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1. Tackling a Probe and Educate Audit, UPIC/ZPIC Audit, Medicaid Audit and Other Contractor Audits: A Full-On Assault

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3. Introduction Seth Lundy King & Spalding LLP (202) 626 2924 slundy@kslaw.com Juliet M. McBride King & Spalding LLP (713) 276-7448 jmcbride@kslaw.com

4. Audits of DMEPOS Suppliers • The Appeals Strategy • Strong Briefing / Arguments • How Far to Appeal • Conclusions Overview

5. Audits of DMEPOS Suppliers

6. Auditors (Medicare compliance): • Medicare Administrative Contractors (MACs) • Recovery Audit Contractors (RACs) • Unified Program Integrity Contractors (UPICs) • Comprehensive Error Rate Testing (CERT) by CMS • Supplemental Medical Review Contractor (SMRC) • HHS Office of Inspector General (OIG) Types of Audits and Auditors

7. DME MACs • Perform prepayment and postpayment targeted reviews • Analyze claims for compliance with Medicare rules • “Progressive Corrective Action” process • “Targeted Probe and Educate” approach: one on one help • There are 4 DME MAC jurisdictions: A through D. Currently, both A and D are assigned to Noridian; and both B and C are assigned to CGS Types of Audits and Auditors

8. DME RAC (Currently Performant Recovery, Inc.) • Postpayment review aimed at correcting past improper payments. Three types of review: • (i) automated (no medical records) • (ii) semi-automated (typically, data-based review) • (iii) complex (medical records reviewed) • Defined look-back period: 3 years from payment • Additional document request limits • Encouraged to extrapolate • Required to make referrals of potential fraud to CMS • Also must refer overpayment findings to a MAC for demand and collection Types of Audits and Auditors

9. DME RAC • “CMS approved issues” on DME RAC website • Example: Types of Audits and Auditors

10. UPICs • Investigate suspected fraud and abuse, and identify improper payments. This includes medical review, data analysis, and identification of need for administrative actions • UPICs will perform functions that were previously performed by Zone Program Integrity Contractors (ZPICs). UPICs were created to coordinate provider investigations across Medicare and Medicaid, improve collaboration with the states, and increase contractor accountability • Must refer overpayment findings to a MAC for demand and collection Types of Audits and Auditors

11. SMRC (Currently Noridian Healthcare Solutions, LLC) • Conducts review of Part A, Part B, and DMEPOS at CMS’s direction, based on CMS’s internal data analysis, CERT audits, and other sources • Reviews compliance with coverage, coding, payment, and billing practices • Typically requests medical records for claim review • Purpose is more to gauge the performance of the MACs and other contractors Types of Audits and Auditors

12. OIG • Conducts investigations of particular issues • Multiple sources can initiate an OIG audit: • Referral from a CMS contractor • OIG’s own internal data review and trends • Complaint from a third party • In conjunction with a DOJ investigation • In furtherance of an item on the OIG Work Plan • May refer back to the MAC or UPIC for administrative action or to another enforcement agency for further investigation Types of Audits and Auditors

13. OIG Work Plan – examples of active items • “Payments for Medicare Services, Supplies, and DMEPOS Referred or Ordered by Physicians-Compliance” (pertaining to ordering providers’ eligibility to order services) • “Orthotic Braces – Supplier Compliance with Payment Requirements” Types of Audits and Auditors

14. Compared to other types of claims, DMEPOS claims result in a high rate of “improper payments” Scrutiny of DMEPOS Suppliers

15. Typically, the audit process is as follows: • Auditor sends supplier a list of claims, and requests all available documentation to support the payment for the claims • The audit notice may indicate the reason for the audit and details regarding the sample (e.g., whether probe or statistically valid) • Supplier compiles the documentation it maintains and requests medical records from the ordering providers • Supplier submits the documentation to auditor for review (usually after an internal review of the records) • Auditor sends the audit results to the supplier, to be followed by a demand letter Audit Process

16. Documentation does not meet medical necessity • Example: No clinical documentation for the period prior to the service to support the diagnosis billed or need for the item • Coverage criteria not met • Example: For a knee orthosis ordered for the treatment of knee instability, no documentation of a knee examination and objective description of joint laxity Commonly Alleged Deficiencies

17. Invalid proof of delivery • Examples: • The shipping date and service date differ • No confirmed delivery date in documentation • Invalid physician order • Examples: • No signature • No start date or signature date • Corrections in the form without initialing and dating • Item ordered and item supplied differ Commonly Alleged Deficiencies

