My phone began to ring off the hook in early August and has not stopped yet. Over a three-week period, Medicare certified home health care providers in California and Nevada had begun to receive letters from Trust Solutions, LLC, requesting documentation of Medicare services they had provided and long since paid for. The letters politely demanded charts for specific patients and imposed a very short deadline.

Most of the voices keeping my phone busy revealed tones ranging from concern to confusion and panic. All of them carried an undertone of bewilderment.

Trust Solutions is the western U.S. Program Safeguard Contractor (PSC), one of a collection of insurance companies or their subsidiaries that have won government contracts to help CMS identify and eliminate Medicare fraud. Like National Government Services, the largest Regional Home Health Intermediary (RHHI), Milwaukee-based Trust Solutions is a subsidiary of Wellpoint, the largest health plan company in the Blue Cross/Blue Shield Association. WellPoint, Inc. (NYSE: WLP) was formed in 2004 when WellPoint Health Networks, Inc. merged with Anthem, Inc.

From its West Coast office in Camarillo, California, Trust Solutions appears to have delivered its letter barrage all at once, putting scores of West Coast agencies on notice that their submitted data had triggered red flags in the contractor’s computers. Many agencies have been reporting that some of the documentation requested had previously been subjected to ADR review and long since approved for payment by NGS.

I noticed that a scanned copy of each requested record already sits with NGS. Could this possibly be a quiet test to see whether some agencies might try to change documentation during a state of panic, now that they are legitimately afraid that millions of dollars might be at stake?

(Editor’s note: In the coming months, RAC Assistance for Home Care will follow one agency’s experience through the entire audit review and appeal process.)

While all PSCs have been charged with controlling Medicare fraud, Trust Solutions, LLC describes its mission as identifying errors as well as criminal intent. August and September demand letters were received by Medicare certified home health care agencies of all types, some in business for decades with no previous fraud accusations.

Upon Trust Solutions’ tacit announcement that mistakes and insufficient clinical documentation will attract its attention as surely as intentionally fraudulent acts, leadership in law-abiding agencies will now want to know what to do to reduce the likelihood that they will attract such unwanted attention. While the reader may expect at this point that the discussion is about to focus on clinical documentation skills and the need for training, I propose there is an earlier starting point. There is a red flag that tells PSC auditors they should request patient charts from certain providers.

PSC Target: Agency Data First; Documentation Second
A great deal of attention has been focused of late on the importance of “Audit Proof Charts,” including articles in this very newsletter. Rarely, however, is it mentioned that there are “Data Triggers,” what they are, how they are used against you, how Medicare providers are targeted and how such targeting can be prevented.

I start by admitting that making sure your charts are in order is still important and, at the very least, a great exercise in housekeeping. Your primary vulnerability, however, is the quality and consistency of the data you submit to State, regional and federal authorities, and where you rank in relationship to others in your MSA code, state and national “norms.” You deliver the government enormous amounts of data through your RAP and claims submissions, OASIS files, ICD9 codes and cost reports.

This is where the red flags live. This is where computers acting on behalf of auditors look for low hanging fruit, starting with Medically Unbelievable Edits (MUE). Obvious problems are disseminated to auditors at every level — RHHI, QIC, PSC, ZPIC and, someday, RAC — telling them which charts to request to find easily deniable claims. At this point, auditors have yet to do any auditing; the computers have done all the work so far.

Once auditors call for your computer-picked charts, however, they are already fairly certain they will find deniable services. By this time, it is often already too late for agency personnel to mount a defense; auditors have already made their mind up about which services to deny. The charts merely confirm their computer-generated suspicions.

Now you can add two more acronyms to that list of auditors. Last month, the DOJ/FBI established a real time connection to CMS billing data. They can both now see them literally the same day you send them.

How OASIS data are used
When you submit OASIS files to your state, remember they simultaneously go also to CMS in Baltimore, from where they are mined for data patterns and, as necessary, forwarded to the H.E.A.T. strike force (joint HHS/FBI/DOJ SWAT-type fraud investigators with warrants in hand), Medical review (CMS fine tooth comb by clinicians), Maximus Federal Services, Inc. (appeals reconsiderations) and several others.

Computers look for inconsistencies that can be detected by “edits,” algorithms that look for errors that appear when one answer is compared with another. Well over 900 different answer combinations can be derived from a single OASIS assessment, as the astute administrator surely already knows, having counted and squared the total number of OASIS questions. When your ICD-9 codes are added, total combinations are too numerous to count, each one a potential red flag. Add service utilization to the mix and you wind up with data soup…for each and every case you transmit.

Every OASIS assessment creates a patient and care plan profile and expands the CMS knowledge database, which has been growing since the late 1990s. The government and its contractors are able to compare profiles you submit against historical patterns established nationally, regionally and locally. They compare you against your own history and against current data being submitted by all providers.

Your profiles are judged medically believable or not and added to what might be called your agency “scorecard.” This information is accumulated and filtered periodically. If you hit a filter at a certain level, suspicions are raised and charts are requested. Let the fun begin.

How claims data are used
When you bill, you submit HIPPS codes and diagnostic information along with service utilization data. These are run against numerous filters designed to find instances where you have provided services for reasons that can be deemed “medically unbelievable.” When enough Medically Unbelievable Edits (MUE) have been added to your scorecard, once again, watch your CWF for love notes from your RHHI.

To hold up in court, CMS contractor accusations must be 90% accurate or greater. For all other levels of statistical evidence in regular court, it is my understanding, after speaking with several statisticians, that a 95% or greater confidence level in the data body is required. Though 5% does not sound like much, when examined, CMS statisticians get close to this but are not always on target.

For this reason, it is not instances but patterns that cause PSCs to issue letters to providers, informing them with certainty and authority that their billing practices are inconsistent with regional, state and national norms.

What is more, PSCs must be sure their analysis, based on your data, is at least 90% accurate in order to send you an initial letter requesting documentation. You can see that clinical documentation simply is not the issue at this point.

“Why was I targeted?”
Keep in mind that these government contractors are insurance companies. They are for-profit corporations paid a percentage of what they extract from Medicare providers. They do not waste time on unwinnable cases. To ensure they filter out cases with low likelihood of success, they actually run ROI projections before sending a letter or coming to visit. If you receive a letter, a computer has already assured the sender that your data indicates you will be a profitable target for them.

They use your data to perform what they refer to as a “pre-probe” edit to determine approximately how much money they might win if they challenge specific cases and then extrapolate those cases across your entire patient population. Extrapolation is what turned a 40-chart audit of a Los Angeles area agency last year into a $14 million payback demand, another for $8 million from a Utah agency and $2.1 million for an agency in Las Vegas.

The pre-probe edit identifies the most profitable prospects nationwide. For the same reason a realtor spends more time developing relationships with corporate relocation departments than with individual families, PSCs spend more time producing computer reports than hiring someone to pore over patient charts. If they are going to invest thirty to fifty thousand dollars in personnel time and other investigation costs, business logic in the for-profit world demands that they first perform a study to determine predictable return on investment. Your submitted data is the subject of those studies.

