TMA Uncovers Medicare Mistakes
By Amy Lynn Sorrel Texas Medicine July 2015

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Cover Story — July 2015

Tex Med. 2015;111(7):24-31.

By Amy Lynn Sorrel
Associate Editor

When physicians talk about leaving the Medicare program because of its many broken parts, it's not just talk, and the Texas Medical Association recently uncovered some major Medicare gaffes that show just what pushes doctors to the brink. 

TMA did not let Medicare pull the wool over physicians' eyes with under-the-radar audits of the Physician Quality Reporting System (PQRS). A staff investigation revealed that veiled threats of recoupments were causing unnecessary angst for physicians because the unexpected reviews are not even mandatory at this stage. Medicare also apparently had trouble with its own complex payment formulas, but the questionable calculations did not slip by TMA. Payment detectives uncovered technical errors in an early draft of the 2015 Physician Fee Schedule that had trickled into payment notices. They incorrectly led nonparticipating (non-PAR) physicians to believe they were overbilling their patients, potentially costing doctors those patients and their livelihoods.

Thanks to TMA members' vigilance and staff persistence, physicians in Texas and beyond won't have to bear the full brunt of these Medicare messes. In both cases, TMA members brought the issues to light, and investigations and advocacy by TMA's Clinical Advocacy, Payment Advocacy, and Medical Economics staff put Medicare on the path to a fix. 

The missteps come as Congress finally acted in April to eliminate a major source of frustration that plagued physicians for years. The Medicare Access and CHIP Reauthorization Act permanently and immediately repealed Medicare's fatally flawed Sustainable Growth Rate (SGR) formula, which threatened physicians with steep pay cuts every year since 2003. Going forward, the overhaul also promises to streamline some of the administrative headaches, like those mentioned above, with Medicare's various quality reporting programs and their penalties. (Read "R.I.P. SGR," June 2015 Texas Medicine, pages 26-37.) 

Shady "Audits"

Dallas pulmonary and critical care specialist Michelle N. Chesnut, MD, brought the under-the-radar PQRS audits to TMA's attention. Having already dropped out of Medicare once before to avoid these kinds of misfortunes, she says: "It's no surprise at all doctors don't want to participate."

In February, Dr. Chesnut received what reads like a rather threatening audit letter from a mysterious Medicare contractor. Arch Systems claimed to be a "business associate" of the Centers for Medicare & Medicaid Services (CMS) and asked her to turn over dozens of patient records to validate the quality data she submitted to PQRS.

"I had no idea who this was, and they wanted us to give over all this protected health information," which Dr. Chesnut says she wasn't about to do. "We take very seriously our patients' privacy."

Her immediate response was to call TMA.

"I remember reading in TMA's publications that the meaningful use [of electronic health records] audits were coming and that you could get big penalties, so I was prepared for that," she said, adding that she helped her practice partner through such an audit in 2013. "But I knew nothing about the PQRS audits until I got the letter," despite her participation in PQRS since 2013. 

Before TMA's investigation into Dr. Chesnut's report, nothing on the CMS website forewarned physicians of the upcoming PQRS review, says TMA Director for Clinical Advocacy Angelica Ybarra. It took two weeks, she says, for CMS representatives to verify that Arch Systems is an approved contractor and that the surveys are legitimate.

After more digging and prodding, TMA, in collaboration with the American Medical Association, also confirmed the requests weren't mandatory audits at all, despite sinister language in the letter threatening to report unwilling participants to CMS "with potential further action, including recoupment" of physicians' 2013 PQRS incentive payments. 

Organized medicine's sleuthing led CMS to finally post a notice on its website in late March explaining the previously unheralded reviews (or "verification" process, as CMS describes it) and Arch Systems' role in conducting them, and clarifying that they are not mandatory. 

According to the notice, the requests are going to select physicians "whose data is inconsistent with norms … to provide CMS with information on the overall rate of reporting error" and "identify measures or measure types for which reporting errors are most prevalent and the most common sources of those errors." CMS also is similarly validating past data reported under the now-defunct e-prescribing incentive program. 

CMS did not respond to Texas Medicine's repeated requests for comment. 

AMA officials say the reviews are part of a validation process CMS conducts with all of its quality reporting programs for the purpose of ensuring and improving overall data accuracy. But this is the first time Medicare is conducting them for PQRS. 

AMA officials say CMS told them the reviews at this stage are not intended to result in recoupment if reporting errors are found. At organized medicine's request, CMS issued a set of frequently asked questions, removing references made in the letters to possible recoupment and instead stating that if Arch finds any errors in physicians' records in the review process, the company will create a summary report of doctors' overall compliance rate and provide CMS with a copy of the report. 

