Observation Deck

Return of the Audits

CMS's announcement that audits would resume Aug. 3 was a shock. Then CMS said it would phase audits back in. What are the details?

• By Wayne van Halem
• Oct 01, 2020

Very quietly, in a document released in July, ironically entitled “Coronavirus Disease 2019 (COVID-19) Provider Burden Relief Frequently Asked Questions (FAQs),” CMS announced that audits would resume on Aug. 3, regardless of the state of the Public Health Emergency (PHE). This news took quite a few by surprise, including me. While we all knew audit activity would not be ceased forever, all the other waivers that CMS announced were to be in place for the duration of the PHE, which is still in effect now through the end of September. I guess many of us assumed that would be the case with audits as well.

Another reason many of us were caught off-guard is the fact that many parts of the United States, at the time of this announcement in July and even today, are still dealing with large numbers of COVID patients and increased hospitalizations. Many suppliers are still struggling to take care of their patients, deal with equipment inventory issues, and maintain the safety and well-being of their employees. To confound the situation, many provider’s billing or administrative staff that would normally handle audit responses are working remotely.

After this announcement, I had an opportunity to meet with representatives of the CMS Central Office to discuss their plan for the return of audits. We learned that, while the date to begin medical review functions is Aug. 3, there will likely be a delayed time frame before audit requests officially go out. At that time of this meeting held in July, CMS was still working to develop instructions for contractors. They indicated that they had no intention of opening up the flood gates for a large volume of audits, but rather, they described their strategy as a “toe in the water” type of approach. In a later publication on Aug. 6, they indicated medical review activities would begin on Aug. 17.

We also learned that Targeted Probe and Educate (TPE) Prepayment reviews, the most common type of review pre-pandemic, would not be a part of this initial audit phase. The reason being is that CMS indicated that (1) they do not want to hold up payments to suppliers, and (2) due to claim processing system limitations, there are fewer flexibilities to grant extensions for those suppliers that would need more time to respond. What they mean by this specifically is that with prepayment reviews, if no documentation is received by the due date, the system will automatically deny the claim.

A Troubling Consideration

A key area of concern, though, is the impact that post-payment audits have. While I appreciate CMS not wanting to hold up a provider’s payments, asking for refunds on claims that have been paid is equally, if not more, damaging. In this environment, many suppliers are already financially impacted by the fact that many patients are no longer going to see their doctors or having surgical procedures, both of which are big sources of referrals. Also, what CMS did not indicate is whether these post-payment reviews will be on a single claim or a sample of claims. If it is a sample of claims, we can expect large overpayments that must then be fought via the often lengthy and frustrating appeal process.

Some other parameters set forth by CMS is that they will only be reviewing claims submitted prior to March 1. While they have indicated that they do intend to audit claims submitted during the PHE, they do not plan to do that at this particular time. I would imagine, at a later date, claims during the pandemic will be scrutinized by CMS.

For this reason, it’s a good time to remind everyone that the claims you submit are always open to being scrutinized, and this will be no exception. CMS has not given us any idea whether there will be a requalification process for patients whose claims would not have been the requirements had they been submitted another time (e.g., oxygen for acute conditions, missing signatures, or lack of measurements), but I imagine there will be, depending on the products.

You should be tracking these patients, and there should be very good notes in your system, explaining under what circumstances the equipment was provided. You should be able to refer back to these patients easily at a later date and understand exactly why the equipment was provided, despite not meeting certain requirements (that were temporarily waived). Of course, our counsel is always to continue to try to get all the required documentation if you can, but if you can’t, you’ve notated that and flagged it in your system.

What does the future hold?

Time will tell, but for now, I anticipate that CMS will maintain a relatively low volume of audits through the rest of 2020. Depending on the state of the PHE, it could continue further than that. However, one thing that we all need to keep in mind is the impact that the PHE has had on the backlog of appeals at the Administrative Law Judge level. Even prior to the pandemic, the volume of appeals being filed by providers was much smaller than what normal volumes had been previously.

The backlog of appeals can be attributed to the Medicare Recovery Audit Contractor (RAC) program, which had a significant impact on DME suppliers. Since reinstating the RAC program, CMS has restricted the RAC considerably. From 2011 to 2014, RACs were given free rein to audit as many claims as they liked. While there were limits to the number of claims they could audit per provider, they were not limited in the number of suppliers they could audit.

Since they are paid a contingency, they understandably went after as much as they could. Thus, the backlog ensued, nearing 1 million cases at one point. When reinstated, CMS would only provide approval for the RAC to audit between 500 to 2,000 claims per audit that they identified. CMS would then analyze the impact on the appeal process before allowing RACS to audit more. If there was no impact on appeals, they would then provide approval for an additional 500 to 2,000 claims.

Since that time, the Office of Medicare Hearings and Appeals (OMHA) has opened up seven new offices and hired 70 new judges. The backlog was expected to be resolved in 2021, but with the extreme slow-down of new cases entering the system during PHE, it will likely be sooner. We are seeing hearings being scheduled at a very rapid rate.

My concern is that once the backlog is resolved, OMHA has the infrastructure in place to manage up to 300,000 cases annually. That is nowhere near what they are receiving right now. I do not see them closing offices and laying off judges versus giving the RACs the green light to begin auditing at a higher volume. The RAC program made the auditors and the government hundreds of millions of dollars. I don’t see them not pursuing that path since they will have the staffing and budget to handle the volume.

This article originally appeared in the Sep/Oct 2020 issue of HME Business.