Articles Posted in RACs

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Thumbnail image for Thumbnail image for Thumbnail image for Thumbnail image for Thumbnail image for Thumbnail image for bloglogo2.jpgPart 1 of this post provided information on the number of appeals being filed by providers from RAC repayment demands and, for those appeals already decided, the extraordinary success providers have had in getting RAC decisions overturned. In some cases, the Equal Access to Justice Act (EAJA) opens the door to the recovery of the fees and costs incurred by the provider in prosecuting the appeal if the provider prevailed in an “adversary adjudication” before an ALJ, and if the position of CMS was not “substantially justified.”

What is an “adversary adjudication?” – Handron v. Secretary Department of Health and Human Services

Psychologist.jpgIn 2003, Dr. Handron, a psychologist, received a demand to repay $604,038 from a Medicare contractor because his documentation did not support the services billed. The amount to be repaid was extrapolated from a nurse’s review of 2,500 of Dr. Handron’s claims. Dr. Handron retained counsel and after losing his initial appeal, appealed to an ALJ. The ALJ determined that of the 2,500 claims reviewed by the nurse, Dr. Handron had been overpaid only $5,434.48 and that because the statistical sampling procedure used by the contractor was unreliable, the extrapolation was invalid. Although the ALJ requested that a representative of the contractor or CMS appear as a non-party participant at the hearing, none did so. However, again at the ALJ’s request, CMS did provide the ALJ with documents related to the sampling procedure and extrapolation used by the contractor.

After prevailing on the vast majority of the claims in his appeal, Dr. Handron filed an application for fees and expenses under the EAJA. The ALJ, the Medicare Appeals Council and the District Court all denied Dr. Handron’s claim based upon a HHS regulation found at 45 CFR § 13.3 that defines an “adversary adjudication” as one in which CMS is represented by counsel at the ALJ hearing. The Third Circuit disregarded the regulation and held that:

[C]ongress chose language that left open the possibility that the government’s position could be represented in some other manner and by someone other than a lawyer. This indicates Congress’s recognition that the position of the United States can be represented in many ways and its desire to grant judges some discretion in determining whether particular action “represents” the government’s position. It does not suggest that the government’s position can only be represented at a hearing if a government representative physically stands before the decision-maker…
Accordingly, we have little doubt that some forms of written advocacy submitted to an ALJ can constitute a representation of the government’s position, so as to make an agency proceeding an “adversary adjudication” for purposes of the EAJA.

images (1).jpgAlthough Dr. Handron won the attorney battle, he lost the war when the Court held that something more than the provision by CMS of the claim files and documents explaining the statistical sampling methodology was required to make his ALJ proceeding an “adversary adjudication.” The Court held that for an ALJ proceeding to be an adversary adjudication, the Government must engage in:

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Thumbnail image for Thumbnail image for Thumbnail image for Thumbnail image for Thumbnail image for bloglogo2.jpgAccording to the latest statistics from CMS, between October 1, 2010 and September 30, 2011, Part A providers filed 27,158 appeals from RAC repayment demands while 20,406 appeals were filed by Part B providers and an additional 9,056 appeals were filed by DME companies. The FY 2011 budget of the Department of Health and Human Services estimated that in FY 2011, Medicare ALJs would receive 282,000 non-RAC appeals and an additional 54,000 RAC specific appeals. Because of delays in the nationwide implementation of the RAC program, the Department’s FY 2012 budget estimates that only 41,000 RAC specific appeals will be filed with the Office of Medicare Hearings and Appeals by September 30, 2012. In FY 2011, CMS reports that of the Part A appeals decided, 6,226 were favorable to the provider, 14,352 Part B appeals were decided favorably and 3,930 DME appeals were favorably decided. CMS did not, however, provide the total number of appeals decided in any category, so it is impossible to calculate the provider’s “win” percentage from the CMS data.

In addition to CMS, the American Hospital Association, through its RACTrac Initiative, has been compiling data on the impact of RAC audits on its members. In its 1st Quarter 2012 report, the AHA reports that its data shows that through the first quarter of 2012, reporting hospitals have appealed 61,729 RAC repayment demands. Of the appeals decided so far, the hospitals have won 75% of the appeals, but 71% of all the appeals are still awaiting a decision.

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Thumbnail image for Thumbnail image for Thumbnail image for Thumbnail image for bloglogo2.jpgOn July 25, 2012, CMS modified the text of its announcement of the Recovery Audit Pre-payment Review demonstration by changing the start of the demonstration from summer 2012 to August 27, 2012. CMS also announced that it will hold a Special Open Door Forum on an as yet unannounced date in August.