18. Audit findings report • Provides the purpose and methodology of the audit • For denied claims, provides claim-specific basis for denial • Provides contact information for the auditor • States whether the results will be extrapolated • If so, should provide the basis for the extrapolation, including how a statistically valid sample was selected Understanding the Audit Review and Outcome

19. Extrapolation • Extrapolation projects the error rate in the sample to a broader claim population from which the sample was selected • A Medicare contractor may not use extrapolation to determine an overpayment amount unless-- • there is a sustained or high level of payment error (as determined by error rate determinations, probe samples, data analysis, supplier history, referral from investigations, allegations of wrongdoing, or OIG evaluations); or • documented educational intervention has failed to correct the payment error • Extrapolation of audit results does not violate due process so long as extrapolation is made from a representative sample and is statistically significant. Chaves County Home Health Service, Inc. v. Sullivan, 931 F.2d 914 (D.C. Cir. 1991) Understanding the Audit Review and Outcome

20. Demand letter • The demand letter is issued by the MAC, except in RAC audits the letter is issued by the RAC • Starts the clock for appeal/repayment • References the audit • Contains the overpayment amount • Contains information regarding repayment and recoupment of the overpayment • Contains instructions for appeal Understanding the Audit Review and Outcome

21. Appeals Process

22. Redetermination • Paper review conducted by the MAC as an “independent” review of the initial determination • Review limited to the denial reason upon which each claim was denied • MAC follows CMS guidance as binding standards • Low reversal rate • Recoupment of alleged overpayment may be stayed during the redetermination review Appeals Process

23. Reconsideration • Paper review conducted by the DME Qualified Independent Contractor (QIC) – currently, C2C Innovative Solutions, Inc. • Review limited to the denial reason upon which each claim was denied • However, all documents that are to be considered at higher levels of appeal must be submitted to the QIC • QIC follows CMS guidance as binding standards • Recoupment of alleged overpayment may be stayed during the reconsideration review, but may not be stayed after the reconsideration decision Appeals Process

24. Administrative Law Judge • Tele- or video- conference conducted by an ALJ • Review not limited to the initial denial reason for each claim • Limited to documents provided to the QIC, unless there is good cause for further additions. Generally, no new evidence may be submitted • ALJ is not required to follow CMS guidance as binding standards - should use law and regulation • Due to significant backlog, current review times are between 2-4 years Appeals Process

25. Medicare Appeals Counsel / Department Appeals Board (DAB-MAC) • De novo review of the ALJ decision, which may include an evidentiary hearing • May deny a claim even if the ALJ found the claim to be payable • Affected by the backlog Appeals Process

26. Federal Court • Standard of review: the findings of the HHS Secretary as to any fact, if supported by substantial evidence, are conclusive • Appeal is final unless court remands Appeals Process

27. Appeals Process - Timeline

28. The Appeals Strategy

29. Alleged overpayment amount • Cost of appeal • Whether to stay recoupment • Subsequent audits or investigations by Medicare contractors or other agencies • Merits / scope of appeal, i.e., whether to appeal all denials or only some • If accepting certain denials – whether to submit a voluntary disclosure Initial Considerations

30. Recoupment of the alleged overpayment amount is stayed through the reconsideration decision if the supplier submits the appeal requests within the following deadlines: • Interest continues to accrue • May not stay recoupment past reconsideration decision Staying Recoupment

31. A supplier may stay recoupment for approximately 7 months, through the reconsideration decision • After the reconsideration decision – • (i) the overpayment must be repaid, and • (ii) the appeal to the ALJ takes 2-4 years • Therefore, suppliers should dedicate as much resources as possible toward the first two levels of appeal, ensuring that, by the time recoupment begins, the alleged overpayment amount has been reduced Staying Recoupment - Strategy

32. Which denials to appeal? • Consider merit, claim amount, and additional evidence/documentation obtained • How much resources to employ? • Challenge extrapolation? • Challenge procedural deficiencies? • Request additional information through Freedom of Information Act requests? Setting the Scope of the Appeal

33. Resources / Partners Available

34. Benefits of partnering with a law firm • Fluency in the applicable legal standards • Familiarity with appeals process, both procedurally and with respect to successful arguments • Relationships with regulatory agencies and knowledge of enforcement activities • Knowledge of industry practices • Maintaining privilege Resources / Partners Available

35. Use of partners in different stages of appeal • At the onset of the appeal (redetermination and reconsideration), the focus is commonly on the collection of clinical documentation, making a consultant particularly valuable • If legal assistance is being considered, lawyers must be consulted during reconsideration to ensure that all necessary documents are introduced • At the ALJ hearing stage, the case is de novo and legal arguments are likely to be most successful Resources / Partners Available

