Newest Medicare Audit Program Increases Physician Scrutiny

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Practice Management Feature – September 2011

Tex Med. 2011;107(9):21-25. 

By Crystal Conde
Associate Editor

Brownsville phlebologist Thomas A. Clark, MD, had never heard of Zone Program Integrity Contractors (ZPICs) until two years ago. Today, he wishes he weren't so familiar with the audit program.

Dr. Clark has practiced in the Rio Grande Valley and participated in Medicare since 1978. In 2003, he started what he thought would be a part-time phlebology practice. He worked as a cardiac and general surgeon until 2005, then transitioned to phlebology full-time. He performs a large number of varicose vein procedures annually, and Medicare never questioned his coding or billing.

All that changed in 2009 when he received an unpleasant wake-up call from the government's ZPIC program, part of its effort to eliminate fraud, waste, and abuse in Medicare. TrailBlazer Health Enterprises, the Medicare administrative contractor (MAC) for Texas, asked Dr. Clark to submit 46 random patient charts for review. All of the charts TrailBlazer obtained were for 2007-08.

"By 2009 I had done several thousand procedures without a word from Medicare," he said. "In December 2010, TrailBlazer informed me I owed $800,000 because none of the 46 patient charts complied with Medicare local coverage determination (LCD) criteria." An LCD is a decision on whether a particular medical service is reasonable and necessary.

By now, many physicians are familiar with the Recovery Audit Contractor (RAC) program, which recently began focusing audits on practitioners in Texas. (See "RACs Target Texas Physicians.") But Dr. Clark's Austin attorney, Mark Chouteau, JD, says many doctors may not be aware of ZPICs. At press time, Mr. Chouteau represented 10 physicians targeted by ZPICs.

ZPICs perform a range of medical review, data analysis, and Medicare audits. While the audits share many similarities with other Medicare audits, they do differ in one key aspect: potential Medicare fraud implications.

In general, government regulators have the power to assess administrative penalties, impose sanctions, and obtain an injunction to prevent disposition of the wrongdoer's assets, plus they can coordinate with other civil and criminal investigative agencies. The Department of Justice and state prosecutors can seek criminal sanctions, as well.

Dr. Clark explains that TrailBlazer arrived at the $800,000 payment by extrapolating 1,800 patient encounters from the 46 charts covering 2007-08.

"They denied every one of those procedures to the tune of $800,000. They didn't find any evidence of fraud and didn't levy any fines, but they wanted close to $1 million from me in two weeks. My other option was to appeal the decision," he said.

With Mr. Chouteau's help, he began the appeal process on Dec. 31, 2010. Dr. Clark expected to hear back from TrailBlazer regarding his appeal 30 days after beginning the process. As of July, he hadn't heard anything.

Staying Off Auditors' Radar

When he testified to Congress in March 2010, U.S. Department of Health and Human Services (HHS) Inspector General Daniel Levinson said the Centers for Medicare & Medicaid Services (CMS) estimated that in fiscal year 2009, $24.1 billion (7.8 percent) of the Medicare fee-for-service claims it paid did not meet program requirements. While not all improper payments involved fraudulent activity, he said CMS shouldn't have paid the claims.

The federal government has made a concerted effort to augment its fraud and abuse efforts in the health care industry.

According to Mr. Chouteau, physicians must learn to work under increased federal scrutiny and understand the government's fraud and abuse investigation initiatives. He says physicians and their staff members should monitor and improve business and clinical systems, routinely audit claims submissions, and track and evaluate claim denials as part of a working compliance program.

"Unless you nurture a culture of compliance in your organization, the results of government audits and investigations can be devastating," he said.

Physicians and their billing staff should monitor online reports by HHS Office of Inspector General (OIG) and the CMS Comprehensive Error Rate Testing (CERT) program to determine improper payments the federal government has identified nationwide.

CERT measures the accuracy of Medicare fee-for-service payments. CMS calculates a compliance error rate (which measures how well they prepared claims for submission) and a paid claims error rate (which measures how accurately carriers, fiscal intermediaries, and MACs made coverage, coding, and other claims-payment decisions) for specific contractors, service types, and health professionals.

The Texas Medical Association can help physicians take the steps necessary to avoid trouble. For example, one of a practice's best lines of defense lies in regular coding and documentation audits, whether performed internally or by an outside consultant. (See "Audit Anxiety? TMA Can Help.")

