Featured Health Business Daily Story, July 3, 2013

Secondary Payers Hit Physician Group with Recoupment After Medicare Audit Findings

Reprinted from REPORT ON MEDICARE COMPLIANCE, the nation's leading source of news and strategic information on Medicare compliance, Stark and other big-dollar issues of concern to health care compliance officers.

By Nina Youngstrom, Managing Editor
July 1, 2013Volume 22Issue 24

A Medicare audit of a Kansas physician group is raising eyebrows because the audit findings were used by secondary payers to recoup their share of the purported overpayment. The secondary payers, which are commercial insurers that pick up the tab for expenses not covered by Medicare, have piggybacked on the Medicare administrative contractor’s (MAC) findings, according to an attorney for the physicians. Because the MAC extrapolated the error rate to a larger universe of claims, the recoupment from the different payers is packing a wallop.

“Their business office manager has a two-foot-high stack of secondary payer requests for repayment based on the MAC audit,” says Richelle Beckman, an attorney with the Forbes Law Group in Overland Park, Kan., which represents the physician group. As soon as the MAC completed the audit and identified overpayments, all the secondary payers requested their share before the physician practice even received the MAC’s demand letter or had a chance to appeal the denied claims, she says. If and when the physician practice wins its Medicare appeals, it will have to battle each secondary payer separately using whatever appeals process it has established.

Meanwhile, the physician group’s experience is a reminder that the use of extrapolation is spreading.

Other Payers Are Piling On

Ernie de los Santos, CEO of the Appeal Academy in Los Angeles, thinks this is a cautionary tale for other providers. “In this case, you don’t know [the provider] is wrong yet. You haven’t gone through due process and they are entitled to due process,” he notes. “It seems unfair to providers.”

This is a twist on Medicare as secondary payer (MSP) reviews. CMS identifies Medicare beneficiaries who are also covered by commercial insurers and recovers payments they should have made on claims because Medicare is always the secondary payer. MSP audits are another secondary-payer issue to pick up steam, with CMS’s use of a commercial payment contractor to identify MSP overpayments and a recovery auditor for this purpose in three states (California, Florida and New York).

Other non-Medicare entities are getting more creative in finding ways to assert collateral claims that are linked to Medicare, says San Francisco attorney Judy Waltz, who is with Foley & Lardner LLP. Although not typically based on MSP provisions, private payers may seek repayments from providers after the Department of Justice wraps up a False Claims Act case on the grounds that they were disadvantaged by the conduct that resulted in Medicare and Medicaid overpayments, she says. The risk of collateral recoveries by third parties may also be greater in light of a recent decision by the U.S. Court of Appeals for the Third Circuit in GlaxoSmithKline LLC v. Humana Medical Plans, Inc., which the U.S. Supreme Court has declined to hear. In the case, a Medicare Advantage plan successfully alleged that a pharmaceutical company could be viewed as the primary payer and therefore might be obligated to reimburse the Medicare Advantage plan for the costs of treating adverse effects stemming from the pharmaceutical manufacturer’s drug. Waltz says the court essentially allowed a Medicare Advantage plan to assert a private right of action under the MSP statute.

Kansas MAC Audit Seen as Troublesome

There are many things that bother Beckman about the Kansas MAC audit, which was performed by WPS Medicare. It has been reviewing services provided by primary care physicians and nurse practitioners, and in the audit of her client, WPS focused on the services rendered by physicians and nurse practitioners to patients in skilled nursing facilities (SNFs).

Two of the provider’s audits were simultaneously follow-up audits following probe review and full-blown extrapolated audits. Normally, they are done sequentially, with the results of a follow-up audit driving the decision to conduct a comprehensive prepayment or postpayment review. In this case, the MAC extrapolated the findings and assessed a $350,000 overpayment on the physician practice, Beckman says. “Between two extrapolated audits, there were close to 700 patient encounters involved.” The physician practice was given 30 days to produce additional documentation for postpayment audits, even though the Medicare Program Integrity Manual allows 45 days, she says.

WPS compared the primary care physician’s bell curve of skilled nursing facility visits to other family practice physicians and compared the nurse practitioner’s bell curve of skilled nursing facility visits to other nurse practitioners, she says. The trouble with that, Beckman says, is the primary care physician and nurse practitioner treat very sick SNF patients, who may have 15 or more co-morbid conditions. That means the bell-curve analysis is not really an apples-to-apples comparison, she says. “While the physicians’ specialties are technically family practice, in this rural area they are acting as geriatric providers with a significantly more complex patient base than average family practice providers,” Beckman says. The MAC also applied the medical-necessity standards inconsistently, she contends. Charges were approved and then denied for the same or similar services, with lack of medical necessity given as the reason. For example, the MAC paid for a visit for “follow-up on Coumadin and urine culture” but then denied a claim when the documentation for the presenting problem stated “the provider visit was a follow up for IV antibiotics. Provider reviewed blood sugars.” And charges were approved for “follow up on INR and pain control” but then denied when the documentation said “provider visit was a follow-up for pain control.”

But the secondary payer issue weighs most heavily on her. While the physician practice is appealing the Medicare claim denials first because Medicare is the primary payer and stops recoupment as soon as appeals are filed, the secondary payers present a big challenge. Beckman notified them that the claims they piggybacked on were being appealed, “but they are being allowed to recoup even though Medicare is not.” Meanwhile, the secondary payers’ timely filing deadlines are hanging over the practice’s head but it can’t do much until the claim denials work their way through the Medicare appeal process. When it’s time to appeal to the secondary payers, “how we go through that process will all be payer by payer,” she notes.

The potential impact on the physician group is magnified because the MAC extrapolated its audit findings from the smaller sample onto a larger universe of claims, de los Santos notes. “They have literally extrapolated an inappropriate act,” he says.

CMS did not respond to RMC’s request for comment by press time.

Extrapolation Is More Prevalent

There’s no doubt that Medicare watchdogs are turning increasingly to extrapolation, says Frank Cohen, a statistician and president of The Frank Cohen Group. OIG did it for the first time in a recent Medicare compliance review (RMC 6/3/13, p. 1). “There’s nothing wrong with extrapolation. It’s used all the time without problems,” he says. Extrapolation is appropriate when it’s not feasible for auditors to review every claim or chart or beneficiary identified as potentially at risk of billing errors. But the fairness of extrapolation depends on the auditor’s use of a statistically valid random sample and a good sampling plan. The sample must be large enough and “you need homogeneity in the sample frame,” he says.

Cohen says there are problems with sampling in the health care industry. “The RAC statement of work says that for auditors to invoke extrapolation, they have to find a high or sustained rate of error, but it is not defined,” he says. And any definition of “extrapolation” can’t be challenged in civil or administrative court. “It gives [auditors] carte blanche,” he contends.

The MSP section of the CMS website is at www.cms.gov/Medicare/Coordination-of-Benefits-and-Recovery/Coordination-....

© 2013 by Atlantic Information Services, Inc. All Rights Reserved.


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