. The result of such improvements, of course, will be a savings to the Government and reduced payments to providers. In case it is ultimately determined that the ALJ’s decisions are in fact correct, another “improvement” suggested by the OIG is that CMS impose a fee only on providers who want to appeal to the ALJ with the hope that this will result in fewer providers filing fewer appeals.

Thumbnail image for Thumbnail image for Thumbnail image for Thumbnail image for Thumbnail image for Thumbnail image for Thumbnail image for Thumbnail image for Thumbnail image for Thumbnail image for bloglogo2.jpgLast week the Department of Health and Human Services Office of Inspector General released its fiscal year 2013 Work Plan describing the issues it intends to investigate during the fiscal year beginning October 1, 2012. In the section of the Work Plan devoted to Parts A and B of Medicare, the OIG identified its concerns with the operation of the Medicare Administrative Contractors (MAC) and the Medicare Recovery Audit Contractors.

The OIG’s Concerns With the Performance of the MACs

OIG seal.jpgIn addition to being concerned about CMS’ ability to adequately monitor and assess the performance of the various MACs, the OIG is concerned with whether the MACs have consolidated all Part A and Part B edits within their jurisdiction, have developed and tested final edits, implemented and used initial, local system, and medical review edits and evaluated edit effectiveness. On a related subject, the OIG is also concerned about Part B claims that were suspended for manual prepayment review on the basis of system edits but on which the reviews were not conducted. According to the OIG, because manual review is more timely and costly to the contractor, some suspended claims might not be reviewed but paid inappropriately. In sum, the OIG believes that the MACs may be paying too many improper claims.

The OIG’s Concern With the Performance of the RACs

Records.jpgAs opposed to its concern with the MACs’ performance in specific areas, the OIG Work Plan does not identify any specific concern with the performance of the RACs. Rather, the Work Plan states that the OIG intends to “review the extent that Recovery Audit Contractors (RAC) identified improper payments, identified vulnerabilities, and made potential fraud referrals in 2010 and 2011.” The OIG will also review CMS’ actions in resolving RAC-identified vulnerabilities, addressing potential fraud referrals, and in evaluating RAC performance in 2010 and 2011. Apparently the OIG does not believe that the problems with the RAC program identified by the American Hospital Association, the American Medical Association and other professional organizations as well as some members of Congress warrant investigation.

The Concerns of Others With the Performance of the RACs

Since its inception, the structure of the RAC program has been the subject of considerable unfavorable comment by Medicare providers. In an April 3, 2012 letter, the leaders of 35 professional organizations representing doctors expressed their opposition to CMS’ plan to have RACs conduct prepayment reviews because “[t]he program’s contingency fee structure inappropriately incentivizes the Recovery Auditors to conduct “fishing expeditions” that are exceedingly burdensome for physician practices” and because “[t]hey [Recovery Auditors] are incapable of efficiently or accurately conducting prepayment review.”

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bloglogo2.jpgIn 1991, in the case of Chaves County Home Health Service Inc. v. Sullivan, the Court of Appeals for the District of Columbia Circuit approved the use of sample.jpgstatistical sampling and extrapolation by Medicare contractors, currently known as MACs or ZPICs, in conducting post payment reviews. Specifically, the Court held that the Secretary of HHS was authorized to employ statistical sampling and extrapolation as set forth in Health Care Financing Administration (HCFA, now known as CMS) Ruling 86-1 since the Medicare Act did not prohibit statistical sampling and such a procedure was consistent with the Secretary’s duty to prevent overpayments. On January 8, 2001, in Transmittal B-01-01, CMS updated the procedures a contractor was to follow in employing statistical sampling and extrapolation during a post payment review. As in Ruling 86-1, the new procedures imposed no limitation on when the contractor could determine the amount of an overpayment in a universe of claims by extrapolation from an analysis of a sample of the claims in that universe.