Fear Factor

Unfortunately for Dr. Chesnut, the clock had started ticking to respond to the letter she had received. She's glad her experience will help inform other doctors. 

"But I did this out of fear, because nobody, whether you're a doctor or not, wants to get anything in the mail implying an audit. The letter says it's voluntary, except if you don't do it, they are going to tell CMS you didn't cooperate and send you to Medicare jail or something," she said. "Quality improvement is something I do anyway, not because I'm reporting to PQRS but because it's the right thing to do for my patients. So it shouldn't cost me more to prove it." 

The letter Dr. Chesnut received calls the process a "measure validation." But "it's basically an audit," she says, describing the hours she spent culling charts, creating spreadsheets, and following instructions.

According to Arch Systems, the company will begin conducting formal PQRS audits next year. But CMS' FAQs still refer to the voluntary reviews as audits, saying, "These audits are within the scope of CMS' Medicare health care operations and health oversight activities, and Arch Systems will request only the minimum data necessary to carry out these functions." CMS notes that "just because you [doctors] were selected for review for the 2013 PQRS and/or eRX, does not necessarily mean your results will be reviewed or audited in subsequent program years."

If the current reviews are any indication of what's to come, however, it's not going to be pretty, according to Dr. Chesnut. 

A nurse reviewer contacted her to start a review of 30 random patient records related to the smoking cessation measures she reported in 2013. To find those patients, however, Dr. Chesnut had to go back through records for all of the 134 patients she reported on that year. The letter then instructed her to create an encrypted, de-identified spreadsheet with the information to send to Arch Systems. Fortunately, she could use a free trial offer on the specific software required because hers was not compatible. 

Of the 30 records, the reviewer selected eight to review in more depth and gave Dr. Chesnut one business day to turn over the corresponding documentation and patient charts. Fortunately, those eight records were enough to comply with the specifications for the smoking cessation measures. If not, Dr. Chesnut would have had to turn over documentation for the remaining 22 patients. 

"We are a tiny office. It's just me and one other doctor — no office manager — so it's all me staying up until midnight doing these charts. And what they asked for was more detailed documentation than what we did when we first reported the measures. It seems to me the criteria should be the same," she said.

In 2014, Dr. Chesnut's PQRS bonus payment was $534. "This is a lot more auditing than what they paid me." 

She says it's these kinds of hassles that pushed her to change her status to a non-PAR Medicare provider in 2011. She and her partner have considered leaving the program entirely due to the ramp-up of measures reporting and penalties under the meaningful use program. 

"I am relieved that the SGR has been repealed, as this was a cause for major financial concern — and the motivation for going non-PAR — every time it came up for approval," Dr. Chesnut said. But she's still reserving her overall enthusiasm until the finer details about the new Medicare program emerge.

"I still believe that the challenge with Medicare is that these patients tend to be complex patients with complex medical and social needs," and physicians are still expected to care for them for inadequate pay while enduring constantly changing performance measurement, she said. "Which breaks my heart because I truly enjoy taking care of these patients."

Medicare Miscalculations

Even non-PAR status didn't shield Austin Internal Medicine Associates from more Medicare bungling.

The group does not participate in Medicare but still sees those loyal patients who've been with the practice for decades, about half of the practice's patient population. Rather than dealing with Medicare billing, nonparticipating status allows doctors to collect a set amount up front for their services, and Medicare reimburses the patients.

But problems on CMS' end could have cost Austin Internal Medicine Associates those long-term relationships: Practice Manager Janet Ream noticed the monthly explanation of benefits (EOB) notices she started receiving in late January and early February did not match the fee schedule she says she meticulously follows, making it look like the group had overcharged its patients. Patients eventually get those notices, too, on a quarterly basis.

"It makes us look like criminals," she said. With no answers from CMS, Ms. Ream also immediately turned to TMA. 

TMA discovered non-PAR physicians are, in fact, not over-collecting. Rather, the discrepancies stemmed from technical errors in an early draft of the 2015 Physician Fee Schedule. CMS issued a revised schedule in January, but the mistakes had trickled down to the master database contractors use to process physician claims, TMA Director for Payment Advocacy Genevieve Davis says. CMS did not correct the database until early February. Meanwhile, Medicare contractors continued to print erroneous EOBs. (See "Payment Problems?")

