Rules of Thumb for HME Providers

HME providers can thrive only with a basic understanding of the business implications of federal and state anti-fraud laws. To pursue sound opportunities and shape effective growth strategies, providers must know how these laws affect business behavior.

An effective compliance program, of course, helps an HME company maintain the checks and balance necessary to ensure adherence to the anti-fraud rules. Providers also must develop a “radar sense” that signals when to consult their compliance officers and attorneys. In addition, there are several “Rules of Thumb” that can provide general guidance, to help a company avoid common misunderstandings and maintain safe and effective business practices.

I developed these rules many years ago, and some have evolved over time as government interpretations, attitudes and emphases have changed. In an age of competitive bidding and auditor scrutiny, here are four new and updated Rules of Thumb for compliant anti-fraud business behavior.

No. 1: State law matters; Medicaid does, too.

There are dozens of federal anti-fraud and abuse rules and hundreds of state rules.

The wide range of federal laws includes the Anti-Kickback Statute (AKS), which prohibits any health care provider from giving or receiving anything of value in exchange for referring or receiving referrals of patients, goods or services related to government-funded programs.

The Stark Law prohibits physicians from receiving financial benefit from any provider of designated health services—including enternal/parenternal, home health, HME and drugs—to whom the physician refers Medicare or Medicaid business, unless the relationship or the referral falls into one of the law’s exceptions.

The False Claims Act prohibits providers from submitting government-reimbursed health care claims that they know, or should know, are false. This includes inaccurate claims in which the provider did not try hard enough to do it right. That is, where the provider was “recklessly indifferent to the accuracy of the claims.” Since the Patient Protection and Affordable Care Act of 2010, the False Claims Act can also be used to turn AKS and Stark violations into false claims.

In addition to federal laws, state laws can also dramatically affect an HME provider’s marketing and referral options. Even knowledgeable health care attorneys sometimes forget to pay attention to state laws when assessing an arrangement’s kickback risks, or a claim’s vulnerability under state fraud laws. Such lapses are dangerous, because as the feds more vigorously pursue health care fraud cases, state attorneys general around the country are following suit.

Anti-fraud laws vary from state to state. To complicate matters, state laws often are not as uniform or organized as the federal Medicare laws. The prohibitions in some state fraud and abuse laws are broader than the federal prohibitions, applying to most or all services. Some state laws have few or no safe harbors or exceptions, and little case law or other guidance is usually available.

Most states have anti-fee-splitting, anti-self-referral or anti-kickback laws that apply to one or more payer types. While the federal anti-kickback statute prohibits HME companies from paying or receiving payments in exchange for government reimbursed services or beneficiary referrals, state laws can apply to patients covered by private health insurance, workers’ compensation or auto insurance.

Complying with federal anti-kickback and self-referral laws can maximize the chances that an HME provider will comply with state laws as well. For example, Pennsylvania’s workers’ compensation anti-kickback regulations protect a business arrangement if it falls within a federal safe harbor or exception. However, that is not always the case.

Florida law prohibits referrals to entities—including HME providers—in which a practitioner has even a small equity interest.  South Carolina has pursued health organizations under its Unfair Trade Practices Act, with a totally different set of rules.

In addition, one new and important trend involves Medicaid services. An increasing number of states are ramping up their Medicaid fraud investigations. They are actively reviewing claims and financial relationships and investing considerable resources in these efforts.

In my experience, some of these Medicaid investigations are based on a strained interpretation of the relevant statutes and regulations. Procedural requirements such as proper notice to the accused provider, or prospective enforcement of policy changes instead of retroactive enforcement, are also violated by Medicaid agencies more often than are their Medicare investigation counterparts.

It is important for HME companies to take such challenges seriously and to fight back. Challenge assertions that services lacked medical appropriateness. Challenge the fairness of new legal requirements imposed for the first time during Medicaid audits. Challenge new interpretations of existing rules.

It is especially important to review a state’s Medicaid reimbursement requirements proactively, as these requirements often vary significantly from Medicare’s or commercial payers’ reimbursement rules. Payment methods, the definition of key terms and the procedural requirements for demonstrating entitlement to reimbursement all may vary from the “regular” requirements of other payers. These unusual variations may derive from unusual statutes or regulations, or they may be the result of policy interpretations by Medicaid officers.

