Business Solutions
A Game Plan for Six-Year Lookbacks
CMS's six-year lookback audits represent a daunting challenge for HME providers, but there are steps they can take to deal with them.
- By Holly J. Wagner
- Oct 01, 2019
The word “audit” can strike terror
into the heart of any business
owner, especially if you don’t know
what to expect or how to prepare
and respond. An audit that goes
back six years sounds like terror x 6,
but it may not have to be.
A DME business that’s been following all the
rules and has been stringent about getting
documentation for every prescription in advance
will have little to worry about from the new
six-year lookback rule — but will still have to
respond. Just like the Internal Revenue Service,
your DME MAC won’t forget about you if you just
keep your head down.
“What will happen if the DME supplier says,
‘I’m not going to mess with it,’ is the DME MAC
will come in and do their own audit, then you
have false claims liability,” says attorney Jeffrey
S. Baird, Esq., is chairman of the Health Care
Group at law firm Brown & Fortunato, P.C. “That
could be far more expensive than complying:
“The civil liability under the False Claims Act
(FCA) is actual damages, plus treble damages,
plus up to approximately $21,000 per claim.”
You can’t blame CMS for checking. According
to the most recent Comprehensive Error Rate
Testing (CERT) data available, fiscal year 2017,
Medicare fee-for-service programs overall
have an 8.12 percent overpayment rate, but for
DMEPOS it jumps up to 35.54 percent, and that
adds up to $2.59 billion.
For now, DMEs that have the most cause for
concern are those who have a large PAP business.
But that doesn’t mean DMEs are in the
clear on other products; this was just the first
review to trigger a major clawback. Any segment
that requires refills or monthly supplies will be
susceptible to problems, and some practices
that may have been acceptable (or just gone
unnoticed) in the past, like blanket orders, won’t
fly now.
“What has happened here can be replicated
for other kinds of supplies,” Baird says. Diabetic, CPAP, wound care, catheters and other repeat
products are getting scrutinized because they
are more susceptible to documentation errors
and fraud. While you may not intentionally send
unneeded supplies, mistakes can happen. And
there’s no guarantee that one-time products
won’t be audited in the future.
“It’s a risk for everybody. They are looking at
things like orthotics, because of all the issues
they have had with the braces. The six-year look-back
applies to any avenue of DME that CMS
wants to go down,” says Kim Brummett, Vice
President of Regulatory Affairs for the American
Association for Homecare. “I don’t think there
is any way to avoid it. Smart suppliers probably
already have compliance teams.”
If you don’t have a compliance officer or
team, it might be time to get one. “We all seem
to be on the same page that we think this is
going to be the norm every time the Office of
the Inspector General (OIG) issues one of their
reports,” says Wayne van Halem, president and
founder of audit consulting firm The van Halem
Group, a division of VGM Group. “That’s something
we have to keep track of now and monitor
because [a six-year lookback] is such a huge
undertaking.”
One thing that seems sure based on conversations
with DME MACs, Brummett adds, is that “It
will never come out of a DME MAC unless they
are instructed to by CMS.”
HOW WE GOT HERE
Baird explains what led to the CPAP reviews
under way now. The OIG released a report in
June 2018. That traces back to 2014-15 when
the OIG reviewed 110 claims nationwide and
found 24 of them compliant and 86 noncompliant.
Though the total overpayment for the
110 claims was $13,414, OIG’s next step was to
do an extrapolation that estimated how much
it was costing across the Medicare system
-- $631,272,181.
“The OIG said, man, we’ve got a big problem
out here,” Baird says. Since the 86 noncompliant
claims came from 82 DME suppliers, CMS told
the DME MACs to have the suppliers do internal
investigations. The MACs sent letters ordering
the investigations, including the six-year lookbacks,
to those suppliers.
THE LETTER ARRIVES. NOW WHAT?
Step 1: Read letter.
Step 2: Mutter something that probably isn’t
printable here.
Step 3: Call a lawyer. You don’t know for sure
what you will find, and having an attorney can
protect your related conversations and reviews
under attorney-client privilege.
“If DME companies hire Brown Fortunato,
we hire van Halem Group,” Baird says. “If they
discover not only bad claims but our client is
doing awful, terrible things that could even be
criminal, that is protected by attorney-client
privilege.”
Most businesses are doing their best to
comply, but sloppy or incomplete paperwork can
trip them up. If you got a letter, you now have
two choices: “Either look at every CPAP resupply
claim for the last six years; or, hire a statistician
to do a statistically valid sample of claims over
the six-year period and extrapolate,” Baird says.
Rooting around through six years’ worth of
claims may be a complicated process, but it’s
nothing compared to creating a statistically valid
sample. Most DME firms, especially small ones,
just don’t have ready access to the expertise —
unless you have an exceedingly low volume of
claims for that code.
If you started by hiring an attorney, the
attorney can hire the other help you need and
the attorney-client privilege extends to the
information those contractors generate during
the review. As Baird explains, “The attorney can,
in turn, hire an outside consultant to assist with
the lookback. The attorney will pay the fees to
the consultant (the supplier will reimburse the
attorney for the fees), the consultant will report
to the attorney, and the attorney will report
to the supplier. By following these steps, and
assuming that no intervening action occurs that
compromises the attorney-client privilege, then
the work performed by the consultant will be
protected by the attorney-client privilege.”
