Funding Fundamentals:

Are You Prepared for an Audit?

ZPICs mean no more business as usual in DME.

Editor's Note: Wayne van Halem presented, "Coming Out on Top of Audits," a special HME Business webinar on this topic this week that was highly informative. If you missed out, don't worry! You can still sign up to watch and listen to a recorded archive of the webinar. Click here to learn more.

I’ve worked in this industry for a long time and a majority of that time was working as a fraud investigator for Medicare contractors conducting audits of DME suppliers in Jurisdictions A, B, and C. Never before have I seen, either in that capacity or now as a consultant working with healthcare providers, the government more aggressive in their audit techniques. The government is intent on reducing what they deem to be improper payments and the new Zone Program Integrity Contractors (ZPICs) are the ones leading that charge. While some might consider it an unfair analogy, I liken the ZPIC contractors to Blackwater, the private security contractor that was engulfed in scandal over its “cowboy” reputation while working in Iraq. The company seemingly had a lot of power and control with little oversight by the government. It is the same issue with the ZPIC contractors.

The country was divided into seven zones and all but two of them (Zone 6 makes up Jurisdiction A and Zone 3 makes up Jurisdiction B) have transitioned. Due to several issues and contract protests, the implementation of this program has been significantly delayed. However, I anticipate the rest of the country will transition in the coming months. In theory, when this program was released, I thought it was a change that made complete sense. Prior to the implementation of the ZPIC program, you had multiple contractors in each state that each looked at a particular set of claims for fraud or abuse. For example, you had one contractor look at DME claims while another would look at home health and hospice, and yet another would look at physician services, inpatient services, etc. Now, they would award a contract to one company to identify and reduce submission of fraudulent claims across all lines of business. This is a noble charge that I think all of us can agree and support. However, the tactics employed by these contractors have not succeeded in doing this, but rather has resulted in the forced closure of small family-owned businesses, layoffs of employees, increased debt, and bankruptcy proceedings while an overwhelming majority of these providers are never investigated by the Office of Inspector General for any fraudulent practices. We have had audit last nearly a year and a half and then closed with no additional actions taken other than a referral to the DMAC for education. Meanwhile, the small provider was crippled financially. In one instance, I had a client purchasing enteral nutrients on his own personal credit card because he had no more credit with his supplier to purchase them but had to do so in order to keep his patients fed. He eventually got off the audit with no action other than an educational referral after a year of fighting.

These contracts are $100 million or more and the companies awarded them are large businesses that will go to great lengths to show CMS a significant return on their investment in an effort to keep their lucrative contracts. For example, SafeGuard Services (“SGS”) is among the most aggressive conducting audits in high-risk areas such as Florida and California. SGS is owned by HP. HP's posted net revenue in 2010 was $126.3 billion. Yet, SGS puts small family owned businesses on 100% prepayment review without notice and often based solely on data analysis or unsubstantiated complaints. Then, all of your patient files go to a subcontractor, IntegriGuard (owned by HMS Holdings, a company that reported revenue of $302,867,000 in 2010) to review the files and adjudicate the claims. IntegriGuard often denies an overwhleming majority of the claims, yet the investigator who is in charge of your case never sees the files and soley reviews error rates. The problem with the denials is they are often incorrect, technical, or trivial. For example, they recently denied claims for oxygen for a Medicare patient that was on the lung transplant list. Another contractor, AdvanceMed (owned by NCI, Inc) denied claims for a ventilator for a patient that has been on a ventilator or iron lung consistently since the 1950’s. Without this equipment, the patient could die within minutes. How is this reducing fraudulent and abusive claims? Why are lawmakers and CMS not concerned over this reckless behavior?

Most unfortunate in these situations, is that these decisions come at the expense of suppliers and sadly, their Medicare patients whose claims often get denied by these contractors for technical issues or because the physician’s documentation was not sufficient to meet the increasingly strict Medicare policy guidelines. Suppliers are held liable for the inadequate documentation of physicians or often times, it’s not that the documentation is inadequate, it just doesn’t include all the specific indications and limitation for coverage outlines in each Local Coverage Determination (LCD). For example, I have worked for CMS contractors and for providers over the past 15 years. I have never seen a physician document that a patient has tried and/or ruled out pillows and wedges before prescribing a hospital bed. However, these contractors can and will deny your claims if it is not documented. More complex policies and strict audits to determine adherence to these policies does absolutely nothing to curb fraud and abuse. The true criminals committing fraud have likely never read the LCD and don’t care. It simply makes it harder for individuals who are trying to remain compliant do so.

I am passionate about this because my father relied on home oxygen before he passed away. The equipment provided to him allowed him to live his remaining years with dignity in his home while enjoying his grandchildren. In a recent conversation with a ZPIC manager, he said “Wayne, you have no idea how many bad DME companies there are out there.” My response to him was, “And you have no idea how many good ones there are.” During this same conversation, he went through a long list of things he was trying to protect including CMS, the Trust Fund, providers, etc. Interestingly enough, the Medicare beneficiary was not among that list.

That being said, it is a different environment and if you do not take appropriate steps to prepare and implement appropriate internal controls and policies that you enforce, than these audits could have a significant impact on your business. Can your business survive that interruption in cash flow in an already challenging economic climate? Many of these audits last an average of 6 to 12 months. I’ve witnessed the effects with good suppliers going out of business because of the impact of a ZPIC audit. In the very minimum, suppliers have been forced to lay off employees and increase their debt in an already difficult and challenging economic climate. I also know many of these companies were not prepared and thought it wouldn’t happen to them.

Although you may not think so, the purpose of this article; however, is not to scare you. The purpose is to get a very important point across that you must prepare and be proactive. As a healthcare provider, you must implement an effective corporate compliance program and implement internal controls to identify areas of risk. Implement policies to obtain as much documentation up front that you can and express that top-down commitment to compliance to all your employees. You must conduct on-going education and training to your staff and regularly conduct internal audits to determine areas where you should focus. You can utilize tools already at your disposal such as your billing software to conduct your own internal analysis of your claims data. Most importantly, educate yourself on what to expect if one of these audits happens, and what to do in advance to prepare. It is time for the industry to fight back and be prepared and perhaps then, the contractors will focus on the truly fraudulent providers. If you attend my upcoming webinar sponsored by HME Business called “Coming Out on Top with Audits”, you can learn what steps you can take to get prepared. Attending this webinar can be your first step in developing a plan and stepping outside of the “business as usual” mode so you’re not waiting and wondering, but rather building the foundation of a strong compliant business that will excel and strive in these uncertain times.

This article originally appeared in the September 2011 issue of HME Business.

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