MGMA Medicare Audits Fact Sheet

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1 MGMA Medicare Audits Fact Sheet Several types of Medicare contractors may audit physicians. This fact sheet describes audits under fee-for-service Medicare (traditional Medicare), Medicare managed care (Medicare Advantage), and the Medicare quality reporting programs. Please refer to the MGMA Medicare Appeals Fact Sheet for a description of the process for appealing claims that are denied and quality reporting program payment recoupments following an audit. MEDICARE FEE-FOR-SERVICE AUDIT CONTRACTORS There are five main contractors under fee-for-service Medicare that physicians and physician practice groups are likely to encounter under the Centers for Medicare and Medicaid Services (CMS ) program integrity initiatives. 1 These contractors audit Medicare fee-for-service claims (i.e., non-managed care). These are claims that have been submitted to a Medicare Administrative Contractor (MAC) for payment. An audit can occur at any of the following times in the claim process: Prior authorization review. The audit occurs after the provider orders an item or service, but before the item has been delivered or the service has been rendered. Prior authorization review currently applies only to durable medical equipment (DME) claims, but physicians may receive documentation requests to substantiate claims by DME suppliers. Prepayment review. The audit occurs after the provider submits the claim to the MAC, but before payment has been made. Post-payment review. The audit occurs after the MAC pays the claim. MACs are the entities that pay physician claims, and they also audit. Until recently, MACs primarily conducted post-payment reviews, but they have now shifted to focus on targeted prepayment reviews under the Targeted Probe and Education (TPE) Initiative, which is expected to roll out nationally in Fall Under TPE, physicians and other providers will be selected for targeted review based on data analysis conducted by the MACs. The MAC will then select 20 to 40 claims for prepayment review, and a specific and detailed breakdown of the results will be issued to the provider. The provider will be offered educational intervention, if appropriate. The provider is then given a pause in auditing, known as the Period of Improvement, in order to implement any necessary changes and corrections to its processes 1 CMS provides an interactive map that identifies the specific contractor for each category in a given state: Programs/Review-Contractor-Directory-Interactive-Map/. 2 One MAC is already conducting TPE prepayment audits as part of the original initiative. 1

2 and procedures in response to the audit results. After the Period of Improvement, the provider will undergo another round of auditing, with the MAC selecting another 20 to 40 claims for prepayment review. If the provider is still deficient, another educational intervention is offered, followed by another Period of Improvement, followed by another round of auditing. If the provider fails its third round of auditing, then it will be referred to CMS for further action, which may include extrapolated denials, referral to a Zone Program Integrity Contractor (ZPIC), or referral to a Recovery Audit Contractor (RAC). Certain MACs are also responsible for prior authorization review. 3 Prior authorization review is a demonstration project that began in 2012 and has now expanded to include 19 states. 4 Under prior authorization review, DME MACs receive requests from either the physician/provider or the supplier for certain kinds of durable medical equipment, prosthetic, orthotics, and supplies items and review these requests before the claims payment process so that Medicare can make sure that all of the relevant requirements are met. In order to make sure that patients receive necessary items quickly, physicians need to ensure that the relevant clinical documentation is provided to the MAC in a timely manner. 5 After receipt of all relevant documentation, the MAC will review the request and communicate a decision to the physician and DME supplier within ten business days stating whether the equipment request meets all Medicare coverage requirements. RACs (also known as Recovery Auditors or RAs ) conduct only post-payment reviews. RACs attempt to identify both overpayments and underpayments in Medicare fee-for-service claims. RAC audits are either automated or complex. An automated review is one in which a decision can be made without requesting a medical record, such as duplicate claim for the same service on the same day. A complex review requires a review of the medical records to make a decision about the payment. RACs can review a claim up to three years after the date the claim was filed. Effective October 31, 2016, there are four regional RACs for Medicare Parts A and B. 6 (Physician claims are paid under Medicare Part B.) The A/B RACs are Performant Recovery, Inc.; Cotiviti, LLC (responsible for two regions); and HMS Federal Solutions. RACs are the only Medicare contractors paid a percentage of every overpayment they recover, so they are highly incentivized to recover improper payments. ZPICs & Unified Program Integrity Contractors (UPICs) conduct both prepayment and post-payment reviews. The primary goal of the ZPICs/UPICs is to find potential fraud and refer those providers to law enforcement. Of course, not every investigation reveals fraud, and 3 Prior authorization review is different from pre-claim review due to timing and when services may begin. For prior authorization, a request must be submitted prior to services beginning and providers should wait until they have a decision before they begin providing services. A pre-claim review occurs after services start but prior to the final claim being submitted. 4 Arizona, California, Florida, Georgia, Illinois, Indiana, Kentucky, Louisiana, Maryland, Michigan, Missouri, New Jersey, New York, North Carolina, Ohio, Pennsylvania, Tennessee, Texas, and Washington. 5 The documentation required to be included with a prior authorization request is information that physicians and suppliers are already regularly required to maintain. For more information about prior authorization specific to physicians, see CMS s prior authorization physician cover letter: and-systems/monitoring-programs/medicare-ffs-compliance-programs/medical- Review/Downloads/PhysicianLetter.pdf. 6 There is also one nationwide RAC for DMEPOS and home health: Performant Recovery, Inc. 2

