Observation Deck

Preparing for the Next Surge in Claims Audits

With the COVID-19 audit pause well behind us, multiple indicators show CMS is quickly resuming audits in a big way. What do HME providers need to know?

• By Kelly Grahovac
• Sep 09, 2021

It has been nearly 17 months since the Centers for Medicare and Medicaid Services (CMS) declared COVID-19 a national emergency, and with that declaration, a variety of waivers and flexibilities were put into effect that allowed health care providers to adequately care for patients amidst a pandemic. Of these was the halting of all CMS audits for Medicare and Medicaid claims.

In August of 2020, CMS reinstated audit program functions and instructed the MACs to conduct audits on a post-payment basis for claims with dates of service prior to March 1, 2020. At that time, CMS described the return of audits as a “toe in the water” approach, alluding to the fact that audit activity would have a slow start.

What followed that announcement in late summer of 2020 was the MACs revisiting the “pre-TPE audit” days, initiating widespread probe reviews on post-payment claims. The product categories weren’t unfamiliar, with orthotics taking center stage. Since then, other familiar product categories such as manual wheelchairs, surgical dressings and urological supplies have been added to the list, as well as some outliers, like osteogenesis stimulators.

Things Are Ramping Up Fast

However, while the MACs were continuing to audit the pre-pandemic dates of service, the RAC and SMRC jumped in, with no exclusions on pandemic claims and with no exemption of claims in the respiratory category. In fact, in October of 2020, the SMRC was conducting a review project on ventilator claims, at the direction of the CMS’ Program Integrity Group.

Fast-forward to June 3, 2021, when CMS announced that MACs could begin conducting post-payment reviews for dates of service on or after March 1, 2020. Essentially, everything is fair game at this point, but the pandemic health emergency (PHE) rules (i.e., waivers and flexibilities) are still applicable, as the PHE was extended another 90 days and likely will be again through the end of this year.

In addition to the MAC and SMRC audits, the RAC has shown an increase in audit activities, as have the UPICs and most state Medicaid plans. Commercial plan audits have also been on the rise, though they were under no directive to cease or slow audit functions at any time during the PHE.

It appears that audits are back and accelerating at a pace most of us in the industry haven’t seen since 2017 and the emergence of the RAC program.

Other Factors at Work

What else is contributing to the fast-paced audit program activities? The soon-to-be eliminated backlog of appeals pending at the Office of Medicare Hearings and Appeals (OMHA), which is required to have the backlog resolved by 2022. Efforts to reduce the backlog included adding seven new OMHA offices and over 70 new administrative law judges to the payroll.

Once the backlog is resolved, OMHA will be staffed to manage approximately 300,000 appeals per year, and CMS will likely lift restrictions placed on audit contractors, whose responsibilities are, in part, to protect the Medicare Trust Fund.

Need further proof that we are preparing for an audit surge? The President’s budget for FY 2022 also includes a $96 billion net increase for the CMS, in which $2.4 billion is allotted for program integrity, including the Health Care Fraud and Abuse Control Program and the Medicaid Integrity Program.

In the budget brief, Medicare medical review is deemed a “top priority,” in which “the collection and clinical review of medical records and related information to ensure that payment is made only for services that meet all Medicare coverage, coding, billing, and medical necessity requirements.” The plan goes on to state that CMS “will increase the percentage of fee-for-service claims subject to medical review, which currently stands at less than one-tenth of one percent”.

The brief also lauds the return on investment that CMS’s program integrity efforts provide, yielding consistent savings of over $10 billion annually. It’s evident that CMS will continue pumping considerable amounts of money into program integrity functions, which includes audit functions.

Six-Year Lookback Audits

Lastly, audit contractors have increasingly hinted to the use of six-year lookback audits as a means for providers that have received improper payments to refund overpayments due. These audits are especially attractive to contractors because they require the provider to do the work — determine the claims sample, conduct the review, identify any overpayments, and refund monies.

Most recently, UPIC findings letters have included language that directs providers to take actions of self-assessments and voluntary refunds in instances where a high error rate was identified. Taking the return on investment into consideration, six-year lookback audits seem like a relatively inexpensive way to recoup overpayments to the program with little incurred expenses.

All signs point to a surge in audits for providers that bill claims to Medicare and Medicaid. The best preparation an HME provider can take is to adopt a proactive approach, including an internal audit and compliance program. Knowing what your claims data looks like before someone else finds it is key to keeping your money in house, and to protecting your investment.