Ms. Davis says the flawed database miscalculated the amounts non-PAR physicians can collect up front from patients — called the limiting charge for unassigned claims — factoring in the EHR and PQRS penalties that kicked in this year for all physicians. Starting in 2015, Medicare docks physician pay for those who do not satisfactorily report to PQRS or become meaningful users of EHRs. The penalties apply regardless of whether physicians choose "participating" or "nonparticipating" status in Medicare. (See "Know Your Medicare Status.")

The patient responsibility amounts printed on Medicare EOBs were off by anything from a few cents to a few dollars, depending on the service. Across dozens of claims and for more expensive services, that can add up, Ms. Davis says.

It wasn't until TMA staff investigated the issue and pressed CMS and Novitas (Texas' Medicare contractor) that notifications finally appeared in late February and late March across Medicare contractors' websites nationwide explaining the problem and putting a fix in the works to correct the EOBs.

CMS would not comment on the issue. 

Given the complexity of Medicare's formulas and web of penalties, physicians rely on Medicare and its contractors for accuracy, says Donna Kinney, director of research and data analysis in TMA's Division of Medical Economics. (See "Hard Math.") Charge too much, and physicians face financial penalties, fraud charges, and possible exclusion from Medicare. Charge too little, and physicians lose the difference.

Due Diligence Thwarted

Ms. Ream says she's careful to follow the fee schedule and collect nothing beyond the limiting charge. Not having an EHR system, she also knew to use the amount that included the penalty. 

The fee schedule mistake thwarted her diligence. 

"We try so hard to do it right, and Medicare just makes it impossible," Ms. Ream said. "It's so frustrating because this was something CMS did. But we are the ones spending time on the phone figuring it out. And our patients get these notices, too. I would have had to write every one of them a 17-cent check. Can you imagine that and how expensive it would be?" 

According to a March 23 notice on Novitas' website, corrected claims started going out at the beginning of March. Ms. Ream had yet to see them. 

TMA continues to monitor the issue. At press time, it was also unclear whether CMS and Medicare contractors stemmed the issue before it would appear on patients' quarterly benefit notices, and if not, whether they would correct any affected patient EOBs. 

The SGR repeal legislation won't immediately resolve these kinds of issues, Ms. Kinney says. But over the long haul, it will mitigate them.

The legislation somewhat simplifies the current fee-for-service system of penalties but not until 2019. It consolidates Medicare's various quality reporting programs and their penalties into a single Merit-Based Incentive Payment System, or MIPS. (See "R.I.P. SGR," June 2015 Texas Medicine, pages 26-37.)

Over the past decade, Ms. Ream says she's had to print the fee schedule several times a year to keep up with Medicare's adjustments and Congress' patchwork politics. When she spoke to Texas Medicine — just before SGR repeal — she said it was "hard to even think about what the new fee schedule would be with a 21-percent cut. I really hope we don't have to see it." 

Now, she won't. 

Amy Lynn Sorrel can be reached by phone at (800) 880-1300, ext. 1392, or (512) 370-1392; by fax at (512) 370-1629; or by email.


Know Your Medicare Status

Physicians have three options for participation in Medicare: 

Participation (PAR)
Physicians agree to provide all covered services for all Medicare Part B beneficiaries on an assigned basis and accept the Medicare-approved amount as payment in full. Physicians cannot collect from patients more than applicable deductibles and coinsurance, but they may collect for noncovered services. 

Nonparticipation (non-PAR)
Physicians do not enter into an agreement to accept assignment on all claims and may collect in full from patients. Medicare reimburses the beneficiary on nonassigned claims. Physicians cannot bill the patient more than the limiting charge, which is set at 115% of the Medicare-allowed amount (roughly 9 percent above PAR-approved amounts). 

Physicians privately contract in writing with Medicare patients. Physicians cannot bill Medicare, and Medicare does not pay the physician or reimburse the patient for services provided, with few exceptions, such as emergency or urgent care situations. Physicians must complete a written affidavit formally opting out of Medicare. With the new Sustainable Growth Rate (SGR) repeal legislation, opt-out status continues indefinitely. Physicians no longer have to renew every two years.

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Payment Problems? TMA's Hassle Factor Log Can Help

Physician members can get help with payment issues by using the TMA Payment Advocacy Department's Hassle Factor Log. The program helps doctors bring their insurance-related issues to TMA's attention so staff can investigate problems and work with private health plans, Medicaid, and Medicare to get claims paid correctly. 

Download the Hassle Factor Log or email the TMA Payment Advocacy staff for assistance. You also may contact the TMA Knowledge Center at (800) 880-7955 or by email

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Last Updated On

May 25, 2016