Ultimately, it comes down to their survival versus yours. When they are more familiar with the data profile you submit than you are, they begin their relationship with you with a nearly insurmountable advantage. I would estimate 75% to 85% of agencies nationwide are fully out of touch with the data profile they submit to the exact organizations that seek to do them the greatest damage.

Why? The most common answer I hear is that it costs too much in resources to shape up all the data submitted on a daily basis. My rebuttal is…if your data is the auditor’s primary determinant to identify you as an agency to visit, probe and collect money from, the consequences will quickly exceed any prevention costs you may have avoided, to the point of becoming fatal to your business.

As taxpayers demand that fraud be eliminated, and as government contractors consistently refuse to differentiate between criminal intent and honest errors, expect to see more 100% ADR demands (think “payroll ceases”), extrapolated overpayment amounts in the millions of dollars (think “permanent debt and closed doors”) and criminal investigations (think “missing your daughter’s birth, graduation and wedding”).

Welcome to the new era of data driven anti-fraud efforts.

Michael McGowan is CEO and principal consultant of “Medicare Appeals Development.” He lives in Las Vegas, Nevada and serves clients across the U.S. with writing and filing payment denial appeals from ADRs through representation before the Administrative Law Judge. He can be reached through the company at www.madappeals.com

Background
The Medicare Payment Advisory Commission (MedPAC / The Commission) is an independent Congressional agency established by the Balanced Budget Act of 1997 (P.L. 105-33) to advise the U.S. Congress on issues affecting the Medicare program. The Commission’s statutory mandate is quite broad: In addition to advising Congress on payments to private health plans participating in Medicare and providers in Medicare’s traditional fee-for-service program, MedPAC is also tasked with analyzing access to care, quality of care, and other issues affecting Medicare. The Commission’s 17 members bring diverse expertise in the financing and delivery of health care services. Commissioners are appointed to three-year terms (subject to renewal) by the Comptroller General and serve part time. Appointments are staggered; the terms of five or six Commissioners expire each year.

In recent years, MedPAC has focused attention on the level of professional skill with which home care nurses and therapists complete the Outcome and Assessment Information Set (OASIS) when assessing patient conditions. As clinical documentation skills have improved since 1999, and OASIS assessments have grown more accurate, episodic payments to home health agencies have increased an average of $200 per episode per year. In response, MedPAC has advised Congress to reduce the home health payment rate by 2.75% per year for three consecutive years until an approximate 8% cut has been achieved.

MedPAC has never addressed the underpayments made to home health agencies during the early years of OASIS use, before nurses and therapists developed the level of accuracy they enjoy today. However, industry watchers and data analysis experts, including Jeff Lewis, founder and former owner of Lewis, Inc., a home care software vendor, have studied OASIS data and estimated underpayments at between 10% and 15% during those years.

Medicare Advantage
The Balanced Budget Act of 1997 (BBA) established the Medicare+Choice (M+C) program with the purported goal of providing a wider range of health plan choices to Medicare beneficiaries. The BBA also modified the payment methodology under the program to correct excess payments, reduce geographic variations in payments, and align payments to reflect beneficiaries’’ health status. Six years later, the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA) increased payments and redesignated the Medicare+Choice program as Medicare Advantage (MA). Participating insurance companies are designated as MA organizations.

In rare cases, the MA program supplements home health agency revenue by paying for services to patients and increasing an agency’s patient census. Most of the time, however, MA has been a burden for three reasons, two are the fault of the MA organization, the other lays at the feet of CMS itself. Summarized here, these three problems have previously been explored in detail in Tim Rowan’s Home Care Technology Report. Links to these previous articles are provided.

1)   As is the custom when insurance companies pay for home health services, each visit must be pre-authorized. Often, providers have to fight to justify the need for every visit, and often hire a specially trained person just to conduct those battles with insurance company denial desk personnel. Patients enrolled in MA plans, therefore, almost always result in lower revenue and higher costs for providers. (See HCTR, 8/15/07)

2)   MA sales representatives have often been overly aggressive with elderly prospective clients. Many state insurance commissioners issued cease and desist orders in recent years after it was discovered that some agents were visiting elderly people in their homes, supposedly to explain the new prescription drug benefit to them. By the time they left, they had signatures not only on Medicare Part D enrollment forms but on Part C (Medicare Advantage) forms as well. Often, the beneficiaries later claimed, they had no idea they were signing up for both plans. (See HCTR, 5/28/08) If these beneficiaries were in the middle of a Medicare home health episode or even if they began one within the next few weeks, the provider agency had no way of knowing they should send their claim to the MA organization instead of to their RHHI. All too frequently, when they finally learned about the patient’s enrollment only because their RHHI denied their claim, they were later told by the insurance company, “We did not order those services. We will not pay for them.”

3)   Sometimes, weeks or months passed between the time a patient signed a MA enrollment form and the time their name appeared on the government’s Common Working File as a client of a particular MA plan. This happens because the insurance company is given 30 days to report new enrollments and CMS only updates the CWF once per month.  A 2008 study, reported in Home Care Technology Report (see HCTR 10/8/08), revealed that names appear in the CMS database after the date MA enrollment begins fully 35% of the time.

Choosing whom to protect
With this as a background, it would be understandable to assume that CMS would look to MA organizations at least as often as to Medicare health provider organizations when looking for ways to extend the life of the Medicare Trust Fund. Consider, however, this spring’s report from the Office of Inspector General, titled “Compendium of Unimplemented OIG Recommendations.”

Page 3:     CMS overestimated certain hospital cost items and should reduce payment rates by 7.5%. CMS agreed with the OIG recommendations.

Page 19:   CMS and its FIs incorrectly processed 74% of DPNA actions (denial of payment for new admissions), with 40% of the cases resulting in overpayments to Skilled Nursing Facilities. CMS should send DPNA instructions promptly, address communication breakdowns, require confirmation that instructions are received and understood and update its guidance for DPNA claims. CMS agreed with the OIG recommendations.

Page 37:   CMS should strengthen program safeguards to prevent improper payment for facet joint injection services, clarify billing instructions for bilateral services and act to resolve the undocumented, medically unnecessary and miscoded services the OIG found. CMS agreed with the OIG recommendations.

Page 41:   CMS should strengthen the Medicare DMEPOS supplier enrollment process to ensure suppliers meet Medicare supplier standards, including conduct more unannounced site visits to determine whether suppliers exist at the addresses on record. CMS agreed with the OIG recommendations.

After another dozen or so agreements, this paragraph appears under the title “Modify Payments to Medicare Advantage Organizations”:

“The 1997 data and estimates used as the basis to calculate monthly capitation payments to MA organizations were flawed, resulting in higher-than-necessary payments. Based on numerous reviews (which are summarized in our September 2000 report), studies by other agencies, and MA organization data, we concluded that from CY 1997 through CY 2000, MA organizations received more funds than necessary to deliver the Medicare package of covered services. Medicare payments funded excessive administrative costs, and MA organizations did not account for investment income earned on Medicare funds.