Dr. Clark says he's learned a few lessons from the ZPIC audit experience. He has had two companies thoroughly review his charts.

"I've made changes so when my documentation is examined, it's cleaner," he said.

He encourages his colleagues to work with a qualified and trusted adviser who can make sure they follow the exact billing and coding guidelines for every form of insurance accepted.

"You may still be audited because of the volume of work you do, but you can at least take steps to see to it your documentation will hold up under scrutiny," he said.

ZPICs Different

Mr. Chouteau says the following characteristics differentiate ZPICs from other audit programs:  

  • They are not bounty hunters because they are paid on a contractual basis and don't get contingency fees.
  • They review pre- and post-payment claims.
  • There is no limit to their look-back period.
  • Their primary goal is to identify suspected fraud and take immediate action with suspension of payments, denial of payments, or recoupment.

He also notes that ZPICs refer truly egregious cases to OIG for civil or criminal prosecution, which could result in recovery of three times the amount of actual financial losses suffered or imprisonment.

There are seven ZPIC zones. Texas is part of Zone 4, along with Colorado, New Mexico, and Oklahoma. The ZPIC for Texas is Health Integrity, LLC, based in Maryland.

When conducting pre- and post-payment claim audits, ZPICs may request documentation on all claims they believe are wrong. They may make an on-site visit on short notice, as well.

Mr. Chouteau says if the ZPIC determines a physician has been overpaid, it sends the physician a letter informing him or her of its decision. That is followed by a letter from the MAC, demanding repayment.

The appeal process for ZPIC determinations involves five steps:  

  1. Submit a request for redetermination to the MAC along with supporting documentation.
  2. Submit a request for reconsideration of the MAC decision to the qualified independent contractor.
  3. File an appeal for the case to be heard by an administrative law judge (ALJ).
  4. If you lose, request a review by the Appeals Council within 60 days of receipt of the ALJ's decision. Be sure to specify the issues and findings you are contesting.
  5. Request judicial review before a U.S. District Court judge if at least $1,300 is still in controversy following the Appeals Council's decision.

For more information on the ZPIC appeals, visit the CMS website [PDF].

At press time, some of Mr. Chouteau's clients had advanced as far as the third step in the appeal process. He explains physicians have been experiencing delays in having their cases heard before ALJs due to a backlog in appeals.

"It's taking well over a year, even up to two years, before a physician can get an ALJ hearing," he said.

Don't Take ZPIC Lightly

Why the ZPIC program honed in on Dr. Clark isn't clear. But he has a theory.

"I think it boils down to the fact that I'm one of few doctors in the area dedicated to the practice of treatment for venous disorders. I've been totally surprised by all the patients from McAllen, Rio Grande City, and Corpus Christi, making the clinic much busier than I expected. I'm sure the fact that my clinic performs a large number of procedures per year makes me stand out," he said.

ZPICs do sophisticated data mining, Mr. Chouteau says. OIG and CMS have created large databases of claims submissions. Medicare uses them to scour claims data to identify the most frequently billed codes and to compare that information across specialty areas. The databanks then generate physician profiles based on that information. At that point, Medicare can see who stands out in terms of overpayment and underpayment.

"The most common outliers are those physicians who upcode in high volume. If a physician is three standard deviations from the mean, he or she will be on an audit program's radar," Mr. Chouteau said.

Keep in mind, however, that undercoding doesn't mean a physician is immune to an audit. Mr. Chouteau says this is one of the common coding myths. Such myths may contribute to revenue loss and risk of a formal audit in physician practices.

Here are three other common coding myths:   

  1. Receipt of insurance payment verifies correct coding.
  2. Practices that don't accept Medicare payments are not audited.
  3. The targets of audits are large group practices; small, solo practices are not audited.

Inaccurate coding can signal CMS about irregularities in a practice and may trigger a formal audit. Because CMS uses profiling to identify practices for audits, if your coding varies from other physicians in your specialty, you will stand out. The result may be recoupment of payment.

Contact TMA Practice Consulting at (800) 523-8766, or email TMA Practice Consulting for more information about coding and documentation auditing and training services.

When a ZPIC targets a medical practice, a documentation problem is almost always the culprit, Mr. Chouteau says. He adds that in many instances, records simply aren't properly signed and dated.

