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					A RAC: Audit of Mass Destruction?

            David M. Glaser
        Fredrikson & Byron, P.A.
            Minneapolis, MN

             (612) 492-7143

              Our Agenda
 What is a RAC?
 What triggers an audit?
 Can you prevent an audit?
 When/how should you do a self-examination?
  (Let‟s call these reviews.)
 What can you do to make an audit go more
 Arguments you can make to avoid an
 What to do when the investigators arrive.

             What is a RAC
 Recovery  Audit Contractors are the
  latest way to squeeze money out of
 They are paid on commission.
 Commission paid on both overpayments
  and underpayments.

RAC Basics and Breaking News
 Two  companies have forced CMS to
  delay RAC implementation.
 RACs aren‟t magical.
 To date, they are very similar to
  intermediaries, but a smidge more

        What triggers an audit
 Statistics.
 Complaints.
  – Patients
  – Competitors
  – Employees
  – Exes
  – Insurers
 Luck.

  What can you do to prevent a
A   trick question.
 Get an “Anomalies happen” bumper
 Goal: Know that you can defend
  yourself if you are audit.
 Means: investigate like an auditor.

 What do you look for? (Physicians)

 Documentation.
 Code distribution patterns.
    – Variation from the norm.
    – Changes.
 Total Production.
 Diagnosis coding.
 Bundling.
 Nervous employees.
 Credit Balances.

                     ABC Company
  Comparison to CMS Norms – New Patient Visits
                     A B C C O M – Family Practice
        Variance by SpecialtyPA N Y
        C o mparis o n to C M S N o rms - N e w Patie nt O ffice Vis its
                 Variance by Spe cialty - Family Practice

       99201         99202             99203            99204              99205
           P roviders                           CM S Normative %

 What do you look for? (Hospitals)

 ShortStays.
 Observation.
 CCs.
 DRG/APC assignment.

           Process Review

 Look  at your charge ticket.
 Examine your coding/billing manuals.
 Ask “what do you do if” questions.
 Just because you think it gets done
  doesn‟t mean it does.
 Think about what the OIG would ask.

We Interrupt This Audit Talk….
 Don‟t   forget about your compliance
 The OIG wants to know about reviews,
  training, and your process for digging up
 How‟s your hotline?
 Record your refunds.

         A problem arises
 An agent is poking around.
 Your compliance committee raises a
 A patient files a complaint.
 An employee raises an issue.

Steps of the Internal Investigation
 Contact  legal counsel.
 Gather facts.
 Evaluate the significance of the facts.
 Identify options.
 Select strategy.

    Who should do the work?
 Attorney/compliance   officer/other?
  – Who will people be most honest with?
  – Who will “ask the next question?”
  – There should be two people; at least one
    might be a witness.
  – Cost.
  – Privilege.

            What is Privileged?
   Attorney-client privilege:
    – Oral and written communications.
    – Communications from the client as well as advice
      from the attorney and retained agents.
    – Key issue: whether the communication was in
      furtherance of obtaining legal advice?
   Work product privilege:
    – Materials prepared or assembled at the direction
      of counsel.
    – Must be in anticipation of potential litigation.

         What is Privileged?
 Exceptions   to privilege:
  – Presence of unauthorized third party.
  – Overbroad dissemination of privileged
  – Waiver.
  – Business versus legal advice.
  – Crime/fraud exception.

          Preserving Privilege
      information sharing to a “need to
 Limit
  know” basis.
 Segregate work product.
 Appropriately stamp all written
  communications “privileged.”

        Hiring Consultants
 Consider   using work product privilege.

        the consultant‟s role; is s/he an
 Discuss
 advocate or a cop?

 Get references. There are some horror

             Getting Advice
 Disclose   all relevant facts.

 Getit (or, better yet, give it) in writing.
 (Send it certified.)

 Don‟t   incriminate yourself.

 Risks of Internal Investigations
 Results will provide a road map for
  prosecution. (Privilege is a tenuous
 Obstruction of justice allegations.
 Nervous employees become whistle-

                  Qui Tam
 “Qui  tam pro domino rege quam pro si ipso in
  hac parte sequitur.”
 Literally, means “who sues on behalf of the
  King as well as for himself.”
 A private attorney general, or bounty hunter
 If victorious, plaintiff receives between 15 and
  30% of the verdict, plus attorney fees.

              Qui Tam

 Generally filed by disgruntled employee,
 patient, customer or competitor.
 Removediscretion from the
 Thereare dozens of filed cases
 currently sealed. Lead time may be 2 to
 3 years.

      Qui Tam Risk Management
 Waivers:
  – Probably not enforceable, definitely a bad
    PR move.
  – A waiver incorporated as a settlement MAY
    bar relator from proceeding if the
    government doesn‟t intervene.
 Certification of concerns.