“Improper payments made in Medicare fee-for-service (FFS) expenditures also contributed to the flaws in the 1997 managed care base rates. Our review of Medicare’’s 1996 and 1997 financial statements identified substantial FFS improper payments. The standardized county rates for 1997 were calculated using 1996 base FFS expenditure data, and the overpayment errors were carried over into the 1997 managed care rates. We estimated the 1996 FFS error rate as 14 percent of FFS benefit payments.

“Recommendations: CMS should modify monthly capitation rates to a level fully supported by empirical data.”

“Estimated savings: $1.97 billion, based on the 3.077% overstatement of 1997 base rates applied to 2006 managed care payments.”

Response: “CMS did not concur with our recommendation to modify payments to MA organizations, noting that the BBA and the BBRA had increased these payments.”

Status: “Because the 1997 base rate was flawed, we have concerns that Federal payments to MA organizations continue to be excessive. We are updating our examination of MA organization payments and continue to recommend that CMS modify monthly capitation rates to a level fully supported by empirical data.”

Moral: If you want CMS to pay you more than is justified by the value of the services you render, it is better to be an insurance company than a healthcare provider organization.

Eliminating fraud requires a completely different effort from the one needed to battle waste. In the case of fraud, a criminal posing as a home care provider may stretch the truth regarding a patient’s diagnosis, ability to function and need for certain services. These folks are not beyond outright lies. In certain parts of the country, people have been caught making cash payments to Medicare beneficiaries in exchange for the use of their Medicare number. They follow this with claims for services that were never provided, to patients who are not sick. The proper response to this problem is to find these people, close their operations and throw them in jail.

In the case of waste, the cure is civil rather than criminal. Here you have honest home care providers serving patients in need of care but not properly documenting the care they provide or not clearly delineating the medical necessity for providing it. To the eye of the RHHI, and eventually the Administrative Law Judge, these payments must be denied but the perpetrators are not criminal. They are simply overworked, improperly trained or lazy.

The proper response to this problem is to educate agency management. Home health agency owners who allow such a situation to exist unchecked need to be convinced to either provide an ongoing staff training program or to ease off on their productivity requirements so that clinicians have adequate time to document properly. Payment denials should be a good way to get their attention.

The buck stops at the owner’s desk
CMS, the Center for Medicare and Medicaid Services, has no mechanism for dealing with waste differently than they deal with fraud. Fines and punishment are the only arrows in their quiver. Solving the problem by helping clinicians learn better documentation skills is the responsibility of the owner of the agency, not the payer. Yes, CMS does provide some training services. It is still up to management to make sure those courses reach the staff.

Judging by the increasing number of Medicare payments denied because of lack of medical necessity — which in practice actually means “lack of documented medical necessity” —  training has not been a priority for too many home health agencies. In fact, the problem of inadequate documentation is rampant in home care. Comprehensive training for home care nurses and therapists is far below the level needed, in spite of the fact that live and online opportunities abound.

Are there consequences? Absolutely. As Medicare’s need to cut costs grows more urgent, good clinicians offering good care with inadequate documentation are just as plum a target for auditors and investigators as full-fledged criminals. And their employers’ fates will be the same, regardless of criminal intent. Agencies unwilling to invest in ongoing, comprehensive training will see their revenue stream decrease by an amount that will dwarf what they would have spent on a comprehensive training program.

Consultants have ethical limits
Recently, we came across a shocking example of what can happen when agency owners make no effort to improve clinician skills. A consultant who has asked for anonymity, for himself and his client, shared with us a letter he wrote, explaining to a regular client why he could no longer represent them before their RHHI and the subsequent appeal levels, QICS, MACs and ALJs.

This agency had been hit with an unusual number of payment denials recently but dediced that the reason was its location within a region CMS has targeted as a high-fraud area. In spite of repeated warnings, the consultant found himself unable to make the client understand why he was able to win back payments in some cases but not in others. “Sometimes,” he told RAC Assistance, “the ALJ is right. The only evidence I can present is the clinical documentation I have been provided. When it truly is inadequate, no amount of legal argument, no matter how skilled or eloquent, can convince a judge to overturn a denial.”

With permission, and with both consultant and client identities masked, we reprint this letter in our next article: “Consultant Fires Client Over Inadequate Documentation.” Following that, under a separate headline, we also reprint some specific examples of the kind of documentation problems the consultant presented to his former client, along with his suggestions of how this client’s staff might have documented differently.

After our long relationship as consultant and client, please know that I care for you and Mr. Smith and your business. Otherwise, I would not have gone through this much effort to draw your attention to a situation that I consider critical to your agency’s survival. I would ask that you examine this document very carefully, try to separate facts from feelings, and take action.

I am deeply concerned for the well being of your home care agency. I have been representing you before your RHHI and the ALJ but I can no longer do so if your slow, progressively terminal condition is left unchecked. Apparently, my representation has been welcome as a cure to your problems but my recommendations for future prevention have not been heeded. You are at risk for yet another post payment review but my attempts to head it off have been repeatedly thwarted.

For the past two years, I have been begging you to make changes in the way in which your nurses and therapists document patient care. My recommendations are based upon various decisions handed down by the ALJ on your payment denial cases. I must begin to sound like a broken record. In spite of my urgings, I have seen no improvements. Whether this is due to a refusal to change documentation practices or inability to change them really does not matter. The harm on its way to you will be the same.

When I have addressed this with your Director of Nursing, she becomes defensive of her clinicians and, at times, displays a rather arrogant attitude in a “what do you expect me to do about it” tone. She appears to be afraid of hurting clinicians’ feelings or losing them to another agency. Considering the number of payment denials due to inadequate documentation with which you have been plagued, I am not certain losing certain ones of them would be a net negative development. If they refuse to learn proper documentation habits, perhaps you are better off letting them work for your competitors.

I do not believe your administrative team fully appreciates the changing conditions under which we currently engage the court, nor are they taking these changes to heart. If further ignored, this situation will lead to significant financial pain; there simply is no other direction for it to go.

You know that Medicare has established standards. I do not understand why, despite my repeated pleas, your clinicians and contractors are not meeting those standards. I have detected an attitude among your clinical staff that they believe their practices are in line with “what other nurses and therapists are doing.” This is a dangerous attitude since they are not acquainted with nurses outside their immediate geographic and cultural community.

There is a vast difference in clinical practice and commitment to practice from state to state and region to region. Not only do the judges who decide your payment denial reversals know this but they have lately been moving around. I know of at least two ALJs who have recently moved from the Midwest to your region. When they look at your charts, they measure you by what they are accustomed to seeing from other parts of the country, not on “what other nurses and therapists are doing” around here. Fair or not, this method on the part of all ALJs is becoming increasingly prevalent; they are not persuaded by the argument that what they see in your charts is common practice in this area.

As an example, we recently lost a payment denial case with which you are quite familiar. You told me I could have and should have won it for you. The ALJ agreed that the patient needed all of the care you provided but noted that the nurse’s practice of doing ”checkbox charting” was fully insufficient to show what actually took place during each and every patient encounter, or any other compelling, convincing reason to pay for the care provided.