In § 935 of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003, Congress added a new subsection (f)(3) to 42 U.S.C/ § 1395ddd. This subsection states:

Limitation on use of extrapolation
A medicare contractor may not use extrapolation to determine overpayment amounts to be recovered by recoupment, offset, or otherwise unless the Secretary determines that–
(A) there is a sustained or high level of payment error; or (B) documented educational intervention has failed to correct the payment error.
There shall be no administrative or judicial review under section 1395ff of this title, section 1395oo of this title, or otherwise, of determinations by the Secretary of sustained or high levels of payment errors under this paragraph.

The meaning of this section became the central issue in the case of Gentiva Healthcare Corp. v. Sebelius.

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Thumbnail image for Thumbnail image for Thumbnail image for Thumbnail image for Thumbnail image for Thumbnail image for Thumbnail image for Thumbnail image for Thumbnail image for Thumbnail image for bloglogo2.jpgOne of the best “investments” available today is the current 10.5% rate of interest paid by CMS on money improperly held by its contractors. The rules on when CMS will pay interest and how appeals affect interest paid on amounts recouped are set forth in 42 C.F.R. § 405.378 and 42 C.F.R § 450.379.

us check.jpgMedicare pays and charges interest from the date of a “final determination,” which is defined in §405.378(c) and generally is the date of the written advice of payment or demand for repayment. Interest starts to accrue 30 days after the notice date and is calculated in 30 day increments thereafter. This means if CMS pays or is repaid the full amount due within 30 days, there will be no interest. If CMS pays or is repaid on the 45th day, the interest due is that calculated as of the 30th day, not the 45th day.

The interest rate applied to the amount due is the higher of the rate fixed by the Secretary of the Treasury after taking into consideration private consumer rates of interest prevailing on the date of final determination or the current value of funds rate. This means that if, for example, the ALJ overturns a repayment demand that has been previously recouped or repaid, the interest rate applied to the amount repaid by CMS is the interest rate in effect on the date of the ALJ’s decision, not the rate in effect on the date of the initial repayment demand. A list of the interest rates paid by CMS since February 2001 is here so you can verify that the MAC is using the correct rate in calculating the interest due.

Section 405.378(g) provides that in the event of partial payments made over time, the amount paid is first applied to the outstanding interest and then to the principal, the same method used by credit card companies when the bill is not paid in full.

How do Requests for Redetermination by a MAC and Reconsideration by a QIC Affect the Interest Paid?

Pursuant to 42 C.F.R. § 405.942(a), a provider may seek a redetermination of an initial 544232_calendar_series_4.jpgrepayment demand “[w]ithin 120 calendar days from the date a party receives the notice of the initial determination.” However, if the amount claimed to be due has not been promptly repaid in full, § 405.379(d) permits a Medicare contractor to begin recouping the amount due from other amounts CMS owes the provider 41 days after the date of the initial repayment demand. Recoupment can be prevented or stopped, however, by a provider request for redetermination. If the provider is unsuccessful, 42 C.F.R. § 405.962(a) provides that a request for reconsideration to a QIC may “[b]e filed within 180 calendar days from the date the party receives the notice of the redetermination.” If the request for reconsideration is filed within 60 days of the adverse redetermination notice, recoupment continues to be stayed pursuant to §455.379(e)(ii). If no request for reconsideration is filed within 60 days, recoupment may be resumed, but will be stopped again by filing a reconsideration request at any time during the 180 day period. Recoupment will resume if the decision of the QIC is unfavorable.

If the provider is successful at either the 1st or 2nd level appeal, it is entitled to interest on any money held by the Medicare contractor for more than 30 days, whether received by payment from the provider or by way of recoupment. However, §405.378(j) imposes an interest penalty on providers who do not immediately pay the amount demanded in full and are not successful until appealing to an ALJ or the Medicare Appeals Council.