"Physicians need to be diligent in documentation, and they need to have someone qualified getting their hands on those charts to ensure they're coded and documented correctly. If you let problems go, when they come to a head with an audit, it will result in a lot of expense and hassle for the practice."

Indeed, ZPICs can have a devastating impact on a medical practice. Mr. Chouteau says the contractors have the power to place a practice under 100-percent prepayment review, which can't be appealed. At press time, he was representing a Texas practice that was subject to 100-percent prepayment review.

"It will take the group 45 to 60 days to get the results of each claim submitted. If the claim is denied, the group has to go through an appeal process each time. Every claim the group gets back includes a letter requesting additional documentation. In one week, the practice received 700 of those letters," he said.

Mr. Chouteau emphasizes physicians should take ZPIC audits and investigations seriously. He says most clients wait to contact him for help until the audit is complete and the physician receives the MAC letter demanding recoupment. He recommends physicians contact a lawyer with experience in audits upon hearing from a ZPIC or any other program.

"It's amazing to me how nonchalant many physicians are about providing a number of records to a ZPIC administrator. Physicians don't cull through the records first to ensure they're complete," he said.

He adds that in many cases physicians need to go beyond their records to prove medical necessity to an auditor. For instance, a specialist may see a patient on referral from a primary care physician and bill Medicare for treatment. When an auditor requests that patient's chart, the specialist should contact the primary care physician for the record to show medical necessity for the specialist's treatment, Mr. Chouteau says.

For Dr. Clark, the ZPIC audit has taken an emotional and financial toll. He says he first went through a brief period of anger followed by grief upon learning of TrailBlazer's determination. He also has spent $30,000 in legal fees throughout the process.

"This has been a long and difficult ordeal. I won't give up seeing Medicare patients, and I'm hopeful the appeal process will bring about some relief when all is said and done."

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.


Audit Anxiety? TMA Can Help

TMA encourages physicians and their staff to be proactive in preventing an audit and can help medical practices avoid nightmares.

TMA Practice Consulting offers evaluation and management (E&M) coding and documentation reviews that include a claims coding and medical record documentation analysis of 10 records per physician. An abbreviated checkup and a full review are available.

TMA Practice Consulting also can conduct a coding and documentation quarterly review to determine whether a medical practice is following payers' guidelines for appropriate billing year-round.

And TMA Practice Consulting offers a 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, and audit triggers, among other topics. Services are available for a fee based on a practice's needs.

To get an idea of your practice's coding pattern, call TMA Practice Consulting at (800) 523-8776 or email TMA Practice Consulting.

TMA also published TMA Practice E-Tips Greatest Hits, Vol. 3: Coding. The PDF, available free of charge on the TMA website, has helpful information and resources for ensuring correct coding.

In addition, TMA's webinar, Avoiding RAC Audits, examines the benefits of self-audits. Discover the top billing and coding risks, when and how to conduct a self-audit, what to do with your findings, and how to get buy-in for corrective action.

Like all webinars in TMA's Distance Learning Center, Avoiding RAC Audits lasts one hour, and offers 1 hour of AMA PRA Category 1 CreditTM.

If you have questions about a RAC audit, contact TMA Reimbursement Specialist Erin Gregorcyk Smith by email or by telephone at (800) 880-1300, ext. 1407, or (512) 370-1407.  

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RACs Target Texas Physicians

Congress established the Medicare Recovery Audit Contractor (RAC) program in 2006 to identify improper payments and reduce fraud and abuse. Until recently, says Austin attorney Mark Chouteau, JD, the RAC program concentrated its efforts on hospitals. But now, physicians' offices are receiving audit letters from Connolly Healthcare, the RAC working in Texas.

To conduct the audit, RACs requests patients' medical records from physicians. RACs link the number of records they request from a practice to its national provider identifier (NPI) number. For example, in a practice with two to five physicians, RACs can examine 20 records per billing NPI, per 45-day period. RACs limit record requests from solo practitioners to 10 records per 45-day period.

View Connolly's medical record submission requirements online.

Now that Connolly has turned its attention toward Texas physicians, it's important to know what to do if you receive an audit letter.

