Medicaid and Medicare Audits

It is extremely important to retain experienced counsel at the outset. Do not attempt to respond to an audit request by yourself. There are many pitfalls associated with incomplete, improper, or untimely responses. It is extremely important that the initial response be correct and provide every possible document requested and explanations where necessary. If an overpayment amount is demanded, it is extremely important that the correct request for review, appeals or hearings be properly and timely submitted, to the correct place and in the proper form, with sending and receipt by the agency/auditor documented. This is not the time to scrimp on legal fees or attempt to be your own attorney. In the event of an appeal, with recent changes in laws and regulations, you may be limited to whatever documents you originally submitted. In most cases, for any appeal or any hearings on overpayment demands and fines, you will need to retain the services of an experienced billing and coding consultant as an expert witness and a health care statistician as an expert witness; you must use knowledgeable, experienced experts who have testified as witnesses in these kinds of case before.

Zone Program Integrity Contractors (ZPIC) and Recovery Audit Contractors (RAC) are private companies or business entities that have contracted with CMS to carry out certain functions that the Medicare regional carriers have traditionally in the past been expected to accomplish. Most recently, these have involved audits for overpayments and detection of and recovery for possibly fraudulent activities. In some cases the contractors (especially the RACs) receive a percentage of any recovery they obtain. CMS’s “Zone 7” includes Florida, Puerto Rico and the Virgin Islands; the Zone 7 ZPIC for 2010 is SafeGuard Services, LLC, with several offices in Florida, including in Jacksonville, Florida, and the Miami area. Zone 5 includes Alabama, Arkansas, Georgia, Louisiana, Mississippi, North Carolina, South Carolina, Tennessee, Virginia and West Virginia; the Zone 5 ZPIC for 2010 is AdvanceMed which has its main headquarters in Nashville, Tennessee. If you are contacted by a ZPIC or receive a letter advising you of an audit, you should immediately contact a health care attorney familiar with ZPIC audits or one of the very few Medicare audit consultants who specialize in ZPIC audits.

If you receive a letter from a company claiming to be a Zone Program Integrity Contractor (ZPIC) for the Medicare Program stating it wants to audit your practice or conduct a site visit, this is a serious matter and we would advise anyone receiving such a letter to immediately consult with health care counsel experienced in Medicaid audits. The states are being placed under an extreme amount of pressure to recover money into their Medicaid programs because of budget shortfalls and the federal deficit. This has resulted in an unprecedented number of Medicaid audits, Medicare audits and audits by Zone Program Integrity Contractors (ZPIC) and Recovery Audit Contractors (RAC) seeking to recover money from physicians, dentists and other health providers for the state and federal government. We have a process we follow to ensure that complete documentation for all care that has been billed to such programs is provided and that any “hot” issues that we know are being scrutinized by auditors are properly addressed. Because of the extrapolation formulas that are used by government auditors each dollar that is disallowed by the auditor can equate to many times the amount that you are determined to owe back. For example, if a claim for a procedure that you were paid $100 to perform is disallowed, this may be extrapolated to a $5,000 repayment using a statistical formula. In addition, you can be assessed fines (for failing to comply with documentation requirements) and the costs of the audit and experts’ reviews, as well. Because of recent changes in Florida laws, the amounts disallowed must be paid back to AHCA within thirty (30) days, even if the provider requests a hearing to challenge the findings. If the audit is wrong and you do not owe the money the agency says, it is imperative that a formal administrative hearing is properly requested in a timely manner so that you have the proper opportunity to prove your entitlement to the money.

Zone Program Integrity Contractors (ZPICs)–A New Sheriff in Town

The Centers for Medicare and Medicaid Services (CMS) has recently entered contracts with a number of private companies to function as Zone Program Integrity Contractors (ZPIC). These are similar to the Recovery Audit Contractors (RAC), but have different functions from the RACs. ZPICs have contracted with CMS to carry out certain functions that the Medicare regional carriers and fiscal intermediaries have traditionally performed. Most recently, these have involved audits for overpayments and detection of and recovery for possibly fraudulent activities

CMS’s “Zone 7” includes Florida, Puerto Rico and the Virgin Islands; the Zone 7 ZPIC for 2010 is SafeGuard Services, LLC, with several offices in Florida, including in Jacksonville and the Miami area. If you are contacted by a ZPIC or receive a letter advising you of an audit, you should immediately contact a health care attorney familiar with ZPIC audits or one of the very few Medicare audit consultants who specialize in ZPIC audits.

