Guilty 'Til Proven Innocent

 State Toughens Medicaid Fraud Rules  

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Cover Story – December 2012

Tex Med. 2012;108(12):16-22.

By Crystal Conde  
Associate Editor  

Glenn Wood, MD, opened his first East Austin Carousel Pediatrics clinic in 2002 to give children high-quality health care with dignity and compassion, regardless of their socioeconomic status. Today, seven physicians and 20 nonphysician practitioners care for about 40,000 Medicaid-covered children at six Central Texas clinic locations. But Dr. Wood's ability to keep his clinics' doors open is in jeopardy as the state investigates fraud allegations against his practice.

Last fall, the Texas Health and Human Services Commission (HHSC) Office of Inspector General (OIG) asked Carousel Pediatrics for patient records and documentation spanning from 2007 to 2011. Dr. Wood says OIG then told him in March that its review of the records revealed he'd committed Medicaid fraud and abuse and owed the state $18 million for billing at codes higher than documentation justified, plus $4 million in penalties.

"OIG does have an important job. Sadly, some people take advantage of the system and overcharge intentionally. I have a clear conscience, and I know our clinics' billing mistakes were unintentional. The problem is OIG doesn't seem to be able to discern between good practices and bad practices. They just look at the numbers and go after groups that see a large volume of Medicaid patients," said Dr. Wood, whose clinics serve a 90-percent Medicaid patient volume.

OIG monitors Medicaid to prevent and reduce waste, abuse, and fraud. And more physicians who participate in Medicaid may find themselves the target of OIG scrutiny, thanks to new "program integrity" rules HHSC adopted in October. The Texas Medical Association adamantly opposed the rules and submitted 35 pages of written comments to OIG that outlined the association's concerns. To read the rules and HHSC's responses to TMA's comments, visit the TMA website

TMA argued the rules, which took effect Oct. 14, cast every Medicaid billing error as a possible target for fraud-and-abuse prosecution. Dr. Wood says OIG "already has too much power and not enough oversight as it is." He worries the rules give the agency broader discretion and prosecution powers, which "only make a bad situation worse."

HHSC's decision to adopt the rules as proposed is "disheartening," says John Holcomb, MD, who signed TMA's comment letter. Dr. Holcomb is chair of TMA's Select Committee on Medicaid, CHIP, and the Uninsured. He objected to the rules repealing language that said not all actions resulting in overpayment to a physician are necessarily fraudulent. He asked HHSC officials to retain that language and reiterate in the new rules that some overpayments are the result of mistakes, not fraud. But that didn't happen.

"These new rules allow OIG to proceed with payment holds and essentially impound money from doctors without providing appropriate due process," Dr. Holcomb said.

HHSC spokesperson Stephanie Goodman says the agency had to adopt the new rules "to comply with new program integrity requirements in the Affordable Care Act."

She said federal law "now requires states to put a payment hold in place when there is a credible allegation of fraud. That means that the inspector general's office has seen enough in its investigation to know that there's a high likelihood of overpayments and evidence that the overpayments are the result of fraud, not a coding error or simple mistake, but the willful intention to deceive the state. That's the kind of behavior these rules target."

OIG has put a hold on payments to three physicians as a result of its investigations and suspended payments to six others this year based on instructions from the Centers for Medicare & Medicaid Services (CMS) or the Texas attorney general's office.

Ms. Goodman says the changes in rules are "long overdue," adding that most doctors who treat Medicaid patients are "acting in the best interests of their patients and the public."

"Good doctors don't get rich off of Medicaid, and they have no reason to be concerned about these changes in the rules or a stronger, more vigilant Office of Inspector General," she said.

In its comment letter to HHSC, TMA acknowledges that the Patient Protection and Affordable Care Act requires holding payments based on a credible fraud allegation. But it says OIG's interpretation of the provision is inconsistent with even the federal government's guidance, which requires states to establish mechanisms to verify the allegations.

The letter urged OIG to implement a meaningful verification system. As the rules stand, TMA argues, OIG can withhold payments based on incorrect or even malicious information, such as a disgruntled employee accusing a physician of fraud with no credible evidence.