This judge almost begged me for a reason to pay you. All we had to offer was the chart the judge already had, and I had to agree it was seriously lacking. Imagine how frustrating this is! I was prepared to argue further but slick talk and lengthy briefs will never replace comprehensively composed clinical documentation.

Expect scenarios like this one to become the norm. Judges themselves are being reviewed on their decisions and must answer to their superiors just as we answer to ours.

Likewise, I myself am judged by my cumulative appeals success record. Your agency’s consistent failure to provide me with thoughtfully and comprehensively composed documentation when I go to court for you places me in a precarious position. I incur great responsibility in defending you yet am left in a position fully out of my control, one with the potential to defame my reputation as a successful appeals consultant. I am able to provide recommendations that would strengthen your agency but my recommendations are brushed off and ignored.

This is not merely uncomfortable for me. It is untenable. It leaves me crippled in my efforts to successfully defend your claims. Therefore, I must notify you that I am suspending my services until this can be resolved. If the situation cannot be resolved, permanent termination of services is the next step.

I do not make this decision lightly. You are aware that your retainer makes my house payment each month and for this I am grateful beyond words. However, I cannot in good conscience continue to take your money, knowing you do not have plans to rectify the situation.

Your clinicians need training and they need discipline. If you like, I can recommend a number of training programs and clinical consultants. I strongly advise you to engage one or more of them. Perhaps, after all of your clinicians improve their documentation skills, we can discuss my return as your appeals consultant.

I am sorry if this sounds harsh. If you know anything of me, you know I always speak my mind, whether what I have to say is popular or not. That is my job and I take it with greatest seriousness.

To help you deliver this message to your staff – and I hope you do – I have attached some specific examples of the kinds of documentation issues I have received from you and have had to present to various judges. Perhaps this can become the beginning of your training effort.

Sincerely,

The letter concludes with the consultant’s signature and an appendix with concrete examples of the agency’s documentation style, along with detailed explanations of what is wrong in each example. We reprint that appendix under a separate headline: “Real-world Examples of Documentation That Will Result in Payment Denial.”

PHYSICAL THERAPY
I typically work on appeals from various regions. The following is a compilation of what I have found in 38 different physical therapy charts. Compare them to what you are doing and please realize they are all being denied all the way to the ALJ level just like yours are.

Two agencies have on their evaluation forms checkboxes indicating many of the following maladies:

• Antalgic gait a limp adopted so as to avoid pain on weight-bearing structures, characterized by a very short stance phase.
• Ataxic gait an unsteady, uncoordinated walk, employing a wide base and the feet thrown out.
• Festinating gait a gait in which the patient involuntarily moves with short, accelerating steps, often on tiptoe, as in parkinsonism.
• Helicopod gait a gait in which the feet describe half circles, as in some conversion disorders.
• Hip extensor gait a gait in which the heel strike is followed by throwing forward of the hip and throwing backward of the trunk and pelvis.
• Myopathic gait exaggerated alternation of lateral trunk movements with an exaggerated elevation of the hip.
• Quadriceps gait a gait in which at each step on the affected leg the knee hyper extends and the trunk lurches forward.
• Spastic gait a gait in which the legs are held together and move in a stiff manner, the toes seeming to drag and catch.
• Steppage gait the gait in foot drop in which the advancing leg is lifted high so that the toes can clear the ground.
• Stuttering gait one characterized by hesitancy that resembles stuttering.

Your agency frequently creates notes such as the ones I received for one patient:

• “Was in hospital for bronchitis, had decline in function.”
  • Which functions? How can one tell?
• Living situation “capable”
• Pain: = 0
  • Why are we in this home?
• Prior Level of function: “Independent”
  • How does “independent” differ from “capable?”
• Posture: “Kyphotic”
  • To what extent? And how is it adversely affecting the patient?  This is never again mentioned in any note. Where did the posture issue go?
• Full weight bearing, with standby assistance.
• Quality/Deviations/Postures: “Decreased endurance with ambulation”

This is the logical place for any of the aforementioned abnormalities to be recorded. Detail on these brief notes would go far when it comes time to defend a denial of payment for this patient. Poor endurance with walking is the primary driver for the care to be delivered but I know that from talking with this therapist. I could not know it from these notes.

SKILLED NURSING
This example leaves a judge not only with a suspicion that this nurse was practicing documentation cloning but also that the patient’s welfare was placed in jeopardy due to the nurse’s lack of response .

Skilled nursing visit dated January 18, 2009 9:00 AM
the skilled nurse focused on the new diabetes regimen with the change doses three times a day with the insulin, and assess compliance and effectiveness of the antibody therapy that was completed on January 17 to assure that no side effects or adverse reactions occurred. Blood sugar of 180 MG/DL, which is approximately 80 points higher than the normal range. It is to be expected that the patient’s blood sugar will come down with the new medication regimen but an infection and the stress of being in the hospital can elevate blood sugars and is a very common side effect of the patient’s illness.

Skilled nursing visit January 20, 2009
demonstrates the blood sugar is now 216 MG/DL, which is 116 points above normal, and the patient is hypertensive at 184/94. Before leaving the house, the patient’s blood pressure was reported as being 150/80.

Skilled nursing visit January 22, 2009 at 10:15 AM
blood sugar continues to climb at 289, which is 189 points above normal. Blood pressure is 170/80 in the right arm left arm records 165/80.

Skilled nursing visit January 27, 2009 8:00 AM
the patient is still experiencing difficulty with blood sugar levels as level as noted to be 305MG/DL

Skilled nursing visit January 30, 2009 10:30 AM
the patient continues to have challenges with the diabetic regimen, blood pressure 159/76 as noted in the right arm and left arm 155/80. Skilled nurse continues to check the patients for signs or symptoms of hyperglycemia yet the patient states that she is feeling fine, the caregiver verbalize that she is comply with blood sugar checking in insulin management has ordered. The skilled nursing instructed the caregiver on the purposes and action of humulan insulin and reinforced the need to monitor the diet and the blood sugar to achieve optimal results with the new medical regimen.

Skilled nursing visit February 3, 2009 9:30 AM; the nurse notes the blood pressure to be elevated at 165/99; when queried the patient denies symptoms of hypertension, the nurse reported the findings to the case manager and M.D. The M.D. decided not to deliver any new orders.

Skilled nursing visit dated February9, 2009 12:00 PM; patient’s blood pressure continues be 156/578 on the right arm 155 are in the left arm with a blood sugar of 280 mg/dl.

Skilled nursing visit dated March 1, 2009 1:15 PM; blood sugar of 264 milligrams/DL.

Analysis: This nurse admits in this six-week narrative that she waited until February 3 to alert the physician of a patient who had been spiraling out of control since January 18. My conclusion not enough was done for this patient. This type of documentation is rampant in your agency’s notes but is not being managed by case managers or the QA staff. As owners, you must ask why not.

It is this type of documentation that leaves you wide open for a continuous series of post payment reviews. Medical necessity is not clearly defined; patient’s conditions are not being responded to; yet bills for services continue to be submitted. Every agency that allows this to go on has a limited life expectancy. I fear yours is nearing its end unless ownership attends to these patterns.