The history of the demonstration

implement-emr-1.jpgCMS first announced the Pre-payment Review demonstration on November 15, 2011. In a Fact Sheet released that day, CMS stated that the demonstration would begin on January 1, 2012 and last three years. During the demonstration, Recovery Auditors will review provider billing before payment is made for selected claim types chosen by CMS in FL, CA, MI, TX, NY, LA, IL, PA, OH, NC and MO and deny payment if they decide the billing is improper. The initial claim types selected by CMS for review were:

  • MS-DRG 069 Transient Ischemia;
  • MS-DRG 312 Syncope & Collapse;
  • MS-DRG 377 G.I. Hemorrhage W MCC;
  • MS-DRG 378 G.I. Hemorrhage W CC;
  • MS-DRG 379 G.I. Hemorrhage W/O CC/MCC;
  • MS-DRG 637 Diabetes W MCC;
  • MS-DRG 638 Diabetes W CC; and
  • MS-DRG 639 Diabetes W/O CC/MCC

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Thumbnail image for Thumbnail image for bloglogo2.jpgIn an earlier post, I discussed the case of Palomar Medical Center v. Sebelius presently pending before the Ninth Circuit Court of Appeals. In Palomar, the District Court agreed with CMS that pursuant to the regulations governing administrative appeals, Palomar could not raise and an ALJ could not decide whether “good cause” existed for the RAC to reopen a claim paid more than one year earlier. After hearing oral argument, the Ninth Circuit issued an order inviting the submission of amicus (friend of the court) briefs on the questions of (1) whether the regulations bar administrative review of a RACs compliance with the “good cause” standard and (2) if the regulations do bar administrative review, may the federal courts enforce RAC compliance with the “good cause” requirement. According to CMS, the response to the second question is no because a federal court can only review a “final decision” of an agency and there has been not yet been a final decision on this question. The amicus brief submitted by the AMA and supplemental briefs submitted by the parties may be found on this webpage established by the Ninth Circuit.

St. Francis Hospital v. Sebelius

1334532_ambulance.jpgAs part of the RAC demonstration project, Connolly Consulting reopened 225 paid claims submitted by St. Francis Hospital and then demanded, through St. Francis’ fiscal intermediary, Empire Medical Services (now NGS), repayment of $1.2 million dollars. St. Francis appealed each claim and as of the time it filed its Complaint in federal court, had won 104 of its appeals with 15 appeals still pending before an ALJ. Like Palomar, St. Francis sought to raise before the ALJ and the Medicare Appeals Council the RAC’s compliance with the “good cause” standard and like in Palomar, the ALJ and Medicare Appeals Council refused to consider this issue based on 42 CFR 926(l).

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Thumbnail image for bloglogo2.jpgPalomar Medical Center v. Sebelius involves a claim paid more than one year before it was reopened during a RAC audit. After losing the first two appeals, the hospital convinced an ALJ that the RAC had not shown it had good cause to reopen the claim. However, when the Medicare Appeals Counsel (MAC) reviewed the ALJ’s decision, it concluded, based on its interpretation of the relevant regulations, that the ALJ had no authority to review the RAC’s decision to reopen the claim.

68918_law_education_series_3.jpgThe relevant regulations, which are not easy to make sense of, appear in Title 42 of the Code of Federal Regulations (CFR). 42 CFR § 405.980(b) provides that:
A contractor may reopen an initial determination or redetermination on its own motion–

  • (1) Within 1 year from the date of the initial determination or redetermination for any reason.
  • (2) Within 4 years from the date of the initial determination or redetermination for good cause as defined in §405.986.
  • (3) At any time if there exists reliable evidence as defined in §405.902 that the initial determination was procured by fraud or similar fault as defined in § 405.902

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According to 42 CFR § 405.986(a), “good cause” is established when:

  • (1) There is new and material evidence that–
  • &nbsp&nbsp&nbsp(i) Was not available or known at the time of the determination or decision; and
  • &nbsp&nbsp&nbsp(ii) May result in a different conclusion; or
  • (2) The evidence that was considered in making the determination or decision clearly shows on its face that an obvious error was made at the time of the determination or decision.

42 CFR § 405.980(a)(5) provides that:

  • The contractor’s, QIC’s, ALJ’s, or MAC’s decision on whether to reopen is binding and not subject to appeal.

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1099211_pie_chart_color_3.jpgLast month CMS published statistics on appeals of RAC repayment demands. According to CMS, between October 1, 2010 and September 30, 2011, the RACs determined that 903,372 claims had been overpaid. During that period, providers filed appeals from 56,620 of these repayment demands. Separately, CMS says that for appeals decided during the same period, the RAC’s repayment demands were overturned in 24,548 or 43.4% of the decided appeals.

The CMS statistics indicate that 31,297 or 55.3% of the appeals were from automated reviews and 22,188 or 39.2% of the appeals were from complex reviews. CMS was unable to identify the type of review from which the remaining 3,135 or 5.5% of the appeals were filed.

CMS also sorted the claims by provider type. Of the 903,372 claims that the RACs alleged were overpaid, 197,739 or 21.8% came from Part A providers, 410,208 or 45.4% were submitted by Part B providers and 295,425 or 32.8% originated with DME providers. During FY 2011, CMS’s statistics indicate that Part A providers appealed 13.7% of the repayment demands while Part B and DME providers appealed 4.9% and 3.1% respectively of the RAC’s repayment demands.

Why did CMS publish this report?

From its inception, providers have been justly concerned that because the RACs are being paid a contingent fee for their work, they would demand repayment of large numbers of perfectly proper claims. To demonstrate that this is not the case, CMS has published a number of reports on provider appeals in an attempt to demonstrate that the overwhelming number of RAC repayment demands are justified and that providers should have no concern that the RACs are lining their pockets with provider money. To justify this position, CMS points to this latest report concluding that only 2.7% of the RAC repayment demands for FY 2011 were overturned on appeal.

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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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