36. Getting your ”House” in order • Ensure that your internal documentation is in order, as well as inventory and shipping systems • How did you get there? • Pull and organize billing documents (HCFA, RA, EOB) to understand if there was a pattern that flagged the audit software • Benefits to partnering with a consultant engaged through legal counsel under privilege Overcoming Common Challenges

37. Throughout the appeal process, the supplier should communicate with the auditor and the MAC, and may communicate with CMS • The auditor has the most information regarding the audit • The MAC has the most information regarding the overpayment amount • If the auditor, MAC, or CMS are unresponsive, the supplier can submit a formal Freedom of Information Act request Communication

38. The audit report should include contact information for follow up inquiries • Questions to ask: • What additional information is available about the audit or methodology? • What additional information is available about the extrapolation methodology? • Is a CV of the reviewer available? • Did the auditor contact anyone else in connection with the audit to collect information or to refer the information for further review (e.g., providers, other contractors, OIG)? • Which DME jurisdictions were included in the audit? • Don’t be afraid to ask – it is your right Communication with Auditor

39. Questions for the MAC: • What additional information about the audit was provided to the MAC? • Did the MAC contact anyone else in connection with the audit to collect information or to refer the information for further review (e.g., providers, other contractors, OIG)? • Questions regarding redetermination and status of each claim on appeal Communication with the MAC

40. Strong Briefing / Arguments

41. Include description of the company’s order process and compliance practices • For each patient, paint the clinical picture, including co-morbidities and all other relevant factors that could have been considered by the physician in ordering an item • Relevant facts should be included in the appeal brief. If some facts are unfavorable, the solution is to address rather than omit them Clear Facts

42. If primary documentation is not available, facts can be proven by other contemporaneous documentation • Example: an orthosis is identified by an apparently generic description (“knee brace”) on the order slip, but the company’s product database for the same period linked the description to a specific brace • If the ordering provider is available, he/she can attest to a fact concerning his/her action • Example: an ordering provider can attest that, while the signature date is absent from the order, the order was signed on a certain date, and that information was communicated to the supplier by phone Clear Facts

43. Know the applicable Medicare payment rules, including statute, regulations, and guidance • Know the scope of the review authority at each appeal level • The supplier has a right to a review on appeal. If the appeal review is clearly deficient (e.g., does not acknowledge key evidence), request another review at the same level • When applicable, discuss relevant legal standards other than Medicare rules (e.g., product shipment requirements under state law) Correct Legal Authority

44. Important to remember that LCDs are guidance/recommendations and not binding • Clinical guidelines, peer-reviewed clinical studies, societal consensus recommendations are often critical to a successful appeal • Used to reinforce the need of the supply, while the provider documents the necessity Governing Clinical Practice

45. Focus effort on obtaining medical records, including all records from specialists • Start early and deploy considerable resources • Emphasize importance of physician judgment and the order • DMEPOS suppliers “do not and cannot treat patients or make medical necessity determinations.” • OIG, Publication of OIG Compliance Program Guidance for the Durable Medical Equipment, Prosthetics, Orthotics and Supply Industry, 64 Fed. Reg. 36368, 36375 (July 6, 1999). SeealsoUnited States ex rel. Groat v. Boston Heart Diagnostics Corp., No. 15-cv-487 (D.D.C. Dec. 11, 2017) (ruling that laboratories may rely on the ordering physician’s determination that a test is medically necessary, and basing opinion in part on rulemaking language that compares laboratories to DMEPOS suppliers). Best Strategies

46. Challenge all technical issues, especially samples and extrapolations • Expert help is key • Where documentation is missing, obtain contemporaneous records communicating the information that was omitted • If contemporaneous information is unavailable, obtain present-day attestation from the ordering provider regarding the missing information • If the missing information is only required in guidance, argue that the guidance is not a legally binding standard • Refer to applicable laws and regulations Best Strategies

47. What to counter: • Facts • Premises • Legal standard • Procedure • Statistical analysis Countering Arguments

48. How Far to Appeal

49. Appeals take time, effort and money; but a failure to appeal means that your claims will be deemed to be “improper payments” • Findings of improper payments, even with a few number of claims, can lead to further audits • Must balance the likelihood of success against the risk of increasing audit volumes • Make sure to appeal, but do not waste efforts on losing causes • Deploy consulting and legal resources based on the size of the sample, the issues involved, and the resources of the supplier Appeal Goals & Resources

50. Statistically speaking, the overturn rates at the appeal stages are as follows: • Redetermination: very low overturn rate • Reconsideration (Part B): 42%-54% rate of favorable decisions • ALJ: 17% rate of favorable decisions. This rate has steadily decreased from 53% in FY12 to 17% in FY18 Likely Outcomes