After several interviews with home health attorneys, consultants and merger/acquisition brokers, we have pieced together a description of a practice that has become known as the “certificate mill.” Quasi-legal entrepreneurs operating on the edges of our service industry apply for Medicare certification, stamp their name on the cover page of a standard policy and procedure manual, undergo a survey and, after a waiting period, receive clearance to submit claims to a Regional Home Health Intermediary (RHHI). Before hiring one nurse or admitting a Medicare beneficiary patient, however, they immediately sell the new “agency.”

According to Chicago attorney Ericka Adler, of the law firm Kamensky Rubinstein Hochman & Delott, LLP, which specializes in health care law, a constant flow of sales contracts arrive on her desk. “They come from people who identify themselves as ‘business brokers’,” she explained, “but it is always the same few individuals reappearing over and over again with new buyers and sellers in tow.”

The process has been cook-booked. A formula that always wins CMS’s blessing is well known and used over and over again. The only thing not clear is whether there are hundreds of different individuals in the game or a handful of people playing hundreds of times in succession. Everyone we spoke to agreed it had reached epidemic levels, at least in some regions — Chicago, Houston and Los Angeles are often mentioned but it is more widespread than that — and that a rule was needed to stop it.

The motivation? Reports indicate the going rate can be as high as $400,000, willingly paid by someone wishing to open a home care agency but not interested in undergoing the lengthy application process. Without having seen a single patient, owners of these newly formed “agencies” have no trouble locating interested buyers, who either begin to hire staff and see patients after the acquisition or wait a short while and flip it again, often realizing their own $50,000 to $100,000 gain in a year or less. In both cases, the original seller immediately starts the process over again.

First fix attempt failed

CMS itself exacerbated the problem three years ago, making the certificate mill industry more lucrative by adding difficulty to the application process. In a previous failed attempt to curb the rate at which new agencies have been opening since 2001, CMS forced states to allocate state surveyor resources by instituting a 4-tier priority system. Tier one services receive immediate surveyor attention while tiers three and four are dealt with only if no higher priority duties remain, meaning, in practice, never. Sending state surveyors to evaluate a new provider seeking Medicare home health certification was assigned by CMS to tier three.

CMS did offer new applicants an alternative to waiting for infinity for state surveyors to arrive. A survey performed by an independent accreditation organization, at its standard fee, is accepted in lieu of a state survey. Certificate mill prices immediately inflated in response to the resulting supply and demand ratio change.

42 CFR 424.550(b) intended consequences

The new rule that took effect on January 1, 2010 requires anyone purchasing a certified home health agency to reapply for certification as a new provider if the agency being purchased came into existence or underwent another ownership transfer during the previous 36 months. Certainly, this rule should eliminate the certificate mill industry. There is no longer any value, certainly not $400,000, to a certificate that becomes invalid as soon as it is sold.

On the surface, it would appear this is the end of the story. CMS has ended a source of abuse and a group of shady characters must find a new scam. There is much, however, lying just below the surface. CMS itself estimates the rule will “affect” approximately 2,000 home health care agencies.

42 CFR 424.550(b) unintended consequences

Many honest businesses formed to offer quality skilled nursing and therapy services over the long term, though not the stated target of 42 CFR 424.550(b), will be harmed. CMS has published interpretations of the rule that extend its reach well beyond certificate mills, appearing to surreptitiously address a different, unrelated issue: CMS’s belief that there are simply too many Medicare certified home health agencies.

Unintended consequence #1: clumsy transition period

Until February 18, (see sidebar) ownership transfers signed by the parties in 2009 but pending RHHI approval on January 1, 2010 were to have fallen under the new rule. This provision was to have held whether an RHHI processes ownership transfer notification form 855A in a timely manner or not. On February 18, CMS forced RHHIs to make the date they received an 855A the effective date that determines whether a transaction will be treated under the new or old rule.

Previously, a CMS spokesperson had told us that no special consideration or exception would be made for agency purchasers who closed a deal in 2009, submitted an 855A before December 31 but did not receive RHHI approval until 2010. Their reasoning is that these buyers and sellers had the benefit of the proposed rule as soon as it was published in the Federal Register on August 19 and should have been aware of the need to submit their applications quickly.

“Nonsense,” say more than one consultant interviewed for this story. According to home health attorney Elizabeth Zink-Pearson, of the Edgewood, Kentucky firm Pearson & Bernard, PSC, some of her clients signed sales contracts and submitted 855A forms to Palmetto GBA as long ago as July, more than a month before the proposed rule appeared in the Federal Register, and had heard nothing regarding approval as of mid-February. “The normal procedure, specified in CMS instruction manuals, calls for RHHIs to turn 855As around in 30-60 days.” Zink-Pearson explained, “There can be a delay after they send it to a regional CMS office for final approval, but the total time frame is typically about six months. For an RHHI to sit on it for seven months instead of two before submitting it to CMS is unheard of and beyond understanding but it has been happening frequently since last spring.” There has been no word from CMS about the status of agencies that have already been illegitimately de-activated by their RHHI.

Home health consultant Michael McGowan reports the same types of delays for his West Coast clients at the hands of Cahaba and NGS. “Some of these 855A applications go back to July and August,” he reported. “When they complain to CMS, they are told, in so many words, “That’s a real shame. It is too bad that happened to you.” He added that complaints directly to any RHHI are met with, “You must speak with CMS about this matter.”

Unintended consequence #2: like catching dolphins in tuna nets

Though not included in the language of the proposed (8/19/09) or final (11/10/09) rule, CMS issued an interpretation that includes all ownership transfers in the following categories:

• Change of ownership (CHOW)
• Acquisition/merger
• Consolidation
• Change request reporting a 5 percent or greater ownership change (including stock transfer or asset sale)
• Change request reporting a change in partners, regardless of the percentage of ownership involved
• Corporate reorganization, where the true owner does not change but corporate ownership is altered

According to merger and acquisition consultant Dexter Braff, president of The Braff Group, this broad net captures far more ownership transfers than CMS’s stated target, including large numbers of legitimate providers who have never been near the certificate mill problem. He offered a few examples:

• A long-time agency owner/operator retires, selling the agency to a married couple, who intend to be active owners themselves. In less than three years, the couple experiences a death or a divorce. The day they notify CMS of how they have reorganized ownership in response to the event, the agency is ineligible to submit claims. The “new owner” must apply as a new agency.
• A legitimate, highly-regarded agency experiences success and decides to seek investment dollars in order to finance expansion to an additional location and invest in new technologies. The investor requests a small amount of stock in the agency in exchange. If the amount of the stock transfer is 5%or more, the agency must reapply as a new agency and cannot submit claims until approval is finalized.
• A couple nearing retirement is advised by their tax consultant to gradually transfer ownership of the agency they have operated for ten years totheir son and daughter. He recommends 10% per year for five years, followed by a transfer of the remaining 50% in year six. This couple would have to reapply for Medicare certification every year in years two through six.

