2011 Big Ten

Audits

How providers deal with the nasty fact of life that Medicare audits have become will shape their 2011.

• By David Kopf
• Jan 01, 2011

If Round One of competitive bidding was CMS’s atom bomb for the home medical equipment industry, then Medicare audits have been its million ticking time bombs. CMS stepped up its Comprehensive Error Rate Testing (CERT), Zone Program Integrity Contractor (ZPIC), and Recovery Audit Contract (RAC) audits over last year, creating a serious impact on provider funding. The issue has been so pronounced that there are many in the industry who feel that the most serious issue facing providers in 2011 is not competitive bidding, but pre- and post-payment audits.

Starting in late 2009 and going into full swing in 2010, CMS stepped up its efforts to audit claims coming from providers both before and after payment. CMS’s program is not isolated to HME and affects both Part A and Part B, and it is intended to be a sweeping program to eradicate as much fraud from the Medicare claims process as possible.

To carry out these audits, Medicare contracts with third parties that undertake the audits. The audits are extensive and providers must provide deep levels of documentation to demonstrate that the claims are valid. Moreover, in some cases the auditing company does not get paid until after an audit succeeds. Providers can appeal audits in some cases, but the process consumes time and money. Meanwhile, throughout the entire process, funding for a claim remains in limbo.

Make no mistake: the problem is extremely serious. When we polled our readers to see by what percentage Medicare audits had decreased their monthly cash flow, we received some eye-opening responses:

• 32 percent said audits had diminished their cash flow by up to 5 percent;
• 9 percent said it had cut it by up to 10 percent;
• 9 percent of respondents said it had cut it by up to 15 percent;
• 13 percent of providers said audits had cut their cash flow by up to 20 percent;
• and a stunning 34 percent said that pre- and post-payment audits had slashed their monthly cash flow by more than 20 percent.

How can any business sustain that kind of hit to the bottom line? This is why many industry watchers consider this situation so grave.

Part of the reason that the audits have become so problematic is that Medicare farms out the actual auditing process. Because these audits are being handled by third parties contracting with Medicare, there have been a number complaints that audit contractors are overstepping and exceeding Medicare documentation requirements, unfairly delaying providers’ funding.

The problem became pronounced enough that at the end of last summer the American Association for Homecare reacted to the increased number of claims audits plaguing providers, that it called on providers to submit examples of excessive or unnecessary documentation requests. The association asked providers to send any audit letters that demonstrate that the audit is asking for documentation that is not required to justify a claim. Using the information, the association says it will craft an “audit accountability strategy” that will address audit activities with CMS and Congress.

It also said it was coordinating efforts with other stakeholder groups such as the American Medical Association, the American College of Physicians, and the American Academy of Family Physicians. How that pans out into any kind of political response that could force a change at CMS remains to be seen. Moreover, it will be a tough fight as CMS is recovering a significant amount of money.

In the meantime, providers must somehow develop strategies for dealing with audits. Many providers are creating internal procedures for obtaining documentation up-front, before it will work with a referral partner. This puts providers in a doubly difficult position, because now the referral partner has to do extra work in order to deal with the HME providers. It’s a Catch 22: cover yourself up-front and risk souring referral relationships, or wait for the documentation later and risk a lengthy audit.

However it might be wisest to err on the side of caution and strive to make the process as easy as possible for referral partners. Reason being is that auditing companies require fast turn-around on documentation requests, so having that documentation at-hand is essential. The longer a provider takes to submit paperwork, the more suspicious the auditor will become and the more intense and lengthy the process could become, consuming time and money and delaying payment all the while.

Another solution is to work with an outside party to conduct an internal review of claims before they are sent to Medicare. In fact, this could result in a new type of service to proliferate in the industry: a sort of pre-fl ight check. We might look to billing software providers in 2011 to shape these sorts of services. It certainly will be a business opportunity for them, because no matter how you slice it, any change will be slow in coming, so CMS audits will be a fact of life this year.

This article originally appeared in the January 2011 issue of HME Business.