Business Solutions

Keeping Watch on Audits

Key Medicare claims audit developments are approaching. What do providers need to know?

• By David Kopf
• Apr 01, 2016

When it comes to Medicare claims audits, HME providers need to keep a sharp lookout. As the past several years have demonstrated, CMS’s audit program and priorities are constantly shifting, and providers must closely monitor those changes to ensure they reduce their exposure to claims recoupments.

So, where the coming months are concerned, what can providers expect in terms of new audit trends, as well as the current state of appealing claims recoupments? The short and sweet answer is that providers can expect yet more change, but let’s examine those changes in detail.

Starting with the audits themselves, probably the two main trends providers should anticipate are the emergence of Supplemental Medical Review Contractor (SMRC) audits in the HME world, and the fact that the industry will get its own Recovery Audit Contractor (RAC).

SMRC Audits

A few years back, CMS created the post-pay SMRC audits, and the current contractor is Strategic Health Solutions. The industry hadn’t seen much SMRC activity for roughly a year, until it began seeing SMRC audits six months ago, according to Kim Brummett, vice president for regulatory affairs for the American Association for Homecare, who works closely with CMS to monitor audit trends and advocate on the industry’s behalf. Initially, the contractor focused on diabetic supplies, but then changed course.

“But given that the majority of folks don’t do diabetic supplies, we heard some discussion about it, but it wasn’t that big a deal,” she explained. “Then, about six months ago, CMS directed the SMRC to do post-pay audits on three categories: oxygen, sleep and nebulizers.”

SMRC began performing it’s audits in phases, because it is pursuing a
large volume of claims.

“We know that there is still probably a wave of those to come because they [SMRC] were doing 50,000 oxygen and 6,000 CPAP and 50,000 nebulizers and accessories,” Brummett explains. “So we expect that those will probably continue though the rest of the year.”

The industry has asked CMS for clarification on how those phases have been implemented, but the answer is not yet clear, according to Brummett. What’s known is that when a provider gets “pulled,” it is identified by its NPI, and then is subject to a 40-claim audit.

“Suppliers typically have 45 days to respond,” she says. “Although we’ve worked with CMS to extend that, so if a supplier calls the SMRC and asks for an extension on an audit, they’ll be granted an additional 45 days.”

The other win Brummett says AAHomecare has been able to negotiate with CMS is that if a provider’s NPI gets pulled for a 40-claim audit, that NPI won’t be pulled for any future SMRC phases for that category, regardless of how many recoupments result from that initial 40-claim audit.

RAC Audits

Then just monitoring if and when we get our very own RAC.

The industry did not have it’s own RAC before. The HME industry’s services we wrapped into the different RACs that were zoned across the country.

Now the industry is going to be getting a dedicated RAC, because the previous arrangement was not studying the industry close enough.

When you’re dealing with an audit contractor that gets paid on a percentage of what they get back, it’s unlikely that they would spend a lot of time looking at us because 15 percent of an oxygen device doesn’t get you very far, but 15 percent of an in-hospital admission can put some money in the bank. So I think it will be a very different scenario once the RAC is announced.

The RACs that are coming will be dedicated to both home health and DMEPOS claims. The question is how much will the auditor pay attention to HME providers vs. their home health cousins?

“Having come from a home health background, I can tell you that a 60-day episode of home health is still worth a lot more than a couple month’s rental on a concentrator,” Brummett explains. “So my hope is that we will still be the least picked-on by the RACs just based on the incentive award system.”

That said, van Halem warns that the RAC auditors’ past lack of attention or possible compensation prioritization should not lull providers into a false sense of security. Again, they must keep watch.

“I think they [the RACs] will come back with a vengeance since they have been on hiatus for so long with their contracts,” he says. “That will likely not be until the end of 2016, but it’s important, because the claims suppliers are submitting now are the claims that will be audited. So, my concern is that people have become complacent because the RACs have been quiet and that is worrisome.”

In terms of categories that van Halem thinks will get special attention from the RACs, he believes vents and orthotics will be key targets.

“You have a lot of mail order companies drop-shipping orthotics all over the country, often multiple braces at the same time, so there is a lot of concern of the medical necessity and overall volume increase,” he says. “There are also a lot of respiratory audits going on with oxygen, nebulizers, and CPAP/BiPAPs.

The Appeal Backlog

One trend that persists is the ever-growing backlog of appeals that are awaiting hearing from an administrative law judge (ALJ) at the Office of Medicare Hearings and Appeals. Because so many audits get overturned at appeal due to them being faulty or technicalities, the industry estimates that between 85 and 90 percent of all denied audits are appealed. Over time, this situation has grown unmanageable.