       Contacting and Interviewing
   What do you share?
    – Secrecy
        Protects the Privilege.
        Staves off relators.

    – Openness
        Builds trust.
        Sunshine is a great disinfectant.

 What if you interview the relator?
 The bottom line: you have two goals,
  gathering information and education.

“If it isn’t written, it wasn’t done.”

 Good   advice, but not the law.

 Medicare payment is determined by the
 content of the service, not the content of
 the medical record.

 The documentation guidelines are just
 that: guidelines (although the carrier
 won‟t believe that).

Role of Documentation: The Law
“No payment shall be made to any provider of
services or other person under this part
unless there has been furnished such
information as may be necessary in order to
determine the amounts due such provider or
other person under this part for the period
with respect to which the amounts are being
paid or for any prior period.”

                Social Security Act §1833(e)

 Example: Concurrent Surgeries
 Ata teaching hospital, a surgeon is
 working with residents on three cases.
 One of the cases is being opened, one
 is being closed, and the third is in a key
 portion. The teaching physician was in
 the third case.

Example: Concurrent Surgeries
A compliance staffer notes that the
 Manuals state that “in the case of three
 concurrent surgical procedures, the role
 of the teaching surgeon” is not payable
 by Medicare.

     Contacting and Interviewing
 Possible conflict issues. Must you warn
 Benefits:
    – Information gathering.
    – Preparation for contact by government
   Risks:
    – Creating anxiety among workforce.
    – Government may view with suspicion.

Example: Concurrent Surgeries

 Therule states that “in the case of
 surgery, the teaching physician‟s
 presence is not required during opening
 and closing of the surgical field.”

        Example: Conditions of
 Yourealize that you are not in
 compliance with a Medicare Condition
 of Participation. Must you refund all the

       Example: Conditions of
 In many cases, the Conditions specify
  that they are NOT conditions of
 It appears that when you violate a COP,
  Medicare can exclude you, but it is NOT
  an overpayment.

              Example: Inpt/Obs
    Medicare Benefit Policy Manual (CMS Pub. 100-02)
    §10 - Covered Inpatient Hospital Services Covered Under
    Part A

   An inpatient is a person who has been admitted to a
    hospital for bed occupancy for purposes of receiving
    inpatient hospital services. Generally, a patient is
    considered an inpatient if formally admitted as
    inpatient with the expectation that he or she will
    remain at least overnight and occupy a bed even
    though it later develops that the patient can be
    discharged or transferred to another hospital and not
    actually use a hospital bed overnight.

             Example: Inpt/Obs
   The physician or other practitioner responsible for a
    patient's care at the hospital is also responsible for
    deciding whether the patient should be admitted as
    an inpatient. Physicians should use a 24-hour period
    as a benchmark, i.e., they should order admission for
    patients who are expected to need hospital care for
    24 hours or more, and treat other patients on an
    outpatient basis. However, the decision to admit a
    patient is a complex medical judgment which can be
    made only after the physician has considered a
    number of factors,

            Example: Inpt/Obs
including the patient's medical history and current medical
needs, the types of facilities available to inpatients and to
outpatients, the hospital's by-laws and admissions
policies, and the relative appropriateness of treatment in
each setting. Factors to be considered when making the
decision to admit include such things as:
The severity of the signs and symptoms exhibited by the
The medical predictability of something adverse
happening to the patient;

        Example: Inpt/Obs
The need for diagnostic studies that
appropriately are outpatient services (i.e.,
their performance does not ordinarily require
the patient to remain at the hospital for 24
hours or more) to assist in assessing whether
the patient should be admitted; and
The availability of diagnostic procedures at
the time when and at the location where the
patient presents.

           Example: Inpt/Obs
Admissions of particular patients are not covered or noncovered
solely on the basis of the length of time the patient actually
spends in the hospital. In certain specific situations coverage of
services on an inpatient or outpatient basis is determined by the
following rules:

Minor Surgery or Other Treatment - When patients with
known diagnoses enter a hospital for a specific minor surgical
procedure or other treatment that is expected to keep them in
the hospital for only a few hours (less than 24), they are
considered outpatients for coverage purposes regardless of:
the hour they came to the hospital, whether they used a bed,
and whether they remained in the hospital past midnight.

     Reaching Some Conclusions
   What are the rules:
    – For government payors, the framework is clear.
      Statutes, rules and manuals.
    – For private insurers, the contract, if any, controls
      (as do any incorporated policies. Absent a
      contract, industry norms control.)
 Be extremely cynical of everyone, but
  especially the government.
 The GAO study of information from Medicare.

        When do you call the Feds?