The list of circumstances that can shut down the operations of honest providers by a rule supposedly intended to capture only dishonest ones goes on and on, including the death of a minority partner, inheritance situations, merger of two equals even if they have both been operating for many years, et cetera. None of these circumstances have anything to do with controlling the certificate mill industry. All of them will harm good providers faced with unexpected, unavoidable events.

Unintended (?) consequence #3: limbo status worse than de-certification

It is even more diabolical than that, Zink-Pearson insists, thanks to a nuance many readers of the final rule may have overlooked. “If the CHOW is not processed, the rule does not actually de-certified the new owner but only de-activates billing privileges. This is an important distinction. A de-certified agency has access to an appeal process. Under de-activation, there is no such recourse. The new owner has absolutely no legal remedy.” McGowan added that some agencies surprised by their de-activation notices asked to have their CHOW voided but those requests are always denied.

Zink-Pearson noted that CMS admitted in its comments published with the final rule that they expect about 2000 home health agencies to be affected. This approximates the number of agencies that closed their doors in the late 90′s when the Interim Payment System (IPS) was in effect. Was this collateral damage unavoidable? Or might minor changes in the rule, or in CMS’s interpretation of it, have protected legitimate providers while still hampering the certificate mill industry? Perhaps the operative question, keeping the IPS episode in mind, is, “What is CMS’s true intention?” It is either to control the certificate mill problem, the stated intention; to reduce the total number of certified home health agencies CMS has to deal with, the suspected reason, or both. Consultants we interviewed say the answer is not at all clear.

RAC Assistance for Home Care requested a comment from CMS on three questions related to the collateral damage issue. The agency’s official response is that the industry had ample opportunity to submit comments on the proposed rule from August 19 through October 19 and that none of these issues were raised as objections in the 20 comments received.

“Not only nonsense, but absolutely false,” our attorneys and consultants universally responded. The examples of ignored public comments and interpretations slipped in after the final rule was published form a litany of offenses:

• There was at least one comment that a 12-month waiting period would have been more than enough to control the certificate mill but that the additional 24 months will only harm legitimate providers. CMS noted the comment but rebuffed it, keeping the proposed rule’s language.
• Applying the rule retroactively, rather than only to sales of assets or stock that occurred on or after 1/1/10, is not part of the final rule as published. “Pending on 1/1/10″ was added as a CMS interpretation of its own rule, published only in the official instruction to RHHIs, known as Pub 100-08, Transmittal 318, which detailed RHHI responsibilities under Change Request (CR) 6750. Both documents were dated 12/18/09, the Friday before Christmas and five weeks after the final rule appeared in the Federal Register. (CMS has backed down on this provision. See inset text box for late breaking news.)
• The same is true for the list of transactions that CMS instructed RHHIs to count as ownership transfers, including the low, 5% threshold for stock transfers that produce no change of operational personnel. It appeared for the first time in CR 6750 on December 18.
• Though CMS stated that it developed this rule because it otherwise does not know whether a new owner will be willing and capable of complying with home health conditions of participation, the broad definition of what constitutes a new owner will cause multiple, wasteful inspections of applicants that have undergone no material management change since their previous application. Stock transfers that leave all management and staff in place and result in no policy or procedure changes are being de-activated at the same rate as those who purchase certificates from the mills.

There is a legal reason expanding a rule’s scope in an obscure document released only to contractors, Zink-Pearson explained. “In court, judges typically defer to CMS’s interpretation of a rule rather than reading the original language and forming their own conclusions. The only legal challenge that can be made is to sue for an injunction in which it is argued that CMS’s interpretation is arbitrary and capricious or otherwise not in accordance with the Constitution. This would be a large, costly approach, inappropriate for any individual agency to pursue.”

Real stories, real people already caught in the net

Beginning the first week of January, new home care agency owners began to receive notices from their RHHIs that their billing privileges were de-activated. Regardless of whether their purchase of an existing agency had been finalized in July or December, regardless of whether the RHHI had delayed processing an 855A CHOW notification, if records showed that a previous ownership transfer of any kind had occurred since January 1, 2007, all payments were stopped within 30 days. Stories are mounting of agency owners that had never heard of the certificate mill problem but who are suddenly without revenue and without recourse. Here is one of those stories.

Agency owner Michele C. — who allowed us to relate her story on condition we did not identify her — is recovering from a stroke. While no one can speak definitively about cause and effect, the event followed three weeks of sleepless nights after her RHHI notified the person to whom she had sold her agency in December that they would be required to apply as a new Medicare agency. Had NGS opened its mail on Friday, December 31, the sale would have been a 2009 sale. But the RHHI says it received the 855A application on Monday, January 4, making it a pending 2010 transaction.

During the transition, however long it takes for the new owner to be certified, neither party may submit Medicare claims. Michele’s former agency does 96% of its billing to insurance companies and 4% to Medicare. Insurance company contracts often require Medicare certification as a condition of treating the company’s covered patients. Prior to the stroke, Michele and her staff, aided by a consultant, spent every business hour explaining to low-level insurance company staff persons the difference between Medicare certification and de-activated billing privileges, hoping to avoid losing her main revenue sources through a misunderstanding.

These are the mistakes Michele and her buyer made. Neither reads the Federal Register every day, leaving them in the dark about the impending rule change. Neither engaged an attorney or consultant with home health industry experience to shepherd them through the sale. They did not pay $10 to ensure delivery of the 855A by December 30. The IRS accepts postmarks as the active date of delivery; RHHIs do not.

It gets worse

Had Michele and her buyer been active Federal Register readers, had they sent their 855A by overnight delivery, certified with receiver signature required, the outcome would have been exactly the same. According to NAHC attorney Bill Dombi, the interpretations included in CR 6750 were complete surprises, not at all expected by those who were studying the final rule in preparing to alert their clients and association members.

Prior to the stroke, Michele filed to rescind her 855A notice of ownership change so she might continue to operate the business. Every RHHI is denying all such requests. In addition, Dombi notes, 855A forms submitted prior to January 1 are not supposed to be subject to the new rule. CMS actually agrees with that interpretation but cannot, or will not, explain why RHHIs continue to violate it with impunity. He said that NAHC may soon resort to asking Congress or the courts to intervene if CMS cannot get its contractors to follow the law.

Recourse: none so far

Though NAHC’s Dombi assures us he continues to negotiate, CMS is so far insisting that the only way to change their current interpretation of the rule is to make a new rule, a year-long process. Buyers and sellers who believe they have been inappropriately subjected to 424.550(b) receive the same answer CMS gives to reporters’ inquiries. “424.550(b) was developed through the HHA PPS rulemaking process. It included a public comment period. No comments were made during the solicitation period about the problems [outlined above]. At the end of the comment period, CMS finalized a policy similar to what was proposed.”

“It is not necessary to make a new rule to change an interpretation,” Zink-Pearson continued her recitation of what she calls CMS’s nonsense statements, “it is not true that they did not receive comments on these specific issues, and it is a stretch to call the final policy, which includes CMS’s interpretations, “similar” to what was proposed.”