According to van Halem, at a recent meeting with OMHA, the office claimed the backlog at the end of FY2015 was just under 900,000 claims. Brummett added that OMHA recently received what would typically be a year’s worth of ALJ requests in 19 weeks. To put it simply, the glut simply keeps growing.

“It just increases,” Brummett observes. “There’s no end in sight, and there’s no way to fix it. It’s the most mind-blowing thing I think I’ve ever seen.”

So Brummett sees providers adopting some different appeals strategies. While in the past providers would simply ratchet up their appeals efforts until they would get to the ALJ level, it now takes longer than two years just to get on the docket. Something needs to change.

And, to that point, there have been some incremental steps forward. Recently, Brummett notes that the American Hospital Association sued HHS over the ALJ backlog.

“The court found in favor of AHA, but we haven’t seen anything change,” she says. “So we’re curious to watch what that’s going to push [HHS] to do.”

And there are other important developments, according to van Halem.

“There are finally a few projects that are being piloted that I think could have an impact,” he notes. “In October 2015, they limited the appeal contractors scope at Redetermination and Reconsideration to look at just the denial reason, code, and claim at issue.

“Previously, they could deny for a completely different reason which happened often,” he continues. “Now, that they can only address the issue in question, that should reduce appeals.”

The Qualified Independent Contractor (QIC) is implementing a pilot program in Jurisdiction C and D that will create a discussion opportunity at Reconsiderations, which is currently an on-the-record review with no human interaction, van Halem adds.

“The pilot if only for diabetic supplies and oxygen equipment and the contractor will notify the supplier if they qualify,” he says. “In addition to that, the QIC is going to go back and review all unfavorable decision for that same PTAN back to Jan. 1, 2013 and see if there is a possibility to render a favorable decision, they will reopen and offer the supplier the opportunity to address those denials too.

“If they are successful, the QIC will request that the ALJ remand the cases back to them so they will be reopened and processed favorably,” he continues. “If they can’t, then the supplier will be able stay in line at ALJ. This really is the first big project that I have seen that is significant enough have a big impact on the backlog.”

According to van Halem, the QIC, C2C Solutions, seems committed to making this pilot successful and expanding it to other products and jurisdictions.

He also notes that the ALJ has expanded the Settlement Conference pilot and as a result, more suppliers qualify for this and have started the process of having a settlement facilitation meeting with OMHA and CMS.

“This too could reduce a significant backlog particularly with some large suppliers participating,” he says.

For now, providers need to determine their best audit appeal strategy, according to Brummett. Standard operating procedure might have been to appeal all the way up the chain, but with the out-of-control delay, providers need to approach appeals more judiciously.

“At what point do you cease and desist [escalating appeals]?” she asks. “Do you get the patient to sign an ABN and do you pick up your equipment? Do you get a credit card and have the patient pay privately? At some point suppliers have to be smarter about what their operational processes are, given the backlog at the ALJ. It’s no longer a viable option to say, ‘I’ll appeal and win,’ two years down the road, and you can’t float your payroll for two years.

“I think a lot of providers are trying to determine for what products and at what levels they stop appealing,” she continues. “I think we see suppliers saying, ‘I’m going to follow the redetermination. If I lose that I’m going to file the reconsideration. If I lose that, I’m not going to ALJ, I’m going to hold the patient accountable. I’m going to pick up my equipment. I’m going to do something different.’”

Preparing for Audit Changes

Getting back to the main audit trends for this year, now that providers are aware of the SMRC and RAC audits changes, how should they prepare?

“I think they need to be mindful of them, and keep tracking to ensure that if they have multiple NPIs, and an NPI gets pulled in one phase that it doesn’t get pulled again,” Brummett advises. “They need to call the SMRC when they get an audit and ask for that 45-day extension. And continue responding to those audits, and the appeal process if and when they get a response.”

Also, van Halem says there are still common mistakes that HME providers are still making when it comes to processing claims. If they avoided some routine documentation pitfalls, they could easily clear up a good portion of their audit worries.

“Documentation remains a supplier’s only defense if an audit, regardless of contractor,” he says. “We don’t cross the T’s and dot the I’s. The CERT error rate has declined dramatically, but it’s still at 39 percent.

“Overall, suppliers still struggle with MD documentation but have been working on that as an industry,” he continues. “If I had one tip, it would be to be proactive as it comes to compliance. Don’t be afraid to hire consultants or experts in compliance.”

Also, he suggests that providers conduct internal audits to make sure their team is processing claims as it should be.

“It’s so important to be prepared and proactive in this intense regulatory environment,” van Halem explains. “The audits are not going away, it’s a new era of doing business in DME, and compliance must be a top priority.”

This article originally appeared in the April 2016 issue of HME Business.