 Take the government at its word: distinguish
  between “fraudulent” (intentionally or recklessly
  false) and innocent “erroneous” claims.
 The Compliance Program Guidance recognizes
  physicians make “honest mistakes” and these
  should be refunded without penalty.
 If someone wasn‟t trying to take advantage of the
  system, I wouldn‟t label the conduct as

   Do You Need To Refund All
   the government detects your violation
 If
  and learns of your knowledge of it, you‟ll
  have an uphill battle.
 The law is complex:
   – 5th Amendment v. duty to return Medicare
   – Potential conflicts between the corporation
     and individuals.

             Federal Law
“Whoever has knowledge of . . . any event
affecting his initial or continued right to any
[benefit or payment under any federal health care
program] . . . and conceals or fails to disclose
such event with an intent to fraudulently secure
[the] benefit or payment . . . shall be guilty of a
felony, and upon conviction thereof fined not
more than $25,000 or imprisoned for not more
than five years or both.”

                Key Issues
 Statute refers to “individuals” rather than
  “persons” as defined in 42 U.S.C.
  § 1301(a)(3) & (4). This means it may not
  apply to corporations.
 What is an “initial or continued right to a
 What is “knowledge”?
 Is an overpayment “fraudulently secured?

  Do You Need To Refund All
 The  law: probably.
 Governmental provider agreements
  typically require refund; private
  contracts may as well.
 Compliance plan obligations.
 Common sense.
 The sage words of Steve Beck.
  Do You Need To Refund All
 Thereal question: What is an
  – Overcoding.
  – Underdocumentation.
  – Violations of other rules.
 What about offsetting underpayments?
 Not every documentation error is an

   How Far Back Do You Go?
 The False Claims Act‟s statute of
 limitations is:
  – Six years; or
  – Three years from the date when “facts
    material to the right of action are known
    are reasonably should have been known”
    by the United States, but no more than ten
    years after the violation.

   How Far Back Do You Go?
 Most billing errors are not false claims.
 The law requires the government to
  waive overpayments when the
  provider/supplier is “without fault” and
  recovery violates equity and good

    How Far Back Do you Go?
 Both  the Manuals indicate that claims
  may only be reopened after 48 months
  when there is evidence of “fraud or
  similar fault.”
 “Fraud or similar fault” requires some
  intentional wrongdoing.

        Fraud or Similar Fault
 Deception by a person who knows that the
  deception may result in authorized benefits to
 An act which approximates fraud, i.e., the
  furnishing of information which the individual
  knows is incorrect or incomplete, or the
  deliberate concealment of information, with or
  without a judicial finding of fraud;

           Fraud or Similar Fault
   Deception by a person who knows that the deception
    may result in authorized benefits to someone;
   An act which approximates fraud, i.e., the furnishing
    of information which the individual knows is incorrect
    or incomplete, or the deliberate concealment of
    information, with or without a judicial finding of fraud;
   A pattern of program abuse by physicians or
    suppliers resulting from practices that are
    inconsistent with accepted sound fiscal, business, or
    medical practice, such as:

       Fraud or Similar Fault
– The furnishing of services that are in excess of the
  individual‟s needs, or of a quality that does not
  meet professionally recognized standards of
  health care; or
– The submittal of incorrect, incomplete or
  misleading information that results in payment for
    that were not furnished;
    more expensive than those furnished; or
    that were not furnished under the conditions indicated on
     the bill.

          Fraud or Similar Fault
    – The submittal of, or causing the submittal of, bills
      or requests for payment containing charges for
      Medicare patients that are substantially in excess
      of the amounts the physician or supplier
      customarily charges; or
    – An act or pattern of program abuse involving
      collusion between the supplier and the recipient
      that results in higher costs or charges to the
      Medicare program; or
   Any act that constitutes fraud under Federal
    or State law.

          Fraud or Similar Fault
   A Determination that „Fraud or Similar Fault‟ is
    present depends on the facts. For example, a
    claim may be reopened more than 4 years after
    payment was approved, if the evidence
    establishes a pattern of billing by a physician for
    weekly routine visits to patients in a nursing
    home for whom, under established standards of
    good medical practice, not more than one visit a
    month is medically reasonable and necessary.

    How far back do you go?
 The bottom line: unless you are guilty
 of fraud or similar fault, 48 months is a
 reasonable period to use.

             RAC Limits
 RACs   (Recovery Audit Contractors)
  may only recover money three fiscal
  years before the year they assert the
 Fiscal years start 10/1.
 They can only go back to October 1,

   Making Voluntary Refunds
 When  do you do it?
 Who should do it?
 Who do you send it to?
 How much detail should you provide?
 How far back should you go?
 Do you use the OIG‟s disclosure

     Challenging Overpayments

 You  have six months to appeal.
 Interest accrues from day one if you
  don‟t pay within 30 days, even if you
 You may select an on the record,
  telephone, or in person hearing.