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Thumbnail image for Thumbnail image for Thumbnail image for Thumbnail image for Thumbnail image for Thumbnail image for Thumbnail image for Thumbnail image for Thumbnail image for bloglogo2.jpgCMS has entered into contracts with numerous auditing companies to review provider billing for various purposes. As time goes by, it is more and more likely that billings submitted by almost every Medicare provider will be subject to review by one or more of these audit contractors. Set forth below is a brief description of the auditing functions of the various CMS auditors.

Medicare Administrative Contractors

auditor.jpgAccording to Chapter 3 of the Medicare Program Integrity Manual (PIM), in addition to their claims processing functions, Medicare Administrative Contractors (MACs) have the authority to review any claim prior to payment. MACs have the discretion to select target areas because of:

  • High volume of services;
  • High cost;
  • Dramatic change in frequency of use and/or
  • High risk problem-prone areas

What this means is that a MAC, unlike a RAC, does not have to obtain CMS’ approval of what procedures it will subject to prepayment review. Also, there is currently no limitation, other than the MACs discretion, as to how many Additional Document Requests (ADR) a MAC may make.

If the MAC feels that a certain procedure is being miscoded or that there is no medical necessity for a procedure, it will conduct a prepayment review of each claim submitted for extended periods of time. This means the provider will be subject to ongoing requests for records and suffer a substantial negative impact to its current cash flow.

Recovery Audit Contractors

A demonstration Recovery Audit program was authorized by § 306 of the Medicare Prescription Drug, Improvement and Modernization Act of 2003 and conducted from March 2005 to March 2008, in six states, to determine if Recovery Auditors could effectively be used to identify improper payments for claims paid under Medicare Part A and Part B. The Tax Relief and Health Care Act of 2006 made the program permanent and expanded it to cover the entire country. To implement the program, CMS divided the country into four regional areas.

The RACs are responsible for identifying improper payments for:

  • Items or services that do not meet Medicare’s coverage and medical necessity criteria.
  • Items that are incorrectly coded and
  • Services where the supporting documentation submitted does not support the ordered service.

keyboard.jpgAutomated reviews conducted by the RACs typically focus on DME, physician and outpatient claims and do not require the production of additional records by the provider. Complex reviews, which do involve the production of additional medical records by the provider, involve coding issues, Diagnosis Related Group (DRG) validations and medical necessity reviews. CMS must approve the issue a RAC wants to review and has imposed limits on the number of medical records a RAC may request. Each RAC has established a website that lists, among other things, the claims that have been approved for audit.

CMS recently announced that a three year RAC pre-payment review demonstration project will begin on August 27, 2012. CMS conducted an Open Door Forum on August 9, 2012 to discuss the operation of this new program. The transcript of the Open Door Forum can be found here

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There has been much discussion about post payment reviews conducted by CMS’ Recovery Audit Contractors (RACs). The discussions center on the burdens imposed on providers by the RAC’s demand for documents and the appeals necessary to fight unwarranted payment demands. Prepayment reviews conducted by the CMS Medicare Administrative Contractors (MACs) may turn out to be much worse!

What are MACS?

An A/B MAC is an entity tasked with processing payments submitted by Part A and Part B providers in the traditional fee-for-service Medicare program. MACs were authorized by the Medicare Prescription Drug, Improvement and Modernization Act of 2003 and have now replaced the former fiscal intermediaries and carriers. CMS began awarding A/B MAC contracts in 2006 based upon its division of the United States into 15 jurisdictions. By 2010, CMS decided that the program would be more efficient if there were only 10 A/B MACs and so is in the process of merging 5 of the jurisdictions with other existing jurisdictions. While the original jurisdictions were identified by number, the new jurisdictions are identified by letter. A history of CMS’ award of A/B MAC contracts is found here and a table listing the current MACs by state (including website) and the state’s original and consolidated jurisdiction is found here.

What are the MACs doing?

According to Chapter 3 of the Medicare Program Integrity Manual (PIM), “[T}he MACs have the authority to review any claim at any time… The MACs have the discretion to select target areas because of:

  • High volume of services;
  • High cost;
  • Dramatic change in frequency of use and/or
  • High risk problem-prone areas

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