Jennifer Kirschenbaum, Esq.

The Centers for Medicare & Medicaid Services (CMS) announced in February 2008 that $371.5 million in improper Medicare payments has been collected from or repaid to health care providers and suppliers as part of the Recovery Audit Contractor demonstration program (RAC program).  The RAC program, authorized by section 306 of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA) directed the Department of Health and Human Services to conduct a 3-year program using Recovery Audit Contractors (RACs) to detect and correct improper payments in the Medicare program.

Given the success of the RAC program, Section 302 of the Tax Relief and Health Care Act of 2006 was enacted to make the RAC program permanent and requires the Secretary to expand the program to all 50 states and potentially all providers who receive Medicare reimbursement by no later than 2010. 

New York’s RAC program is scheduled to begin provider audits in October 2008. Specifically, RACs are tasked with detecting Medicare improper payments and correcting improper payments by collecting overpayments from providers who submit claims to Medicare and to pay back underpayments to providers.

In addition, in an extreme effort to combat the cost of the nation’s most expensive Medicaid program, the Federal government allocated $1.5 billion to the New York State Medicaid to expand its fraud and abuse recovery unit. The Federal-State Health Reform Partnership (F-SHRP), approved on September 29, 2006, created the Office of Medicaid Inspector General (OMIG) and allocated $1.5 billion to New York State on a contingent basis; the contingency being that New York State must return $1.6 billion to the Federal government over five years representing fraud and abuse recoveries reaped by New York State. Should the OMIG fail to meet stated recovery targets the penalty will be monies owed to the federal government equaling the difference between the actual and target recoveries.

OMIG was also instructed to spend 2007 developing an audit plan to increase recoveries so that the government may reach specified recovery targets. To add perspective to the recovery requirements, in 2006 Elliot Spitzer’s charge against fraud and abuse recovered $243 million, a record setting number. By 2011, under the F-SHRP agreement, OMIG is responsible for almost tripling that number and recovering $644 million in fraud and abuse funds.

OMIG TARGETS

Inspector General James Sheehan has listed general targets in his quest to find fraud, waste and abuse in New York’s $48 billion Medicaid program. OMIG intends to increase by 50% the number of providers under review. The new 35-page plan presented by the Office of OMIG includes, but is not limited to, the following audit targets:

• Review of documentation to see if ambulatory surgery procedures could have been performed with less cost in doctors’ offices;

• Review of whether assisted living facilities are double-billing for items whose costs are already covered by per diem Medicare rates;

• Review of diagnostic and treatment centers;

• Review of outpatient and mental health community residential rehabilitation services;

• Review of Medicaid payments for chemical dependency services.

However, any provider who has received a Medicaid payment may be investigated. In addition, the Bureau of Investigations and Enforcement will investigate fraud in business arrangements that allegedly violate the federal health care anti-kickback statute and the statutory limitation on self-referral. Auditors may review services provided for six years from the billing date for such services.

What does this mean for your practice? The impact of F-SHRP will be felt by the vast majority of practitioners treating Medicaid patients. OMIG has engaged auditing companies to review records submitted and issue recovery demands in an effort to recover monies from hospitals, ambulatory care facilities, nursing homes, group practices and solo practitioners.

PROTECTING YOUR PRACTICE

Protecting your practice from an audit is not an easy task. In the majority of instances, should the OMIG or RAC target your practice with an audit, a recovery demand will be issued. There are, however, simple steps that you can take to minimize your exposure should an audit of your practice be conducted:

Compliance as a Priority. It is imperative that you make compliance a priority. Every practitioner needs to ensure that their practice has a practical compliance program that contains the practice’s compliance procedures and methods by which billing irregularities are addressed. Additionally, we suggest that group practices elect a compliance officer, someone who is willing and capable of overseeing the practice’s compliance program so that all procedures are up to date. A compliance program that is not reviewed and understood by each employee is essentially useless, so we encourage our clients to have regular compliance meetings in their offices and to evidence such meetings with the recording of minutes and attendance, if possible.

The Audit Process. Should you be audited, it is important not to respond without the assistance of legal counsel. The process begins with notification or the surprise arrival of auditors for an on-site audit. The audit is followed by an exit conference with the provider with preliminary conclusions resulting from the audit. Thereafter, the auditor may send a draft audit report identifying proposed “recoupments.” The provider then has 30 days in which to respond to the draft report with mitigating documentation before the auditor issues a final report. Upon receipt of the “final” report, the provider has 60 days in which to object to the final report and request an administrative hearing. After the hearing decision, a provider can appeal to New York State court by commencing an Article 78 proceeding.

If you are audited, it is important to contact an attorney to help determine the scope of the audit. In addition, an attorney can advise you on strategies for negotiating audit preliminary conclusions and assist in objecting to a final report and filing an appeal. We strongly advise that you object to any final report. Crain’s Health Pulse recently reported that a new Centers for Medicare and Medicaid Services report stated that nearly 60% of all OMIG audit findings in New York State were later overturned on appeal.¹

Hearings. Should any matter escalate past the audit process, an attorney should accompany you to any hearing.

In addition, it is important to note that, on occasion, auditors are known to report practitioners to the Office of the Attorney General for potential criminal investigation and prosecution, should an audit uncover relevant information to any criminal activity. For such reasons, it is important that you contact an attorney at the initial stage of audit activity so that representation can be effective and lower your risk of exposure.

For additional information about audit matters, compliance plans or audit defense, please feel free to contact Kirschenbaum & Kirschenbaum, P.C. at (516) 747-5700 or email Ms. Kirschenbaum at Jennifer@kirschenbaumesq.com.