Potential reform is on the horizon for the DMEPOS auditing process
by Seth Johnson

Audits and the need to reform the process has clearly become the industry’s top issue. The number of 
Medicare audits and the growing backlog at the Administrative Law Judge (ALJ) level, which now requires providers to wait up to three years to get their day in court to appeal a claims denial, clearly needs to be addressed. Many in Congress agree and, at the time of this writing, Representative Renee Ellmers (R-NC), a member of the House Energy and Commerce Committee, was in the process of introducing legislation to reform the DMEPOS audit process in order to provide some relief to address the significant problems.

Why is the industry in this situation, and what can we do to help advance commonsense reforms to address? DME providers are being audited by Medicare contractors, including Durable Medical Equipment Medicare Administrative Contractors (DME MACs), Zone Program Integrity Contractors (ZPICs), Recovery Audit Contractors (RACs) and the Comprehensive Error Rate Testing Contractor (CERTs). The multiple audits by the various auditors (sometimes for the same claim) are limiting a provider’s ability to serve patients. When Medicare contractors audit a claim within a rental cycle and deny a claim, all other claims within the rental cycle are also denied.

While most denials are overturned when they reach the ALJ level of appeal, in December 2013 the Office of Medicare Hearings and Appeals (OMHA) announced that they were suspending for up to 28 months the assignment of new cases to the ALJ hearing docket due to the more than 600,000-case backlog. Generally, it takes up to an additional six months for the actual hearing to occur. Chief ALJ, Nancy Griswold, reported at a recent OMHA Medicare Appellant Forum that they are receiving 15,000 new appeals requests per week—three times the amount received in fiscal year 2012. Of the 600,000 Medicare claims currently awaiting appeal, 25 percent of those are DME, even though DME is only 1.4 percent of the annual Medicare spend. As a result of the significant delays in getting paid for equipment already provided to Medicare beneficiaries, many providers have been forced to scale back services, while others have closed their businesses due to the negative impact on cash flow.

In an effort to fix these serious problems, the American Association for Homecare (AAHomecare) and the North Carolina Association of Medical Equipment Suppliers (NCAMES) worked closely with Representative Renee Ellmers (R-NC) on the development of legislation that would require the Secretary of Health and Human Services (HHS) to work with industry stakeholders to establish standards to improve the effectiveness and efficiency of Medicare DME audits. Specifically, the legislation would achieve the following.

Create an Improper Payment Outreach and Education Program—To reduce improper payments, each Medicare administrative contractor would be 
required to establish and have in place an effective improper payment outreach and education program under which the contractor, through outreach, education, training and technical assistance activities, would provide to referral sources and DME suppliers.

Reduce Error Rates—Targeting audits
by Medicare audit contractors with 
respect to high error DME suppliers identified.

Ensure Benefit Integrity Improvement—The Secretary of HHS would be required to ensure that all suppliers of medical equipment and supplies are audited at least once in a 24-month period to determine the supplier’s payment error rate. The Secretary is provided the authority to excuse suppliers with a low payment error rate from further audits for some or all of a 24-month period. Suppliers that fail to respond to more than 5 percent of the audit requests directed at them in a year are subject to a site visit and sanctions.

Require Application of Timely Filing Limits to Claims Subject to Payment 
Audits—Allowing for a timely filing override by the DME MACs for any claims related to an initial claim that is subject to a prepayment or RAC post-payment audit.

Congressional support for this legislation continues to grow. While this legislation will not solve all the issues that exist with regard to the flawed processes and procedures being used by some Medicare auditors, this legislation should go a long way toward restoring a fair and reasonable process to Medicare audits.