TMA opposes health care fraud and supports a fair process to prevent and detect actual fraud, says Darren Whitehurst, TMA's vice president of advocacy. He says TMA will evaluate its options for asking the legislature to make sure the state conducts fair fraud and abuse investigations and gives appropriate due process protections to physicians and other health care professionals accused of fraud, waste, or abuse. Additionally, TMA convened a Physicians Medicaid Congress at its fall conference in October to discuss ways to attract more physicians to participate in the program and to alleviate physicians' fears of OIG.

Rules Could Deter Participation  

The onerous nature of the new OIG rules concerns Dr. Holcomb, who says it's going to be "increasingly difficult to convince physicians to step up to the plate and see new Medicaid patients." He pronounced the rules "just another nail in the coffin."

He has reason to worry. According to TMA's 2012 survey, Texas physicians available to treat all new Medicaid patients plummeted from 42 percent in 2010 to 31 percent – an all-time low. To make matters worse, in 2010 and 2011, the state cut physicians' already-meager Medicaid payment rates another 2 percent. Then, at the start of this year, the state cut payments to doctors who care for the state's poorest elderly and disabled patients (dual-eligible patients) another 20 percent. These cuts hit physician practices extremely hard, especially because Medicaid payments cover less than half of the average cost to provide services, Dr. Holcomb says.

Without due process protections and other important changes in the draft rules, Dr. Holcomb wrote, "The pervasive fear among physicians that they will be incorrectly accused of fraud, waste, or abuse, or denied meaningful recourse in a fraud investigation will continue to contribute to the decline in physician participation in Medicaid."

Kaufman pediatrician Charles Turner Lewis, MD, battled fraud allegations levied against him by OIG from 2005 to 2008 and emerged victorious and with a renewed commitment to the Medicaid program. Upon learning of the new program integrity rules, he said, "This is what happens when a governmental body gets to write its own set of rules."

He encourages physicians to hold OIG accountable for its actions and to demand the agency afford physicians proper due process in the course of investigations.

"If this is not done, we will have decreased Medicaid participation rates, thereby further burdening the emergency rooms and raising costs to the state and taxpayers. Physicians will not want to come to Texas, thereby decreasing access to care, and physicians will have less control over the practice of medicine, placing it in the hands of bureaucrats and destroying the quality of our medical system," Dr. Lewis said.

Ms. Goodman explains that due process under the new rules hasn't changed.

"Depending upon the type of case, the provider may receive a notice of potential sanction before any final decision is rendered. That notice gives the provider an opportunity to schedule an informal review with OIG to sit down and talk about the case so we can work to resolve some or all of the allegations," she said.

In the absence of notice of potential sanction or failure to resolve the issue via informal review, however, OIG issues a notice of final sanction.

"The provider can then conduct another informal review, an appeal, or both. If the second informal review does not resolve all issues, the case can be docketed for a contested case hearing before an administrative law judge," she said.

Physicians can request an expedited hearing, but Ms. Goodman says cases typically are set for hearing within 60 to 75 days of the request.

Should an administrative law judge determine the evidence against a physician doesn't constitute fraud, Ms. Goodman says all funds OIG withholds from the physician flow back to the physician.

"But that judge could determine that the provider was overpaid due to waste, abuse, or inadvertent error even without a fraud finding. In that case, the judge could still allow the agency to recoup the overpayment using held funds," she said.

Bad for Business  

When he found out he was the target of an OIG investigation and potentially owed the state $22 million in fines and penalties, Dr. Wood contacted his attorney, Mark Chouteau. Shortly thereafter, he received another letter notifying him OIG would withhold all of Carousel Pediatrics' Medicaid payments during the investigation.

Carousel's high Medicaid patient load may be what attracted OIG's attention in the first place, Dr. Wood says.

"The clinics serve as an innovative medical home for a large number of Austin-area Medicaid children. The fact that we bill Medicaid at such a high rate may be what caught us in OIG's radar," Dr. Wood said.

Dr. Wood had an independent certified coder review OIG's findings and compare them with the clinics' records and documentation.

"The outside coding expert disagreed with or rendered irrelevant about 85 percent of OIG's findings, but did find some coding mistakes on the part of Carousel Pediatrics. We acknowledge some mistakes and are willing to remedy them, but they account for fewer than 3 percent of the cases reviewed," he said.