3 these audits often identify overpayments that do not rise to the level of fraud or warrant a law enforcement referral. These contractors perform investigations that are tailored to specific circumstances and occur only in situations where the contractor perceives the potential for fraud, as opposed to a simple mistaken billing. ZPIC audits may be initiated through data analysis, by referral from another contractor, or directly by fraud complaints. An aberrant billing pattern can precipitate a ZPIC audit. Examples include a sudden increase in billing for a particular item or service or a billing pattern that is atypical for that type of provider. Claims may be reviewed by ZPICs within one year for any reason or within four years for good cause (new evidence, error on the face of the record, or clerical error). If there is potential fraud or similar fault, however, there is no time restriction on a ZPIC audit. ZPICs are in the process of transitioning to UPICs ZPICs audit only Medicare claims and are being phased out and replaced by UPICs, which will audit both Medicare and Medicaid claims. Comprehensive Error Rate Testing (CERT) contractors conduct random post-payment audits of small volumes of claims to determine the annual, nationwide improper payment rate. The purpose of the CERT program is to measure performance of the contractors, but their actions can still result in findings of overpayment or refund requests for providers. CERT contractors review Medicare claims on a post-payment basis, and the reviewed claims are limited to the current fiscal year. Claims are randomly selected for review once a set of claims is selected for review, the CERT contractor will request medical records from the providers whose claims were selected for the sample. The Supplemental Medical Review Contractor (SMRC) conducts post-payment reviews with a focus on CMS-identified special topics. The topics are usually selected based on reports from the Office of the Inspector General in the U.S. Department of Health and Human Services. The SMRC is tasked with re-auditing claims that have already been subject to review, sometimes as far back as four years, and are designed to focus on areas of high vulnerability. The SMRC evaluates medical records and related documents to determine whether Medicare claims were billed in compliance with coverage, coding, payment, and billing practices. The goal of the SMRC is to perform or provide support for a variety of tasks aimed at lowering the improper payment rate and increasing efficiency of the medical review functions of the Medicare and Medicaid programs. MEDICARE QUALITY REPORTING PROGRAM AUDITS Eligible professionals, including physicians, who participate in the Electronic Health Record (EHR) Incentive Program 7 may be audited by CMS EHR Incentive Program contractor, Figliozzi and Company. Under the EHR Incentive Program, eligible professionals must attest to their meaningful use of EHRs in order to receive an incentive payment and avoid a payment cut. To ensure that incentive payments are made only to those who meet program requirements, CMS conducts routine audits through its contractor. Meaningful use audits may be either pre-payment or post-payment. Physicians and providers are selected randomly for 7 The Medicare EHR Incentive Program for eligible professionals ended with the 2016 reporting period the reported data will be used for 2018 payment adjustments. Medicare eligible clinicians will now report to the Quality Payment Program, discussed below.. 3

4 audits, although audits may be based on suspicious or anomalous data. For pre-payment audits, the physician must present supporting documentation to validate their meaningful use attestation before CMS will release a payment. For post-payment audits, physicians must submit supporting documentation to validate their meaningful use attestation in response to a request for information from CMS audit contractor. The initial review process will be conducted using information provided in response to the request letter. In some cases, an onsite review of the EHR system may follow. If the provider is found to be ineligible for an EHR incentive payment, the payment will be recouped. Eligible professionals should retain all relevant documentation to support attestation data for meaningful use objectives and clinical quality measures for six years post-attestation. As CMS implements the Quality Payment Program (QPP) under the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA), further physician auditing will be implemented. Physicians and providers will have two tracks to choose from in the QPP: the Merit-based Incentive Payment System (MIPS) or Advanced Alternative Payment Models (APMs). MIPS payment adjustments will go into effect in 2019 based on 2017 MIPS data, in 2020 based on 2018 data, and so on. In a MIPS audit, CMS will evaluate data submitted for the four MIPS performance categories (quality, improvement activities, advancing care information, and cost). CMS will selectively audit MIPS eligible clinicians and groups on a yearly basis. Participating clinicians who receive a request for an audit from CMS would be required to respond with documentation to substantiate their MIPS data within 45 calendar days. Eligible clinicians should retain their MIPS data and supporting documents for 6 years following the end of the MIPS performance period. If an audit determines that a clinician received an improper payment under MIPS, CMS will recoup the payments. CMS has stated that it will further address the process for auditing measures and activities under MIPS through sub-regulatory guidance. AUDITS BY MEDICARE ADVANTAGE ORGANIZATIONS There are two distinct audit situations that physicians and physician practice groups may encounter with a Medicare Advantage Organization (MAO). First, when CMS conducts an audit of a MAO, the MAO will likely request documents from physicians that it contracts with to provide health care services. Physicians are obligated by federal law, and likely by their contracts with MAOs, to comply with these requests. Second, MAOs conduct general compliance audits of first tier, downstream, and related entities (FDRs) that they contract with to provide health care services to Medicare eligible individuals, including physicians and physician practice groups. Under Medicare Advantage, the MAO is ultimately responsible for fulfilling the terms and conditions of its contract with CMS and for meeting Medicare program requirements. CMS may hold the MAO accountable for the failure of its FDRs to comply with Medicare program requirements. MAO Audits of Physicians and Physician Groups Under Medicare Advantage, MAOs are required by CMS to implement compliance monitoring, which includes audits of their FDRs compliance with Medicare requirements. MAOs must undertake auditing to confirm compliance with Medicare regulations, sub-regulatory guidance, 4

