How the home health case creates new opportunity for DME providers
by Liz Carey
May 11, 2018

Burdened by the backlog of Medicare appeals, a number of health care providers have had to shut down in recent years. However, a recent 5th Circuit Court of Appeals decision gives providers the opportunity to seek injunctive relief from a federal district court against a recoupment action by CMS while the providers are waiting for an administrative law judge (ALJ) hearing and decision.

In this case, Family Rehabilitation, Inc., a Texas-based home health agency, doing business as Family Care Texas and doing business as Angels Care Home Health, counted on Medicare-reimbursable services for most of its revenue. However, a claims audit moved a Medicare administrative contractor (MAC) to begin recouping $7.6 million from the company before the rest of the appeals process could be exhausted. According to Family Rehab’s Complaint, such recoupment would have put Family Rehab out of business and disrupted patient care.

Family Rehab provides home health care services to patients in Texas, serving approximately 280 patients as of October 2017. Nearly all of its revenue—between 88 and 94 percent—comes from Medicare-reimbursable services. The documentation errors were related to the initial home health certification, according to Family Rehab’s federal court complaint.

The 5th Circuit covers Texas, Louisiana and Mississippi, but the ruling could trigger wider adoption, said health care law specialist Jeff Baird of Brown & Fortunato, a law firm that represents companies and organizations in the home health and durable medical equipment industry, among others.

“This is significant, and it applies equally to home health agencies, to hospitals, to labs, to any health care provider that has to go through the administrative appeals process, and that includes DME companies,” Baird said. “This is the first case out there to my knowledge that really has ruled on this issue.” The 5th Circuit decision reverses and remands a previous decision of the federal district court, which said it did not have the jurisdiction to consider Family Rehab’s request for injunctive relief.

For home health agencies, DME providers and other health care providers, claims are often denied because of technical errors in documentation, resulting in a repayment demand. Providers then can take denied claims through the Medicare appeals process: redetermination, reconsideration, ALJ and ultimately the Medicare Appeals Council. Family Rehab had lost at the redetermination and reconsideration stages, the process of that delaying recoupment.

However, CMS will recoup the overpayment while the appeal is winding itself through the last ALJ stage. Many providers cannot afford this hit and are forced to close their doors because while the law mandates a resolution within 90 days, in reality it takes four or more years.

Baird explains the case’s significance in this way: One of the federal circuits has now ruled that a federal district court has the jurisdiction to decide if CMS should be prevented from recouping overpayments between the reconsideration decision and the ALJ decision. The Family Rehab case is the “law of the land” in Texas, Louisiana and Mississippi, the three states that comprise the 5th Circuit. If providers file similar lawsuits in other circuits, then the providers can cite the Family Rehab case as precedent. The other circuits can then decide whether or not to adopt the 5th Circuit’s decision in the Family Rehab case. The Family Rehab case will become “the law of the land” if the U.S. Supreme Court affirms the Family Rehab decision, or all of the other federal circuits adopt the Family Rehab decision. On the other hand, if some circuits adopt Family Rehab while other circuits reject Family Rehab, then this will result in a “split in the circuits.”

Medicare Auditing—Briefly

Medicare’s audit program aims to strengthen program integrity, as well as yield savings for existing and future Medicare beneficiaries. Outstanding appeals have mounted in recent years, and the Department of Health and Human Services (HHS) by a federal district court was ordered to eliminate the backlog by December 31, 2020—although the D.C. Circuit has instructed the district court to rethink such a strict deadline. Meanwhile, CMS, the largest health care payer in the U.S., has been working to reduce expenditures—through a variety of ways, and the agency has made a commitment to #PatientsOverPaperwork.

Congress mandated the creation of the recovery audit program to identify improper payments—medical necessity discrepancies, duplicate payments, outdated fee schedules and coding inaccuracies, for examples—and return them to the Medicare Trust Funds. Recovery audit contractors (RACs) detect and correct past improper payments so that CMS and Medicare administrative contractors (MACs), among others, can implement actions that will prevent future improper payments. MACs also audit claims.

A MAC is a private health care insurer that has been awarded a geographic jurisdiction to process Medicare Part A and Part B (A/B) medical claims or DME claims for Medicare fee-for-service (FFS) beneficiaries. CMS relies on a network of MACs to serve as the primary operational contact between the Medicare FFS program and the health care providers enrolled in the program.

Audits and investigations have revealed major offenders. Between 2011 and 2015, investigations by the Department of Justice (DOJ) and Office of Inspector General (OIG) resulted in multiple criminal convictions and civil settlement, and the recovery of hundreds of millions of dollars.

DME’s Dilemma—Audit Reform

A sea of small DME claims constitutes a large portion of ALJ appeals, in addition to the larger unresolved appeals of hospitals. The total Medicare payments to DME suppliers amount to approximately 1.22 percent of the entire Medicare budget, according to DME industry advocate and lobbying organization AAHomecare.

RACs sometimes get it wrong, as was the case for Carolina’s Home Medical Equipment near Charlotte, North Carolina. Carolina’s fought claim denial and won, but the company had substantial money tied up in the ordeal and untold amounts wrapped up in the stress and uncertainty of it all.

“The man hours of working through the appeals process are so costly,” says Kaitlin Nacarato of Carolina’s Home Medical Equipment, a large independent provider that still has unresolved appeals. While Medicare program compliance takes resources, audits can take tens of thousands of dollars and years to sort out.

AAHomecare payer relations specialist Laura Williard said recently that appeals had slowed but much remains unresolved. “What we need is audit reform,” she said.

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