One of the offices mistakenly coded throat cultures as blood cultures, for instance.

"It was an accidental overcharge on our part," Dr. Wood said.

Clinic officials periodically audit coding, Dr. Wood says, but some mistakes must have gone undetected.

TMA can help physician practices avoid coding mistakes. TMA Practice Consulting offers coding and documentation services that help practices identify any areas of concern and make adjustments. (See "Coding Anxiety? TMA Can Help.")

Another mistake involves Carousel billing Medicaid for after-hours patient care. Dr. Wood says the clinics are open until 9 pm during the week and are open a few hours on weekends. The clinics' contracts with their Medicaid managed care plans and HMOs authorize them to bill for after-hours services. But the clinics' contract with Texas Medicaid & Healthcare Partnership (TMHP), which administers the traditional Medicaid program, didn't authorize payment for after-hours care.

"TMHP knew we were charging for after-hours services, but no one told us not to or questioned the billing," Dr. Wood said. "By staying open later and on weekends, Carousel Pediatrics saves the state money by keeping children out of the emergency room. We also improve access by having more flexible operating hours that make it possible for working parents to bring in their children."

Mr. Chouteau and Dr. Wood met informally with OIG earlier this year to appeal the payment hold. Dr. Wood gave investigators copies of his contracts with Medicaid managed care plans and HMOs, the independent coder's analysis of the records, and a letter from Superior Health Plan praising Dr. Wood and the care Medicaid children receive at his clinics. Carousel contracts with Superior, a Medicaid managed care organization that came to the clinics' defense upon learning of the OIG payment hold.

"That organization was able to convince OIG there would be a real access-to-care problem if Carousel Pediatrics couldn't provide services to tens of thousands of area Medicaid children," Mr. Chouteau said.

OIG lifted the payment hold for the Medicaid managed care organizations and HMOs Carousel contracts with, but not for payments from the traditional state Medicaid program administered by TMHP. Dr. Wood estimates the clinics lose about $40,000 per month due to the payment hold.

As a result, Dr. Wood had to reduce staff by about 20 percent. He also closed one Austin clinic over the summer but reopened for business in the fall. At Superior's urging, he opened three clinics in the Rio Grande Valley earlier this year but had to close them all one month later because of the investigation.

Following the meeting to appeal the payment hold, Mr. Chouteau and Dr. Wood compiled 800 pages of documentation supporting the clinics' billing claims and submitted the information to OIG in May. Mr. Chouteau says once OIG has finished reviewing the documentation, he and Dr. Wood will set another informal review with the agency to discuss OIG's final findings.

Dr. Wood's ordeal with OIG is taking a tremendous emotional and financial toll on him. He describes it as "going through all the stages of grief" and says he's ready to move forward and resolve the case. Dr. Wood is grateful for TMA's help during a trying time.

"I shared the records in question with TMA and gave the Office of General Counsel a copy of our documentation and the independent coder's assessment. TMA then routed the information to two pediatricians and another specialist for review. All three of them responded by saying they found some minor coding mistakes but nothing to suggest fraud," he said.

TMA's Patient-Physician Advocacy Committee reviewed Dr. Wood's documentation and recommended the association support Carousel Pediatrics in an effort to ensure fair treatment of physicians subject to the OIG's Medicaid fraud investigation process.

Mr. Chouteau says he and Dr. Wood hope to resolve OIG's case against Carousel Pediatrics soon.

Ms. Goodman says HHSC can't comment on it because the investigation is still open.

Dedicated to Medicaid Patients  

Dr. Lewis' experience with OIG mirrors that of Dr. Wood. Beginning in 2005, he struggled to keep his office open after his billing practices caught OIG's attention.

In its investigation of Dr. Lewis, OIG reviewed only 30 records out of tens of thousands of his patients' files and concluded he'd overbilled Medicaid $146,396.89 for 2004 and 2005. After OIG factored in administrative penalties, Dr. Lewis potentially owed the state $439,109.67.