Any HME provider of any size may want to add a corollary to my Rule of Thumb No. 1, as follows: Complying with state and Medicaid rules is usually easier and less expensive than fighting them, even when the rules are unusual or wrong.

No. 2: Fraud risks rise with sloppy claims submissions.

Many HME providers tread dangerous waters because they do not realize that anti-fraud and abuse laws apply to more relationships than the traditional “joint venture.” While joint ventures perhaps have gained the most notoriety under the laws, virtually every financial activity an HME provider undertakes falls within these anti-fraud rules’ scope.

Indeed, most government scrutiny focuses on deficient claims.  These deficiencies often lead to payment denials or overpayment refund demands, but when an HME company’s claims demonstrate an alleged ongoing pattern of repeated mistakes, the government may consider it to have a “reckless indifference” to whether it submits accurate claims. Such reckless indifference can trigger stiff penalties under the federal false claims law. Most important, the feds consider these types of deficiencies to be low hanging fruit in its anti-fraud efforts—easy to notice, easy to examine and easy to attack.

For this reason, it is essential that HME providers monitor their claims submissions to ensure compliance with the regulations and policy statements in the Supplier Manual, Coverage Determinations, etc.

Currently, verifying that the medical records will clearly demonstrate medical necessity for the equipment or therapy within the specific reimbursement parameters established by CMS or the MACs is also essential.

No. 3: Fight claims denials aggressively unless you are entirely wrong.

HME providers should challenge claims denials assertively. Deficient records can sometimes be remediated.  Auditors may misinterpret the rules, apply them too broadly or extend them over an inappropriate time period. Medical records may support medical necessity, even though the evidence is not in the portion of the record read or noticed by the auditor.

This willingness to fight is important for three reasons.

1. Overpayment demands often will go beyond the amount of deficiencies identified from the claims reviewed by the auditors. Rather, the repayment amount will be an extrapolation that multiplies the supposed deficiencies in examined claims by the entirety of claims over some period of time. The extrapolated amounts due can be substantial. Therefore, a successful challenge to a claim denial will result in a substantial reduction to the amount allegedly due.

2. When auditors determine that an HME provider is worth examining, they will continue to audit the provider periodically—if the company has proven itself a good return on investment, as it were. Conversely, when an HME provider fights back, and especially when it prevails, it will be less attractive to auditors in the future. Auditors have budgets. Resources, both time and money, are limited. Companies who make audits costly will only be pursued when the challenge is worth the effort. Of course, even a successful and feisty company will not avoid audits altogether. However, as long as the fight is handled in a polite and dignified manner, the company will usually avoid being buried under audits.

3. For a claims investigation to turn into a fraud investigation, the government must find that the HME provider intentionally submitted improper claims or did so with a reckless indifference to their accuracy. It is extremely difficult for the government to establish intent, or even recklessness, when a challenged HME provider can demonstrate that the government’s stance is based on subtle or recent policy interpretations, close judgment calls or a wide variety of reasons. The reckless indifference standard requires a pattern, and establishing a fraudulent pattern is difficult without a significant number of claims that demonstrate the same, easily provable, clearly improper errors.

No. 4: Size both matters and does not matter.

Generally, a larger company will be more attractive to government investigations. This is conventional wisdom, and it remains largely accurate. The dollars at stake are often greater. The company is better able to pay a significant settlement. Larger companies often make bigger headlines and help the government fund its exhaustive investigation.

However, some recent developments have shaken up conventional wisdom. CERT, RAC and ZPIC audits are subjecting more claims to scrutiny than ever before. This scrutiny focuses on all HME providers, large and small. Even as claims are scrutinized for potential overbilling, patterns of inaccuracy and claims that suggest potential misrepresentation are flagged for possible fraud investigation. Evidence of potential fraud with claims submissions will often lead to investigation outside the audit into an HME company’s financial relationships. Further, an HME company with such financial relationships is just as likely to come under scrutiny because of the other contract parties as from itself.

So, any HME provider of any size may want to add a corollary to my Rule of Thumb No. 4, as follows: Do not let your size dictate your attitude toward anti-fraud rules.

These four Rules of Thumb do not apply in all circumstances, of course, nor are they intended to be an exhaustive list of useful tips or tricks.  Still, the information offered in this article will provide useful guidance and help HME providers nurture profitable and safe business decisions.

HomeCare, March 2012