Providers Fall Victim to Hard-Charging ZPICs

ATLANTA — It may not take competitive bidding to crush the home medical equipment industry; ZPIC audits could get the job done all by themselves if the scores of audit-beleaguered providers considering closing their doors are any indication.

Every weekday, Sean Schwinghammer, executive director of the Florida Alliance for Home Care Services, receives phone calls from HME providers desperate for help in dealing with an avalanche of further documentation requests from Zone Program Integrity Contractors. The ZPICs have been hired by the Centers for Medicare and Medicaid Services to do both post- and pre-pay audits as a way of curbing improper Medicare payments.

In most cases, the providers have been hit with hundreds of requests for further documentation and have discovered they are on 100 percent prepayment review, which means that all of their Medicare claims are denied pending administrative review, Schwinghammer said.

“I have businesses calling me just about every day saying, ‘I am shutting down’ or ‘I don’t know how long I can hold out. I think I am going to have to close my doors,’” he said.

While ZPIC contracts have been awarded for a number of states, Florida and Texas seem to have been the hardest hit so far. The ZPIC contractors — SafeGuard Services in Florida and Health Integrity in Texas — have saturated the states with audit requests, providers have reported.

“The effect that this is having is clearing a lot of providers out of the [durable medical equipment] industry,” said Edward Vishnevetsky, a litigation and health care associate with Thompson, Coe, Cousins & Irons. The Dallas firm has been working to aid providers in decreasing their denial rate and just last week saw one client taken off prepayment review.

But every success takes much painstaking effort and time; it can take months, in fact, to get a provider released from the prepayment review and see their revenue restored. Schwinghammer said he has heard of providers taking money out of their retirement and personal funds to keep their companies going, but the well sometimes isn’t deep enough and they end up shuttering the businesses.

One family-run HME is closing after 25 years in the business, he said. “He was a good man and in business for 25 years and now they are shutting down their business — and not because they have done anything wrong,” Schwinghammer said. With ZPIC audits, he noted, “you’re guilty until you’re proven innocent. It’s very sad, very discouraging … We are seeing the complete collapse of our industry and its infrastructure.”

Wayne van Halem, who now runs health care consultancy The van Halem Group in Atlanta, said auditors are being very strict about Medicare policies, resulting in sometimes-huge numbers of requests for further documentation. One of his clients, he said, has been hit with 1,200 documentation requests.

“This is the most I’ve seen,” he said, adding, “This isn’t a huge company. They have about 20 employees and they are spending about $2,000 a day in manpower and everything else just to get the documentation. All of their staff is focused on this. It is crippling … and then, every day, they receive another 40 to 50 requests, which hurts morale even more.”

Van Halem said CMS has been made aware of the situation and “they are looking into it.”

“It’s pretty standard that businesses have to close branches and keep employees just to deal with the audit,” Schwinghammer said. “They have to pay overtime to keep their employees dealing with audit responses and not their fundamental business. But they are not saying, ‘I am getting an audit, I can’t serve you.’ They are still serving their patients.”

But for how long is the question. “Most people have a 95 percent compliance rate after the review,” Schwinghammer said, “but there is no certainty in the process. There is no ending. It can continue and continue. How can you borrow money to run your business when you can’t bill and when you don’t know when the money is coming back?”

Van Halem said the reviews “normally last a quarter. At the end of the quarter, they calculate the effectiveness of that edit, and if the error rate is anywhere below 80 percent, sometimes 90 percent, that edit is going to remain on there.”

That means the provider’s revenue stream is again dammed up.

They’ll Be Coming after Everybody

Vishnevetsky said the end result of such draconian audits would likely be apparent when DMEPOS competitive bidding kicks in in January 2011. While industry advocates have long predicted that providers who accept CMS contracts for the program will go bankrupt trying to service Medicare clients at Round 1’s suicide rates, CMS is banking on a vast pool of providers to draw from should that happen.

That pool is swiftly being drained, Vishnevetsky said. “There will be no back-up companies because you’ve killed them with all these audits,” he said.

It isn’t just the requests for reams of documentation that can fell a provider. Sometimes, timing can do them in. Providers have only 30 days to respond to the requests or CMS can automatically deny the claims. That 30 days is from the date on the letter ZPIC contractors send out. But the letters have often been delayed for several days, leaving providers with even less time to gather what could be 50 to 60 pages of documentation for each request.

“It was a huge issue for our clients,” said van Halem. “In some cases, it took 10 days for them to get the request — that’s a third of the time they are allowed [for response].”

When he delved into the issue, van Halem discovered a surprising reason. The ZPICs work with DME MACS. The DME MAC for his clients in Jurisdiction C is Cigna. “Cigna has a post office of its own in Connecticut, and they were holding letters until they had enough to get a bulk rate,” he explained. Among those letters: ZPIC requests for documentation. He noted that CMS is now working with Cigna to address the issue.

While there is no way to put a happy face on a ZPIC audit, both van Halem and Vishnevetsky stressed that all providers would do better to be prepared, no matter where they live.

“People need to understand that the ZPICs will be coming after everybody. It may not be today, it may not be tomorrow, but they will come after you,” said Vishnevetsky. “Texas and Florida have obviously been considered to be, in the words of CMS, where fraud is rampant. They’ve gone from larger cities in Texas to smaller cities, larger suppliers to the smaller suppliers.

“The rest of the country doesn’t even know what’s going on,” he continued. “But they are coming and they are coming hard.”

Van Halem agreed, and said CMS is already behind schedule. “ZPIC audits should have been throughout the country already,” he said. CMS has been slower than anticipated to contract with auditing agencies, but it is picking up speed.

“I anticipate ZPIC audits really picking up in 10 states in the southeast in the next few months,” van Halem said, adding that he believes the western states will follow and then the midwestern states. A former Medicare fraud investigator and national manager for Part B second-level appeals, van Halem said providers should be making sure they are compliant with all Medicare documentation requirements — and they should go beyond that.

“These are the toughest audits I have seen come down the road, and I have been doing audits for a decade,” van Halem said. “DME companies are the most unprepared of the various agencies I work with,” he continued. “No one is being proactive in preparing for what they need to do … Companies need to be more prepared, get documentation up front and use internal auditing to make sure what they’ve got [in terms of documentation].”

Both van Halem Group and Thompson Coe have been successful in getting clients off the prepayment review status or at least improving their cash flow by decreasing the denial rate, but it does take time. Vishnevetsky encouraged providers to call for help early on rather than when they’re on the brink of closing. “You can’t get a provider off prepayment audit in 30 days,” he said.

FAHCS, in partnership with the American Association for Homecare, has also had some success. “We’ve had some limited results,” said Schwinghammer. “We might be able to help, but there isn’t a path that is guaranteed. Every [situation] is a fight. The main pattern is this: [The auditors] come in unannounced, they take your files, they reduce your payments, then it’s a delay, a delay, a delay.”

Those delays could mean death to small HME companies, said John Browning, director of the health care practice group for Thompson Coe. “The timing can wind up being crucial for the continued life of a small business,” he said.

“The battle that everyone is fighting right now is competitive bidding. But you have to live through this first to see competitive bidding.”