5 contractual agreements, and all applicable Federal and State laws, as well as internal policies and procedures to protect against Medicare program noncompliance and potential fraud and abuse. According to CMS, a best practice is to include provisions in the contract between the MAO and a physician or physician practice group related to auditing, as well as requirements for compliance policies and procedures. As a result, failure to comply with MAO auditing and compliance monitoring may result in a breach of contract claim. Physicians and providers should refer to their contracts with MAOs to determine auditing requirements and compliance policies and procedures. CMS Audits of MAOs 8 Physicians may also be audited when CMS assesses an MAO s compliance with Medicare rules. CMS conducts annual Risk Adjustment Data Valuation (RADV) audits of MAOs to ensure risk adjusted payment integrity and accuracy. When CMS conducts a RADV audit, they will issue a letter to the MAO for use in requesting medical records to indicate that the request is for a CMS-initiated RADV review. CMS reviews documentation from physicians and other providers to verify that the records support the conditions that were treated and reimbursed by MAOs. If the record is insufficient or does not support the MAO s reimbursement, CMS may demand a refund from the MAO. The MAO may then pursue contractual remedies against the physician or provider. Physicians and physician practice groups must comply with these record requests under federal law. Failure to cooperate may result in a referral of the MAO and/or its FDRs to law enforcement or implementation of other corrective actions. MAOs may also include in their contracts with physicians and providers provisions requiring compliance with document requests. These contract provisions may include financial penalties for failure to comply. The National Benefit Integrity Medicare Drug Integrity Contractor (NBI MEDIC) 9 performs specific program integrity functions for Parts C (Medicare Advantage) and D under CMS Medicare Integrity Program. The NBI MEDIC is primarily concerned with detecting potential fraud and abuse. The NBI MEDIC investigates fraud and abuse complaints, conducts proactive data analyses to detect fraud and abuse, and identifies program vulnerabilities. If appropriate, the NBI MEDIC refers potential fraud cases to law enforcement agencies. If the NBI MEDIC determines that the issue is noncompliance or mere error, as opposed to fraud or abuse, the matter will be referred back to CMS or the appropriate contractor. * * * * * * * * * This Fact Sheet was prepared with the assistance of the Powers Law Firm, MGMA s longtime Washington Counsel. For further information, contact Bob Saner, Ron Connelly or Christina Krysinski at 8 Under authority granted by the Affordable Care Act, CMS has expanded the role of the RACs to conduct Medicare Part C and D audits. CMS has implemented the Part D RAC program, but has yet to implement RAC auditing for Part C, which includes Medicare Advantage. 9 Health Integrity is the NBI MEDIC for all 50 states. 5

6 GLOSSARY OF ACRONYMS APM Alternative Payment Model CMS Centers for Medicare and Medicaid Services CERT Contractor Comprehensive Error Rate Testing Contractor DME Durable Medical Equipment EHR Incentive Electronic Health Record Incentive Program Program FDRs First Tier, Downstream, and Related Entities MACRA Medicare Access and CHIP Reauthorization Act of 2015 MAC Medicare Administrative Contractor MAO Medicare Advantage Organization MIPS Merit-based Incentive Payment System NBI MEDIC National Benefit Integrity Medicare Drug Integrity Contractor QPP Quality Payment Program RAC Recovery Audit Contractor RADV Audit Risk Adjustment Data Valuation Audit SMRC Supplemental Medical Review Contractor TPE Initiative Targeted Probe and Education Initiative UPIC Unified Program Integrity Contractor ZPIC Zone Program Integrity Contractor 6

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