A ZPIC will routinely telefax a letter to the practice shortly before close of business the day before a site visit/audit to that practice. The site visit/audit may be scheduled to occur at a branch office or remote location the practice has and not at the main office of the practice. Auditors will request to inspect the premises, will photograph all rooms, equipment, furniture and diplomas on walls. They will usually request copies of several patient records to review later. They will request copies of practice policies and procedures, treatment protocols, all staff licenses and certifications, drug formularies, medications routinely prescribed, and medications routinely used in the office. They will inspect any medication/narcotic lockers or storage cabinets and will request drug/medication invoices and inventories.

You will usually be contacted for follow-up information and documentation after the audit and will eventually be provided a report and, possibly, a demand for repayment of any detected overpayments.

Increased Medicare and Medicaid Fraud Initiatives

Because of the severe state budget shortfalls and the federal deficit, we are seeing a tremendous increase in Medicare and Medicaid fraud initiatives, including but not limited to: audits by Medicare Program ZPICs and RACs, use of Medicaid Fraud Control Unit (MFCU) Investigative Subpoenas to obtain records, Medicaid Fraud Control Unit (MFCU) Search Warrants used to seize patient records, billing records and computers, Medicaid audit letters from the Agency for Health Care Administration (AHCA), and related activities. In one ten (10) day period, we had clients who had their offices searched and records and equipment seized by the Medicaid Fraud Control Unit (MFCU); we had another client who had 77 patient records subpoenaed by a MFCU investigative subpoena; and we had a client who experienced a site visit/audit conducted on less than 18 hours notice by a ZPIC for Medicare.

Medicare, Medicaid and TRICARE now routinely share audit results and information on repayments made by health providers. We had a client who conducted a self-audit and found an overpayment situation. The client made a voluntary disclosure and sent in a voluntary repayment of the amount it had overbilled Medicare. A few weeks later it received an overpayment demand from the federal TRICARE Program based on the same patients and the same claims for the co-pays and deductibles that had been paid by TRICARE.

Under recently enacted Florida law, if Medicaid audits your practice and determines an overpayment, you must repay the entire amount within thirty (30) days or your medical license will be suspended, even if you deny you owe the money and request a hearing.

Because of the extrapolation formula used by the state Medicaid Program to calculate overpayment amounts, every dollar you are able to prove you are owed on the audit itself may cause you to save $50 – $100 on the final audit.  One of our goals when assisting a Medicaid Provider in a Medicaid audit is to produce sufficient documentation to prove the amounts originally billed and paid were correct.  Every dollar saved in such an audit can yield hundreds in the final results and may even avoid any sort of repayment or penalty assessment.

Audits routinely result in a provider being assessed tens of thousands of dollars in alleged overpayments, plus fines, penalties or interest on top of that.  For example, in one representative case a provider was found on the audit to have been overpaid the actual amount of $679.00 on the patients audited.  This was extrapolated by the Medicaid Program to result in an overpayment amount of $60,807.70, a ratio of 89.56 to 1.  Click here for actual calculation.

However, it has been our experience in such cases that if a statistics expert is retained to review these calculations, many errors can be discovered.  This may lead to the formula being discarded completely as unreliable in an administrative hearing.  Often incorrect numbers are used, samples are not representative, or other problems are found in the way the sample is taken.

The motto of this story is that it pays to have expert assistance in such matters.

See, also, Executive Order 13520 (November 2009) Eliminating Fraud and Abuse.

See also the information on our website regarding:

Medicaid Investigations
Medicare Appeals
Medicare Fair Hearings
Medicaid Qui Tam or Whistle Blower Cases
Medicaid Litigation