Life’s Constants

For years, there has been a debate about the three constants of life. The main two, death and taxes, are universally accepted, but the third has always been a matter of contention. I believe, after much thought, research and soul-searching, that I have identified the third as Medicare audits.

While there have always been audits, lately they have been increasing in frequency and intensity. Let’s look at two types of audits, the CERT (Comprehensive Error Rate Testing) and the RAC (Recovery Audit Contractor) audits. These are two very different kinds of audits designed to achieve very different results. In fact, an argument could be made that one could be used to “feed” the other as you will see.

The CERT audit has been around since 1996, although not in its present form. It was initially designed to measure the overall FFS (fee for service) error rate for carriers, DMERCs, fiscal intermediaries and quality improvement organizations. Then CMS decided to audit these entities individually for compliance error rates and paid claim error rates, and published its first findings in 2003.

The CERT audits randomly select thousands of claims a year to check for provider compliance and payment errors. While the audit is not itself designed to detect fraud, it is able to identify billing patterns that could indicate fraudulent behavior. It has also been found useful in determining fraudulent behavior in cases where providers can’t be located after medical records have been requested. In such instances, a lack of a response causes a CERT “no documentation” error.

In the CERT May 2007 report, which looked at 144,345 claims in the 12-month period ending Sept. 30, 2006, audits determined that the national payment error rate is 4.2 percent. You might think that percentage is so small that it could not be significant, but in this case, 4.2 percent equates to improper payments in the amount of $10.4 billion. Now that is a very significant number. When you look at only the DMERCs’ total overpayment of $900 million, or 10 percent of the entire FFS amount, you can easily see why these error rates are being monitored so closely.

The top error for DME was “no documentation.” Three-quarters of all FFS no-documentation errors came from DME providers, and of that number, the majority came from Florida. Most of the DME claims scored this error because the supplier was unreachable after the company’s claims were sampled for a CERT audit.

It is imperative that you take the CERT audit seriously. Every time a CERT audit is deemed as an error, that is a black mark on the HME industry. Not only will you have to pay back the money to Medicare but it will also show up on the CERT error report, increasing the error rate. CMS is looking at this error rate closely and is creating policy to reduce it, so as an industry, we need to get that error rate as low as possible.

The most serious type of audit to date, in my opinion, is the RAC audit. You may not be familiar with this audit unless you currently service beneficiaries in New York, California or Florida, the only states involved in the RAC demonstration project. The demonstration is a three-year project scheduled to last through March 27, 2008.

The following is the RAC mission statement:

“The RAC Program’s mission is to reduce Medicare improper payments through the efficient detection and collection of overpayments, the identification of underpayments and the implementation of actions that will prevent future improper payments.”

RAC auditors only get paid when they identify overpayments; they are paid a percentage of the overpayment recouped. They are also contracted to find any underpayments, but they do not receive any reimbursement for that service. The contractors involved in processing DMERC claims are Connolly Consulting for New York, PRG Shultz for California and both HealthData Insights and Connolly Consulting for Florida.

These firms use “proprietary data mining” techniques to determine where an overpayment or underpayment may exist. Possible areas are:

• Payment for services that are not medically necessary;
• Excessive or insufficient payments for services that are coded incorrectly.;
• Duplicate payments; and
• Payments for which another insurance company is responsible.

In 2006, the RACs identified a total of $289.1 million in overpayments and a total of $10.4 million in underpayments. Of the total overpayments, $64.6 million had been collected, with an additional $224.5 million still processing. With this kind of money at stake, you can bet that the RAC contractors will be going for the jugular. Have you been collecting all of the documentation you need for claims?

If you think you are safe because you do not have any beneficiaries in California, Florida or New York, think again. Every year since its inception, a report of what the RACs have found and collected has gone to Congress. Congress has been impressed with those results and has decided to make the RAC program permanent; it is required to be expanded to all 50 states by no later than 2010.

There will be four RACs set up to mirror the four DME MACs. At this point we do not know who will be doing the actual work, but it could be the same companies that are doing it now.

So far, DME has accounted for only 4 percent of all of the overpayments that have been identified. This may be due to the fact that DME is a small portion of the overall FFS budget — or it may be an area that the RACs have not spent a lot of time on yet.

Whatever the reason, you can expect the level of RAC audits to increase steadily as the auditors become better at determining what they need to look for. Your best defense, as always, is to be in compliance with the Medicare local coverage determination and to have the appropriate documentation to back up the claim.

If you receive an audit letter, do not assume that the auditors do not want a piece of documentation that they ask for. Give them everything they are looking for or you may find yourself paying back a lot of money. Also make sure you have a senior person working these audits so simple mistakes are not made.

Audits are never fun, but you can come through them clean if you are prepared and have obtained the documentation required for your claims.

Jane Bunch is vice president, HME consulting, for Atlanta-based CareCentric. A reimbursement specialist, Bunch delivers educational seminars worldwide, helps develop corporate compliance plans and serves as a consultant for fraud and abuse cases. She can be reached at 678/264-4495 or via e-mail at [email protected].