Confident he hadn't intentionally defrauded Medicaid, Dr. Lewis requested a formal hearing with the State Office of Administrative Hearings. During the four months leading up to the hearing, the state withheld 25 percent of his Medicaid payments. At the 2006 hearing, a medical coding expert testified that he examined the same 30 files and found Dr. Lewis' charges to be in line.

Judge Shannon Kilgore ruled in Dr. Lewis' favor and told the state it couldn't withhold the payments. Even so, OIG ordered him to file all Medicaid claims by paper, instead of electronically.

At the time, Dr. Lewis says the state denied more than $500,000 in traditional Medicaid claims. Parkland Community Health Plan Medicaid HMO did pay his claims, however.

Facing potential financial ruin and the threat of having to shut down, Dr. Lewis ran his practice out of his own pocket.

After Dr. Lewis and his lawyer met with TMA attorneys and other staff, a TMA reimbursement specialist reviewed 10 of the Medicaid claims the state had denied and found them to be valid.

In 2008, Attorney General Greg Abbott ordered OIG to obey Judge Kilgore's ruling. The case settled that year, Medicaid processed Dr. Lewis' unpaid claims, and he didn't have to pay the state a dime.

Still, the incident was costly. Dr. Lewis spent about $65,000 on legal fees, drained his retirement and personal savings accounts, took out a second mortgage on his home, and sold many of his possessions to keep his office open. He's never been able to retrieve 200 patient charts OIG confiscated from his office as part of the agency's investigation.

"TMA and my attorney have tried to get my charts back to no avail," Dr. Lewis said. "When we ask OIG for the charts, they tell us either they don't have them or the investigation is still open. I'm missing charts for some of my patients, who are rightfully upset. Plus, the medical board requires me to maintain patient records, but I don't have access to the ones OIG still has."

Despite his ongoing quest to recover his records and his past struggles with OIG, Dr. Lewis continues to see Medicaid patients.

"Eighteen years ago, I decided to bring a high-quality pediatric practice to Kaufman, a rural area. I feel like it would be a detriment to the community to let OIG win, to close my practice to Medicaid patients. I have a real connection to the community, which has been so supportive. The parents here really appreciate the fact that they have quality care for Medicaid children," he said.

 Crystal Conde can be reached by telephone at (800) 880-1300, ext. 1385, or (512) 370-1385; by fax at (512) 370-1629; or by email.  


Coding Anxiety? TMA Can Help  

TMA Practice Consulting offers evaluation and management (E&M) coding and documentation help that includes a review of claims, coding, and medical record documentation to determine whether a practice follows coding guidelines for appropriate billing. An abbreviated checkup and a full review are available.

TMA Practice Consulting reviews a practice's documentation for:  

  • Accurate CPT coding, appropriate application of CPT coding guidelines, E&M coding guidelines, and the correct use of modifiers;
  • Accurate ICD-9 coding, appropriate application of ICD-9 coding guidelines, and documentation of medical necessity; and
  • Encounter forms, claims, and corresponding explanations of benefits to ensure accurate billing and reimbursement levels.  

TMA also offers an E&M coding and documentation training program for practices that need help understanding documentation guidelines or identifying inappropriate or inaccurate coding and weaknesses in medical record documentation. The two-hour session covers a review of 1995 and 1997 E&M documentation guidelines, time-based coding, modifiers, audit triggers, prolonged services, preventive medicine, and E&M utilization patterns, among other topics. Services are available for a fee based on a practice's needs.

For more information, call TMA Practice Consulting at (800) 523-8776, email[at]texmed[dot]org or visit the TMA website to access all of TMA's billing and coding resources.

TMA Practice E-Tips Greatest Hits, Vol. 3: Coding is available free of charge online.

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TMLT Has You Covered  

All Texas Medical Liability Trust (TMLT) policies covering individual physicians include the Medefense Endorsement, which provides reimbursement for legal and tax audit expenses for disciplinary proceedings. Medefense covers payment of civil fines and penalties associated with disciplinary proceedings with limits of $50,000 per insured event and an annual aggregate limit of $100,000 per policy period. Medefense benefits are subject to a $1,000 deductible, and physicians pay 10 percent of the legal expenses as coinsurance after meeting the deductible.  

December 2012 Texas Medicine Contents
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Last Updated On

November 20, 2017

Originally Published On

November 21, 2012