One workaround, but it is dangerous

At this early date — the new rule has been in effect for less than two months at this point — paths for legitimate providers to follow are not completely clear. According to Braff, new ownership transfers of agencies subject to the rule, in other words, of agencies that have experienced full or minor ownership changes within three years, may be wise to consider temporary management contracts instead of outright purchases. “These operating agreements would only have to last until the 36-month window closes, which could be six or eight months or less, Braff” he explained, adding, “But this may raise liability concerns. If the seller retires to a beach somewhere and the buyer gets into trouble with CMS, a patient’s family or the IRS, that seller may find out he is not as retired as he thought he was.”

Braff added that the due diligence process for agency buyers has suddenly become more complex. Not only will prospective buyers inspect the seller’s books, interview staff, study Home Health Compare reports and the like. They will also have to perform a thorough search of ownership history, looking for the most minor shifts in corporate structure.

CMS stated in the preamble to both the proposed and final versions of this rule that it was doing this because it finds itself unable to know whether new participants in Medicare home health are willing and able to comply with home health conditions of participation. The way this new rule is working so far, they know no more than they did before. A buyer intent on running a shady or sloppy operation merely has to shop until finding one to acquire that has not had a recent ownership change.

On the other hand, if their intention was to shut down the certificate mill industry, they could have easily accomplished that with a 12-month exclusion instead of 36 months.

All of this exposes a possible gap between the government’s stated and actual motivation. The last time the number of Medicare certified agencies approached the 10,000 mark, CMS created the Interim Payment System, which forced approximately 2,000 closures, though CMS swore at the time that was an unfortunate side-effect and not its intention. We are at 10,000 again. Perhaps 424.550(b) is intended to have unintended consequences of its own.

Next issue

There is much to be learned about the long-term effects of 42 CFR 424.550(b) as we are less than two months into the enforcement period. We welcome comments from affected agency owners. We will continue to seek guidance from consultants and attorneys about how an affected agency should proceed.

Obviously, the expectation is that these contracts will be quite lucrative for the contractors. But are they actually lucrative for Medicare and taxpayers? A quick look at the monies involved in the three-year RAC demonstration is quite revealing. It is clear why losing bidders put up such a fight. It is not clear, however, that Medicare and taxpayers will be significant winners.

Analyze the numbers
According to CMS’s most recently published RAC demonstration evaluation, dated January 2009, a full year after the demonstration ended, RACs corrected more than $1.03 billion of improper Medicare payments over three years. Approximately 96% of these improper payments were overpayments collected from providers, while the remaining 4% were underpayments repaid to providers, leaving a net gain of $954.9 million before program expenses.

While some hospitals and physicians audited during the demonstration did appeal their RAC’s overpayment decisions, the majority did not bother. CMS reports that providers chose to appeal 22.5% of overpayment determinations. Of those 118,051 appeals filed, 40,115 were successful (34%). There were no home care providers audited during the demonstration.

Extrapolating that 34% win rate across all 525,133 overpayment determinations, it is reasonable to calculate that, had providers appealed every overpayment determination instead of fewer than one-fourth of them, more than 210,000 would have been overturned. A 66% win rate across the board would have considerably reduced the government’s $954.9 million gross profit. It is not possible to affix a dollar amount to that reduction, however, as CMS only publishes the number of appeals filed and won, not the total amounts involved. A little educated guesswork will be required to continue our analysis.

Why these hospitals and physicians elected not to contest RAC takebacks more than three-fourths of the time is unknown but there are two logical reasons. Either most RAC accusations were obviously justified and those providers knew appeal success was unlikely or dollar amounts were low and it was decided a lengthy appeal process was not worth the effort and expense. The latter reason begs one more question. If only large recoupments were appealed, what conclusions can be drawn about the amounts Medicare was left with after 34% of appeals filed were successful?

Educated guesses
Simply dividing $954.9 million by 525,133 overpayment cases cannot tell the story. Few would engage legal counsel to recover $1,818.40. It is likely that those 118,051 appeals involved much higher amounts. These were the cases that skewed the average dollar amount per case upward, meaning the takebacks not appealed would have been the ones with dollar amounts well below that average.

Recapping:

• 22.5% of determinations were appealed
• 34% of those were won
• Assuming the average per-case amount, Medicare loses $73 to appeals
• Assuming only above-average cases were appealed, Medicare may have lost twice that much
• Had all providers appealed all cases instead of 22.5% of cases, Medicare might have lost more than $300 million
• The RAC demonstration took place in only 6 states, though they were mostly large states, representing more than 6/50 of the Medicare budget

Rather than allowing our speculation to get too far afield, we will remain with the middle estimate, about $150 million lost to successful appeals over three years in 6 states. Now the government’s net from the demonstration program falls closer to $800 million. But this is not the final net as there are more expenses to subtract. Remember the bounty payments, which are only the beginning.

• 12%, or approximately $100 million, goes to commissions paid to contractors (explaining the battle of the bidders, above)
• Unknown additional amounts to support salaries of government attorneys who represent RACs before Administrative Law Judges
• Unknown additional amounts to support salaries of Administrative Law Judges

We end with Medicare netting somewhere in the neighborhood of $700 million over three years. 2008 Medicare expenditures on beneficiaries, not including HHS and CMS overhead or profits to intermediaries and other contractors, attorneys and judges, totaled about $450 billion, or about $75 billion in those 6 states. The RAC demonstration program, therefore, realized a few points shy of one-half of one percent of the Medicare budget over three years.

Two possible conclusions
Without a doubt, the RAC program will be beneficial to the collection agencies that won the contracts. However, the net returned to taxpayers is not in a dollar range to significantly impact Medicare Trust Fund survival. CMS has two choices. Either it will instruct RACs to be far more aggressive now than they were during the demonstration or it will rewrite its reasons for instituting the program.

Option one is not necessary. A 12% commission is more than enough incentive for the RACs to be as aggressive as the law allows. As a side benefit, it will keep them focused on the deep pockets of hospitals and large physician clinics and away from minimally lucrative home care and hospice providers for a long time. The second option is not entirely a negative. Just as the threat of an IRS audit keeps most taxpayers honest, even if they have never actually been audited, the threat of a RAC audit will have the effect of improving clinical documentation for all types of providers, even if the program does not significantly improve the condition of the Medicare Trust Fund.

As another of this week’s news items explains, healthcare providers are vulnerable to payment denials because of their paperwork more than because of the quality of the care they provide. Judges most often decide clinical documentation does not show evidence that specific treatments were provided, while making no comment on whether the clinician is telling the truth now, in court, that they were provided. History may decide that Recovery Audit Contractors were an expensive way to convince clinicians to chart properly and completely. It will certainly agree that the program provided employment for the handful of collection agencies that participated in the program as contractors. Perhaps both of these judgments will have been worthwhile in the long run, even if they are the only ones.

After studying descriptions of the patient assessment and care plan, try to determine why payment for this episode was denied by the RHHI and why both QIC and ALJ agreed.