Here are some pointers from TMA:  

  • All office staff members who open mail should be aware of the name Connolly Healthcare and familiar with its logo.
  • Designate someone on staff to be the contact person with Connolly. If you have multiple practice locations, you could have one person serve as a contact across the board, or you could have separate contacts for each location. Notify the RAC about your designee(s) using Connolly's Provider Contact Form.
  • If your practice receives a request for medical records from Connolly, be sure the designated person sees the letter and takes action immediately.
  • Verify that the issue for which you are being audited is actually one CMS has approved. Connolly must get all audit issues approved by the Centers for Medicare & Medicaid Services (CMS) before it can audit for them.
  • Make sure the number of records the RAC is requesting is within these CMS-specified limits:

Group Office Size                  Maximum Requests per 45 Days             

50 or more                              50 records
25-49                                      40 records
6-24                                        25 records
Fewer than 5                           10 records

Example 1: Group ABC has 65 physicians who billed Medicare fee-for-service last year. The maximum additional documentation requests (ADRs) for the group is 50 every 45 days.

Example 2: Group XYZ has six physicians who billed Medicare fee-for-service last year. Four are located at ZIP code 12345, and two are at ZIP code 21345. The maximum ADRs for this group are 10 per site every 45 days.  

Once Connolly makes its audit decision, you have two choices:    

  • If you agree, refund the requested amount of the overpayment. 
  • If you disagree, be sure you appeal within the specified timeframe.

Physicians may appeal an overpayment request if they think there is a mistake in the audit. If the physician wins the appeal, the RACs must return the contingency fee awarded from that particular audit to CMS.

The American Academy of Professional Coders (AAPC) warns that simply requesting an appeal doesn't mean physicians don't have to pay the alleged overpayments within the stipulated time. Overpayments must be returned to CMS before exhausting the appeal process.

More information on the RAC appeal process and timeline is available from the CMS publication MLN Matters [PDF].

When responding to a RAC audit, AAPC says, a practice should make note of the deadline for submitting records and ask for an extension if it cannot respond by the date specified. Send records back to the auditor promptly. You have only 30 calendar days to respond.

AAPC has these tips for physicians who are the subject of a RAC audit:  

  • Send in as much documentation as you have, but keep photocopies.
  • Never alter any charts or records you submit.
  • Try to figure out the auditor's concerns.
  • To accompany the files, also send a thorough cover letter that includes a description of your practice, your practitioners, and their credentials, as well as information about the patient's condition, procedures, and ongoing care.
  • Send all documents by certified mail, receipt required.

In addition, TMA advises physicians to call Connolly Healthcare at (866) 360-2507 to verify it has received the records. Physicians also may call the number to address simple errors, such as forgetting to send in a page of the medical records.

RACs Rake in Overpayments

During a three-year RAC demonstration project in Florida, California, New York, Arizona, South Carolina, and Massachusetts, according to CMS, the RACs succeeded in correcting more than $1.03 billion of improper Medicare payments. But they collected far more money in overpayments than they repaid. According to September 2008 project data from CMS, overpayments recouped totaled $992.7 million, while underpayments amounted to just $37.8 million.

The financial implications of overpayment recoupment can be significant for a medical practice. For example, if a RAC finds the average overpayment of audited claims amounts to $25 per claim for 10,000 Medicare patient visits, the practice would owe $250,000 plus interest.

The majority of payment errors were due to medically unnecessary procedures (40 percent), followed by incorrect coding (35 percent), other errors (17 percent), and no or insufficient documentation (8 percent).

The RACs look for outliers, or practitioners whose billings for Medicare services are higher or lower than the majority of their peers in the community. Outliers come to the attention of RACs through data mining.

Before conducting an audit, Medicare may notify outliers in writing. AAPC says those physicians should review their coding practices to ensure they'll withstand an audit.

In January, RACmonitor, in association with The Frank Cohen Group, LLC, surveyed health care professionals to gather information on the cost effectiveness of the RAC process and to examine the success of physician appeals. is a source of news and information on RAC activities for health care professionals.

The organizations hoped respondents' answers would provide a snapshot of whether the RACs use statistical techniques in audits, what overpayment demands look like, how often physicians appeal RAC results, and whether physician appeals are generally successful.

Of the 316 health professionals who completed the survey, 100 had endured a RAC audit. Eighty percent of respondents were medical practices, and respondents represented 46 states, including Texas. Seventy-four percent of respondents indicated the audit resulted in an overpayment demand by the RAC. Survey results brought to light some good news: About 65 percent of respondents appealed the RAC decision, and of the appealed records, one-third resulted in a reversal in favor of the practice.

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