While CMS allows DMEs to use RATS-STATS
to perform their own sampling, Brummett says,
“That’s a tool, but nobody knows how to use it.
Suppliers aren’t statisticians. The requirement
in the letter is scary, because you either audit
every claim for the last six years that takes that
code, or you take a statistically valid sample that
you can justify as being accurate and audit that.
When you do a self-audit on the last six years
that you’ve filed for that one number, there could
be thousands.”
“It’s not something that a lot of people can
do internally,” van Halem says. “Where it gets
challenging is that you have to run a statistically
valid random sample. Most DME suppliers
don’t have anyone with that expertise. We have a
statistician who is able to design a sample that is
statistically valid.”
Unfortunately, you can expect to spend
$10,000 or more just for the audit, which van
Halem estimates takes about 40 hours to review
about 100 claims — plus the time it takes to pull
your records, perform your internal review and
go through the process.
“That’s just for the audit component, not
pulling the claims or identifying the sample and
doing all that. It’s a significant amount of time,
particularly the review element,” van Halem says.
“Overall, in general it would probably be close
to or over 100 hours of time dedicated on it —
that’s if everything goes smoothly. What we find
is that once we get through the first part of the
review there are a lot of documents missing that
they have to go back and try to locate. There’s
a lot of back-and-forth and communication with
attorneys.”
In most cases, it’s probably not wise to try to
do the review yourself. Most of your existing
service providers can’t be much help. Likely the
best your software and billing services providers
can do is help you identify the universe of potential
claims.
WEIGHING THE COSTS
The help you need to do your internal audit right
the first time isn’t cheap, but the cost is likely to
be far lower than making a mistake. In addition
to the looming threat of FCA claims, the results
of your internal audit may be the path to getting
claims rehabilitated, which would reduce any
amount you would have to pay back.
In some cases, for example if your review was
triggered by just one or two faulty claims, you
may be able to dodge the six-year lookback
bullet by rehabilitating those claims.
“Some clients have not had to pay, because
we were able to get the claim overturned in the
appeal process,” Van Halem says. “Once the
claim was overturned there was no overpayment.
There was only one payment to begin with that caused it.”
There are three possible steps in the process:
Redetermination, Reconsideration and administrative
law. With redetermination, the supplier
submits paperwork correcting the problem and
submits it to the DME MAC.
For example. blanket orders are out if they
fail to include the exact quantity the patient
needs. To fix the problem, “the supplier goes
back to the doctor, says ‘please issue me a new
order, dated today (because we don’t want to be
dishonest), that says this new order is correcting
or rehabilitating the prior order you’ve filled until
now, today.’ The doctor is stating the quantity
ordered for the patient two years ago until
today. The old order will have a new order, which
is effective two years ago. That is a way to rehabilitate
the order.”
If the DME MAC declines the redetermination,
the DME can seek reconsideration. At this stage
the supplier can no longer add new material to
the case. If that review fails, the DME may appeal
to an administrative law judge for a hearing but,
Baird warns, “Between the reconsideration and
the ALJ, the DME MAC can and will offset” the
disputed amount against the supplier’s account.
“Most people lose at redetermination or
reconsideration,” Baird says. “Out of 30 claims at
issue, you might win three at redetermination. At
reconsideration you might win on three claims.
But you still lost on 24 claims.”
But for one or two faulty claims it’s probably
worth a try, because as Brummett notes,
if the appeal on the triggering claim succeeds,
“The MACs have told us they are not going to
respond. They’re putting it in the file and closing
it.” van Halem adds, “We’ve had clients with
claims that were actually denied that we got
overturned in the appeal process. The good
thing is, CMS did indicate that if that was the
case, they don’t think it was necessary to do a
six-year lookback.”
PROACTIVE IS THE WATCHWORD
In most of the cases under review, “DMEs would
put out the product and not have the documentation
in the patient file that was sufficient to
withstand an audit,” Baird says. The lookback
rule is “motivating the DME not to put out the
product until their documentation is complete…
If you are running a tight ship, even though you
will have to respond, you’ll be just fine.”
It may be small consolation, but Brummett
says at least six-year lookbacks don’t require any
new day-to-day processes. “If you are following
the rules you should not have to change any
processes,” she says. “They are not looking to
change anything, just make sure you are doing
what you should have been anyway.”
Going a step further, van Halem advises that
DMEs police themselves carefully and early to
avoid problems. “We shouldn’t sit back and wait
for this to happen again. We should be, on a
quarterly basis, auditing our claims proactively to
identify any issues. If you catch it within a quarter
you can minimize the impact of it and get it
taken care of, so that moving forward we don’t
have this issue ongoing.”
He also advises DMEs not to get complacent
once they pass a six-year lookback: “There is this
six-year lookback. That means they are probably
going to come back and do a review in another
couple of years to make sure this issue is no
longer an issue. I would just go back to being
proactive and trying to put the effort in up front
to identify issues before the government does
that.”
This article originally appeared in the October 2019 issue of HME Business.