Patient Background

• One HHPPS episode provided, 59 days, to 72-year old female.
• Diagnoses: osteoarthritis of lower let, difficulty walking, diabetes type II uncontrolled, hypertension, esophageal reflux and hypothyroidism.
• History of falls without injury
• Functional limitations: endurance, ambulation, shortness of breath on moderate exertion, poor vision.
• Patient oriented, forgetful, anxious.
• Referral made by primary care physician due to exacerbation of osteoarthritis and increase in knee pain. Physician prescribed Celebrex and ibuprofen.
• Son/daughter available to assist with all activities of daily living, monitor blood glucose level.

Care Background

• SN for observation, assessment and education on new medication regimen.
• Physical therapy evaluation determined patient needed assistance to walk at home. She could walk 25-30 feet with a cane and stand-by assistance and displayed an unsteady gait.
• PT provided therapeutic exercise, transfer therapy, gait training, balance training, ultrasound and muscle re-education.
• SN provided education on disease process and assessment for medication compliance and response.
• Patient missed or canceled last three scheduled weekly SN visit appointments and was discharged, one week after the final cancellation, with goals met.
• At discharge, blood pressure and blood glucose levels were stable.

The ALJ Decision

• Celebrex and ibuprofen do not constitute a change in the patient’s treatment regimen requiring SN services.
• Skilled nurse provided nothing more than observation of a chronic condition.
• Patient, with daughter’s help, was able to monitor her own blood glucose levels.
• Three successive canceled visits indicates SN was little needed.
• “The record does not support the medical reasonableness and necessity of the SN services provided.”
• “The record does not indicate a functional decline requiring the skills of a PT.”
• “Physical therapist checked a box at each intervention but provided no description of the specific interventions provided. Thus, it is unknown if the skills of a therapist were required.”

As can be seen, the ALJ made no determination as to whether the patient had shown some improvement over the course of the episode. No judgment was made that the provider did not provide necessary services. Neither the skills of the nurse nor the therapist were called into question. The judge does not even specifically state that the care itself was not reasonable and necessary.

This judge referenced the condition of participation known as G-tag 161. “Orders for therapy services include the specific procedures and modalities to be used and the amount, frequency, and duration.” To quote from the judge’s final conclusion, with emphasis added, “The record does not establish the medical reasonableness and necessity of the services provided…”

In this case, it is the lack of comprehensive, compelling documentation that is the primary driver for payment denial. To clinicians who say, “I may not write it down well but I provide excellent care,” ALJ’s are beginning to say, “if you expect to be paid for your excellent care, you had better learn to write it down well.”

Though the RAC program itself is new and though no contractor has yet received permission from CMS to audit a home care agency, most providers accept the fact that the day will eventually arrive. When it does, CMS has declared, the appeals process for reconsideration of a payment recoupment resulting from a RAC audit will be exactly the same as the current process for appealing a payment denial by a Regional Home Health Intermediary.

Editor’s note: We have decided to continue using the terms “Regional Home Health Intermediary” and “fiscal intermediary” for clarity. When the new name, explained below,* enters into common usage, we will begin to switch our usage as well.

CMS has made quite clear the rules under which RACs must play, including during the appeals process. The CMS Program Integrity Manual (PIM) is the guide for all contractors. Readers are invited to examine previous articles in this series for detailed descriptions of the appeals process.

From the CMS Program Integrity Manual
1.1- Overview of Program Integrity and Provider Compliance
(Rev. 313; Issued: 11-20-09; Effective/Implementation Date: 12-21-09)
Affiliated contractors (ACs) shall follow all sections of the PIM unless otherwise indicated.
Medicare administrative contractors (MACs), comprehensive error rate testing (CERT) contractors, recovery audit contractors (RACs), program safeguard contractor (PSCs) and zone program integrity contractors (ZPICs) shall follow the PIM as required by their applicable Statement of Work (SOW).

*Background on Medicare Contractors
The Centers for Medicare & Medicaid Services (CMS) contracts with private insurance companies to perform many functions on behalf of the Medicare program, including processing claims for Medicare payment and carrying out the first level of the Medicare claims appeals process. Historically, these companies have been known as fiscal intermediaries (FIs) for Part A services and carriers for Part B services; however, as directed by section 911 of the Medicare Prescription Drug, Improvement, and Modernization Act (MMA) of 2003, both Part A and B work is being integrated under new entities called Medicare Administrative Contractors (MACs). For more information on MAC implementation, see: http://www.cms.hhs.gov/MedicareContractingReform/.

The Medicare fraud strike forces are multiagency teams of federal, state and local investigators designed to detect and prosecute fraud. In addition to DOJ and HHS, these strike forces involve the Federal Bureau of Investigation (FBI) and the Drug Enforcement Agency (DEA).  The strike forces use real time data analysis to stop fraud as it occurs.

According to Attorney General Eric Holder, Medicare and Medicaid fraud cost the government billions of dollars each year. In an effort to combat these problems, DOJ and HHS have established a new taskforce, the Health Care Fraud Prevention and Enforcement Action Team (HEAT).

An FBI agent caries a computer seized from Courtesy Medical Group, Tuesday, Dec. 15, 2009 in Miami. Federal agents arrested several suspects and expected to roundup about 30 in three states Tuesday on charges related to Medicare fraud totaling $61 million as the government cracks down on waste under health care overhaul plans. (AP Photo/Wilfredo Lee)

On December 16, the Department of Health and Human Services announced the new strike force offices in Baton Rouge, Tampa and Brooklyn. The strike forces have focused on states that spend the most money on Medicare per person. According to HHS, Louisiana spent $8,659 per enrollee in 2004, the highest in the country. Previously, the Houston strike force office handled all of Louisiana.

Types of Medicare Fraud
Medicare fraud can involve a variety of activities. Most commonly, this fraud involves the billing and coding for services, for example:
-Billing for services not provided
-Billing for equipment not provided
-Billing for services that are not medically necessary
-Improperly coding for services
-Double billing

However, fraud may also involve some type of improper financial relationship between a physician and an entity providing health care. For example, an anti-kickback law prohibits any type of payment in return for referring a patient. A physician self-referral law prohibits a doctor from having a financial relationship with an entity to which he or she refers a Medicare patient.

Civil and Criminal Liability
Last year the DOJ filed 502 criminal health care fraud cases with charges against 707 defendants, ultimately resulting in 588 convictions. The average prison sentence was more than three years (37.4 months).

Many federal statutes deal with health care fraud. Some specifically apply to health care fraud, like the anti-kickback law and the law against self-referral. Others are general laws that can be applied to health care fraud, such as the False Claims Act, Racketeer Influenced and Corrupt Organizations Act (RICO) and money laundering laws.

New State-Based Medicaid Strike Force Teams
In addition to the Medicare strike force teams, DOJ and HHS are encouraging the states to establish their own Medicaid strike forces using some of the same tools used by the Medicare strike forces, such as real time data analysis. These strike forces are working together to help eliminate fraud and investigating fraudulent operators who are cheating the system and costing taxpayers money.

Recommendations
These investigations are very serious and anyone convicted of Medicare of Medicaid fraud charges faces severe consequences. Owners of home care agencies and hospices who discover they are under investigation should treat the situation with utmost seriousness and speak to a criminal defense attorney immediately.