      Challenging Overpayments

 If you win, the carrier cannot appeal.
 If you lose, and more than $500 remains at
  issue, you have 60 days to appeal to an
  administrative law judge.
 Under new rules, you can not present any
  evidence to the ALJ unless you first
  presented it to the QIC. This means you
  should at least consult with counsel before
  the hearing.

      Challenging Overpayments
 Every  overpayment assessment we have
  seen has had at least one major error.
 CMS claims that providers win half of all
 Statistics reveal that in the old days,
  provider won 42% of all fair hearings, and
  60% of all ALJ decisions.
 That means providers actually win nearly
  77% of all appeals.

  Fighting Insurance Companies
 “If I am not for myself, who will be for
 If I am only for myself, what am I?
 If not now, when?”
 Hillel said it. I don‟t think he was talking
  about Aetna, but who knows?

      Overpayments - Who pays?
 The government will pursue the person it paid, but
  doesn‟t care who pays.
 Indemnification is an issue - and a good guide:
   – Good faith.
   – Acted in corporation‟s best interest.
   – Reasonably believed acts were lawful, proper.
 Guidelines, rather than policy, are a good way to
  approach the issue.
 It is worth considering the issue before a problem

           Here Comes Trouble
 Postal Inspector
 IG Railroad Retirement Board
 Licensing boards
 Patients
            Beware Of:
 Personalized correspondence.
 Medicare bulletins.
 Overpayment letters.
 Frequent denials.
 “Routine audit”/survey.

1. Did you order a complete blood count (sometimes
   referred to as a “CBC”) or other hematology profiles
   for this patient on this date?

              _______Yes    _______No

2. Did you specifically request any of the additional
   automated hemogram indices referenced above for this
   patient on this date?

             _______Yes     _______No
4. If you answered “No” to question 2, please answer
   questions 4a through 4e below.

  4a. Did you receive the additional automated
      hemogram indices as part of the test result
      provided from the laboratory?

      ____Yes     _____No

  4b. Were the additional automated hemogram indies
      routinely provided as part of your request for the
      hematology profiles?

      _____Yes    ______No    ______Not Applicable
4c. Did the laboratory notify you that these additional automated
    hemogram indices were automatically included as part of
    hematology profiles?
       _____Yes ______No ______Not Applicable

4d. Were you aware that these additional automated hemogram
    indices or other indices were billed separately under the
    Medicare program?
      _____Yes ______No ______Not Applicable

4e. If you received the additional automated hemogram indices
    as part of the laboratory results, were the indices useful to
    you in the treatment of the Medicare patient?
        _____Yes ______No ______Not Applicable

    NOTE: If available, please provide an example copy of the
    laboratory requisition form.
               Beware Of:
 Contact   from the carrier or OIG.
 Sudden    delays in reimbursement.
 Complaints   from patients.
 Complaints   from employees.

You’re Under The Microscope If:
 Medicare  requests multiple medical records.
  (Don‟t worry about individual prepayment
 You receive an overpayment letter.
 The carrier or Office of Inspector General
  contacts you with specific questions or seeks
  a meeting.
 Armed agents pop up at employees homes
  (or maybe office).
               You are here

           Prep work is key
 You need to inoculate your employees.
 The half life of the vaccine is very, very
 An emergency plan must include how to
  contact people at odd hours.

              The letter
 Who  sent it?
 Requests for multiple records are much
  more troubling.
 Make sure you keep a copy of
  everything you send.
 Be thorough.
 Talk with counsel.

          The On-site Visit
 Keep  track of what is reviewed.
 Keep the auditor isolated from the rest
  of the business.
 Be friendly, but firm.
 Try to be sure that no originals are

             Telephone Calls
 Get    the caller‟s name.

 Find   out what they are talking about.

     the person back. This will allow
 Call
 you to verify the caller‟s identity, and
 gather your thoughts.

       Armed Agents At the Door
 If   they have a warrant, let them in.

 Do    not talk to them.

 Get    I.D. and call a lawyer.

   Dealing With Investigations
 Agents   want you to talk. They will use
  – Fear.
  – Confidence.
 Your   biggest weapon:
  – Silence.
 Be especially wary of saying “my lawyer
 told me it was ok.” You will have waived
 the attorney-client privilege.

       The Agents Are Not Your
   Don‟t try to convince the agent “It is all a
Remember two key points:
   Medicare rules are complicated. You may
    have violated one without knowing it.
   To many investigators - there is no such thing
    as an “innocent mistake.”

            Know Your Rights
   Can‟t require anyone to attend interview.
   Can‟t obtain documents without a warrant or
   Can‟t obtain privileged information.
   Can‟t prevent you from talking about the

          Know Your Obligations:
 Cannot     prevent employees from talking.

 If   you talk, you must tell the truth.

 Never     destroy/hide documents.